Acre Cards-Mortgage Broker

Front 1

IBO

Back 1

Interest beneficiary only, letters indicating that the interest is to go to a stated beneficiary.

Front 2

`V` Cracks

Back 2

`V` cracks are considered serious and should be marked as a red flag. They indicate a broken foundation. Typically, they start at the bottom of the foundation and rise up in a `V` shape pattern, getting increasingly deeper as they move upwards. Usually they can be seen both outside and on the inside of a home.

Front 3

1031 Exchange

Back 3

A tax advantaged exchange of like-kind properties from one
entity to another

Front 4

Abandonment

Back 4

The voluntary surrender of property that is owned or leased without naming a successor as owner or tenant. Abandonment does not
relieve the obligations of the lease or ownership unless the abandonment is accepted by the entity to which the obligation is owed.

Front 5

Abatement

Back 5

A legal action to stop a nuisance. An abatement action requires the removal of the nuisance.

Front 6

Ability To Assign

Back 6

The ability to transfer any right, claim or interest in
a property to another person or corporation. Often used to refer to the transfer of a mortgage from one lender to another.

Front 7

Abstract Of Title (Abstract And Opinion)

Back 7

A summary or condensation of the essential parts of all
recorded instruments which affect a particular piece of real estate, arranged in the order in which they were recorded.

Front 8

Acceleration Clause

Back 8

A clause in a contract by which the time for payment
of a debt is advanced, usually making the obligation immediately due and
payable, because of the breach of some condition, such as failure to pay
an installment when due.

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Acceptance

Back 9

The indication or manifestation by the offeree that the offeree
is willing to be bound by the terms of the offer.

Front 10

Acceptance Date And Time

Back 10

The deadline by which a positive response to an
offer or a counter offer must be signed in order to create a binding agreement between the parties. Failure to respond by the acceptance date
and time results in the expiration of the offer.

Front 11

Accession

Back 11

Attaining title as a result of attaching or joining property to
other property.

Front 12

Accretion

Back 12

An addition to land from natural causes as, for example, from gradual action of the ocean or river waters

Front 13

Accrual Basis

Back 13

A method of recognizing revenue and expense when earned or incurred rather than when cash is received or disbursed

Front 14

Accrued

Back 14

An adjective describing something that has come into existence but has not yet been claimed by or distributed to its rightful owner

Front 15

Acknowledgement

Back 15

The establishment of an instrument`s validity by a notary public acknowledging the signatures of the parties

Front 16

Ability To Assign

Back 16

The ability to transfer any right, claim or interest in
a property to another person or corporation. Often used to refer to the transfer of a mortgage from one lender to another.

Front 17

Abstract Of Title (Abstract And Opinion)

Back 17

A summary or condensation of the essential parts of all
recorded instruments which affect a particular piece of real estate, arranged in the order in which they were recorded.

Front 18

Acceleration Clause

Back 18

A clause in a contract by which the time for payment
of a debt is advanced, usually making the obligation immediately due and
payable, because of the breach of some condition, such as failure to pay
an installment when due.

Front 19

Acceptance

Back 19

The indication or manifestation by the offeree that the offeree
is willing to be bound by the terms of the offer.

Front 20

Acceptance Date And Time

Back 20

The deadline by which a positive response to an
offer or a counter offer must be signed in order to create a binding agreement between the parties. Failure to respond by the acceptance date
and time results in the expiration of the offer.

Front 21

Accession

Back 21

Attaining title as a result of attaching or joining property to
other property.

Front 22

Accretion

Back 22

An addition to land from natural causes as, for example, from gradual action of the ocean or river waters

Front 23

Accrual Basis

Back 23

A method of recognizing revenue and expense when earned or incurred rather than when cash is received or disbursed

Front 24

Accrued

Back 24

An adjective describing something that has come into existence but has not yet been claimed by or distributed to its rightful owner

Front 25

Acknowledgement

Back 25

The establishment of an instrument`s validity by a notary public acknowledging the signatures of the parties

Front 26

EQUAL CREDIT OPPORTUNITY ACT (ECOA

Back 26

Passed in 1974 and amended in 1976, the purpose of the Equal credit Opportunity Act is to prohibit creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act.

Front 27

REGULATION B

Back 27

When you take an application, as a lender:

You may not verbally, in writing, in an advertisement, or otherwise, discourage a qualified applicant, or perspective applicant, or any member of a protected class from making or pursuing a loan application;
You may not require the applicant to reveal information about their sex, race, national origin or religion. However, you may ask the applicant to volunteer this information (except religion) to assist federal agencies in enforcing anti-discrimination laws.
You may not ask the applicant if they are widowed or divorced. You may only ask whether they are married, unmarried, or separated.
You may not ask if the applicant is pregnant, planning on becoming pregnant, is using birth control, or has the capability to bear children.
You may not ask the applicant anything about their spouse or former spouse, unless:
The spouse is a co-applicant;
The applicant is relying on the spouse income to qualify;
The applicant and/or the property is located in a community property state; or
The applicant is relying on alimony, child support and/or maintenance from a spouse or former spouse.

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Evaluating Applications

Back 28

Except as otherwise provided in this law, when evaluating an application, a lender may NOT consider any of the following:

A lender may not consider age, sex, marital status, race, nationality or religion. Exceptions for age: The applicant must be of legal age. It is okay to discriminate for age if qualifying for program with an age requirement, such as a reverse mortgage.
A lender may not consider whether the applicant's income comes from any form of public assistance. You must treat that source of income the same way as any other income.
A lender may not consider the likelihood that the applicant may become pregnant and/or raise children. You may not discount the income based on that kind of assumption.
A lender may not consider whether the applicant has a telephone listing. However you may take into consideration if the applicant has a telephone in his residence.
A lender may not consider marital status or lack thereof. You must evaluate married and unmarried applicants the same way. With joint applicants, no consideration should be given based on the existence, absence, or likelihood of a marital relationship between the parties.

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Extension of Credit

Back 29

A creditor shall not refuse to grant an individual account to a creditworthy applicant on the basis of sex, marital status, or any other prohibited basis.
A creditor shall not refuse to allow an applicant to open or maintain an account in a birth-given first name and a surname that is the applicant's birth-given surname, the spouse's surname, or a combined surname.
If an applicant qualifies for credit on his own, a creditor may NOT require there to be a co-signor. If there is a co-signor, the creditor may NOT require that the co-signor be a spouse. (Exception: the credit may require a spouse to sign if the applicant resides in a community property state.)
On an existing open ended account, where the applicant has merely experienced a change in age, retirement, name or marital status; a creditor may NOT do any of the following:
Terminate the account,
Change the terms of the account, or
Require a re-application (except if the creditor has reason to believe that the change in marital status, has caused a loss in the income originally used to qualify).

Front 30

Consumer Notification Requirements

Back 30

You as a lender MUST notify the applicant regarding certain actions taken, and you MUST do so within specific time frames

Front 31

Notification of Adverse Action

Back 31

Within 30 days of receiving an application, you must notify the applicant concerning the approval of, counter offer of, or declination ("Adverse Action") of their request. If the notification is an adverse action or counter offer, then it must be provided in writing, and it must contain:
Name and address of the lender,
A statement of specific reasons for the action taken,
The provisions of ECOA statement,
The name and address of the federal agency that administers compliance, with respect to the lender.

Front 32

Right to Obtain a Copy of the Appraisal

Back 32

you MUST provide an applicant with a copy of the appraisal used in connection with the application. Depending on the company you work for, this can be accomplished in a couple of ways:

· You can routinely provide every applicant with a copy of the appraisal, or

· If you do not routinely provide a copy of the appraisal, then you must provide an applicant with a notification of their right to receive a copy of the appraisal, upon written request. Upon receipt of a written request from an applicant, you have 30 days to mail or otherwise deliver a copy of the appraisal.

Front 33

Information for Monitoring Services

Back 33

when you as a lender receive an application for a home loan, you need to request the following information from the applicant:

· Race: You must use the categories American Indian or Alaskan Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White.

· Ethnicity: You must use the categories: White; Hispanic or Latino, and White; Not Hispanic or Latino.

· Sex

· Marital Status: You must use ONLY the categories Married, Unmarried, and Separated.

· Age

Front 34

Pattern and Practice of Discrimination

Back 34

The Department of Justice may file a lawsuit under ECOA where there is a pattern or practice of discrimination. In cases involving discrimination in home mortgage loans or home improvement loans, the Department may file suit under both the Fair Housing Act and ECOA. Other federal agencies have general regulatory authority over certain types of lenders and they monitor creditors for their compliance with ECOA. ECOA requires these agencies to refer matters to the Justice Department when there is reason to believe that a creditor is engaged in a pattern or practice of discrimination which violates ECOA. Each year, the Department files a report with Congress on its activities under the statute.

Front 35

Department of Housing and Urban Development

Back 35

Individuals who believe that they have been the victims of any unfair credit transaction involving residential property may file a complaint with the Department of Housing and Urban Development [HUD] or may file their own lawsuit.

Front 36

EQUAL CREDIT OPPORTUNITY ACT (ECOA

Back 36

Passed in 1974 and amended in 1976, the purpose of the Equal credit Opportunity Act is to prohibit creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act.

Front 37

REGULATION B

Back 37

When you take an application, as a lender:

You may not verbally, in writing, in an advertisement, or otherwise, discourage a qualified applicant, or perspective applicant, or any member of a protected class from making or pursuing a loan application;
You may not require the applicant to reveal information about their sex, race, national origin or religion. However, you may ask the applicant to volunteer this information (except religion) to assist federal agencies in enforcing anti-discrimination laws.
You may not ask the applicant if they are widowed or divorced. You may only ask whether they are married, unmarried, or separated.
You may not ask if the applicant is pregnant, planning on becoming pregnant, is using birth control, or has the capability to bear children.
You may not ask the applicant anything about their spouse or former spouse, unless:
The spouse is a co-applicant;
The applicant is relying on the spouse income to qualify;
The applicant and/or the property is located in a community property state; or
The applicant is relying on alimony, child support and/or maintenance from a spouse or former spouse.

Front 38

Evaluating Applications

Back 38

Except as otherwise provided in this law, when evaluating an application, a lender may NOT consider any of the following:

A lender may not consider age, sex, marital status, race, nationality or religion. Exceptions for age: The applicant must be of legal age. It is okay to discriminate for age if qualifying for program with an age requirement, such as a reverse mortgage.
A lender may not consider whether the applicant's income comes from any form of public assistance. You must treat that source of income the same way as any other income.
A lender may not consider the likelihood that the applicant may become pregnant and/or raise children. You may not discount the income based on that kind of assumption.
A lender may not consider whether the applicant has a telephone listing. However you may take into consideration if the applicant has a telephone in his residence.
A lender may not consider marital status or lack thereof. You must evaluate married and unmarried applicants the same way. With joint applicants, no consideration should be given based on the existence, absence, or likelihood of a marital relationship between the parties.

Front 39

Extension of Credit

Back 39

A creditor shall not refuse to grant an individual account to a creditworthy applicant on the basis of sex, marital status, or any other prohibited basis.
A creditor shall not refuse to allow an applicant to open or maintain an account in a birth-given first name and a surname that is the applicant's birth-given surname, the spouse's surname, or a combined surname.
If an applicant qualifies for credit on his own, a creditor may NOT require there to be a co-signor. If there is a co-signor, the creditor may NOT require that the co-signor be a spouse. (Exception: the credit may require a spouse to sign if the applicant resides in a community property state.)
On an existing open ended account, where the applicant has merely experienced a change in age, retirement, name or marital status; a creditor may NOT do any of the following:
Terminate the account,
Change the terms of the account, or
Require a re-application (except if the creditor has reason to believe that the change in marital status, has caused a loss in the income originally used to qualify).

Front 40

Consumer Notification Requirements

Back 40

You as a lender MUST notify the applicant regarding certain actions taken, and you MUST do so within specific time frames

Front 41

Notification of Adverse Action

Back 41

Within 30 days of receiving an application, you must notify the applicant concerning the approval of, counter offer of, or declination ("Adverse Action") of their request. If the notification is an adverse action or counter offer, then it must be provided in writing, and it must contain:
Name and address of the lender,
A statement of specific reasons for the action taken,
The provisions of ECOA statement,
The name and address of the federal agency that administers compliance, with respect to the lender.

Front 42

Right to Obtain a Copy of the Appraisal

Back 42

you MUST provide an applicant with a copy of the appraisal used in connection with the application. Depending on the company you work for, this can be accomplished in a couple of ways:

· You can routinely provide every applicant with a copy of the appraisal, or

· If you do not routinely provide a copy of the appraisal, then you must provide an applicant with a notification of their right to receive a copy of the appraisal, upon written request. Upon receipt of a written request from an applicant, you have 30 days to mail or otherwise deliver a copy of the appraisal.

Front 43

Information for Monitoring Services

Back 43

when you as a lender receive an application for a home loan, you need to request the following information from the applicant:

· Race: You must use the categories American Indian or Alaskan Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White.

· Ethnicity: You must use the categories: White; Hispanic or Latino, and White; Not Hispanic or Latino.

· Sex

· Marital Status: You must use ONLY the categories Married, Unmarried, and Separated.

· Age

Front 44

Pattern and Practice of Discrimination

Back 44

The Department of Justice may file a lawsuit under ECOA where there is a pattern or practice of discrimination. In cases involving discrimination in home mortgage loans or home improvement loans, the Department may file suit under both the Fair Housing Act and ECOA. Other federal agencies have general regulatory authority over certain types of lenders and they monitor creditors for their compliance with ECOA. ECOA requires these agencies to refer matters to the Justice Department when there is reason to believe that a creditor is engaged in a pattern or practice of discrimination which violates ECOA. Each year, the Department files a report with Congress on its activities under the statute.

Front 45

Department of Housing and Urban Development

Back 45

Individuals who believe that they have been the victims of any unfair credit transaction involving residential property may file a complaint with the Department of Housing and Urban Development [HUD] or may file their own lawsuit.

Front 46

Federal Trade Commission

Back 46

The FTC governs retailers, finance companies, creditors (including most mortgage companies) that are not assigned to another agency

Front 47

Office of Thrift Supervision

Back 47

The Office of Thrift Supervision (OTS) governs savings associations and federally chartered savings banks (the word "Federal" or the initials "F.S.B." appear in a federal institution's name).

Front 48

Comptroller of Currency

Back 48

The Comptroller of Currency (OCC) governs National banks and federal branches/agencies of foreign banks (the word "National" or the initials "N.A." appear in or after the bank's name).

Front 49

Federal Reserve Board

Back 49

The Federal Deposit Insurance Corp. (FDIC) governs state chartered banks that are not members of the Federal Reserve System

Front 50

National Credit Union Association

Back 50

The National Credit Union Association (NCUA) governs Federal credit unions (the words "Federal Credit Union" are included in the institution's name).

Front 51

Penalties and Liabilities

Back 51

The (ECOA) Act provides that any creditor that fails to comply with a requirement imposed by the Act or Regulation B is subject to civil liability for actual and punitive damages in individual or class actions. Violations of the ECOA or Regulation B also constitute violations of other federal laws.



Liability for punitive damages can apply and is limited to:

$10,000 in individual actions
The lesser of $500,000 or 1% of the creditor's net worth in class actions.

Front 52

Purpose of the Fair Credit Reporting Act

Back 52

- Accuracy and fairness of credit reporting – The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system. Unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system. There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy.

- Reasonable Procedures – This title requires that consumer reporting agencies adopt reasonable procedures with regard to confidentiality, accuracy, relevancy, and proper utilization of credit information. Consumer credit, personnel, insurance, and other information must be provided in a manner which is fair and equitable to the consumer, in accordance with the requirements of this title

Front 53

Who FCRA Governs

Back 53

In short, FCRA governs any kind of consumer reporting agency

Front 54

as a mortgage broker the only type of consumer reporting agencies you will be dealing with are "credit reporting" agencies -who are they?

Back 54

1. Equifax
2. Experian
3. Trans Union

Front 55

The provisions of the Fair Credit Reporting Act include

Back 55

- Right to a Credit Report
- Prescreening and Trigger Lists
- Right to Correct Inaccuracies
- Explanatory Statements
- Lender's Responsibility to Disclose Identity of Credit Agency
- Adverse Action Disclosure Requirements

Front 56

A consumer may also receive a free copy of his report upon request, including but not limited to:

Back 56

- Whenever the consumer has been denied credit,
- Whenever the consumer received notice of a debt collection,
- Whenever the consumer has reason to believe his file may contain fraudulent entries, or
- In connection with a fraud alert.

Front 57

limitations regarding how long a negative credit entry can be kept in a consumer's credit file

Back 57

- Bankruptcies can be kept on file for ten (10) years from the date of final discharge (adjudication).
- Tax liens are kept for seven (7) years, but from the date of final payment.
- Civil suits or judgments can remain on file for seven (7) years, or until the statute of limitations has expired, whichever is longer.

Front 58

What are Prescreening and Trigger Lists

Back 58

credit reporting agencies may provide a form of credit report to ANY creditor, even though the transaction was not initiated by the consumer. This can only happen if:

The transaction consists of a "firm" offer of credit (or insurance), AND…
The consumer has NOT elected to have his name and address excluded from any list kept by the particular credit agency.

Front 59

Right to Correct Inaccuracies

Back 59

disputed by the consumer:

The consumer notifies the agency directly or indirectly of such dispute.
The agency will, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate.
The agency has 30 days from the date of the dispute, to investigate the consumer's dispute. By then the agency must confirm the accuracy of the original entry, update the consumer's file with corrected information, or delete the disputed entry altogether.
The credit reporting agency must then report back to the consumer with the results of the investigation and a copy of any corrected credit report.

Front 60

Explanatory Statements

Back 60

the creditor validates the original information, the consumer can still have the agency place an explanation of the dispute in connection with this entry, on their credit report.

Front 61

If a lender declines an application for credit (takes adverse action), AND that decision was based in any way on the credit report, then the lender must disclose:

Back 61

The adverse action taken, with
The name, address, and telephone number of the credit reporting agency (bureau) that furnished the report.

Front 62

Adverse Action Disclosure Requirements

Back 62

whenever credit is denied (or the charges for said credit are increased) it is considered an adverse action. For each adverse action taken, the lender must provide a detailed explanation as regards the reason(s) for the adverse action taken. In so disclosing, the lender must also provide a notice to the consumer regarding the consumer's rights to obtain a copy of the information used and method of dispute.

Front 63

Fair and Accurate Credit Transactions Act (FACTA) was created to:

Back 63

1. Prevent identity theft,
2. Improve resolution of consumer disputes,
3. Improve the accuracy of consumer records,
4. Make improvements in the use of, and consumer access to, credit information,
5. And for other purposes.

Front 64

FACTA amended FCRA by mandating

Back 64

that the agencies provide a free report (including the credit score) to consumers (upon request) every twelve (12) months.

Front 65

To achieve the above stated goals, this law expanded FCRA so that

Back 65

- The consumer could file a dispute directly with a creditor regarding the reporting of inaccurate or otherwise disputed information. Under FCRA, the consumer could file a dispute with the credit agency only.
- While the creditor is conducting their investigation into the disputed information, the creditor may not report any negative information related to the consumer.
- The "fraud alert" section was added. This allowed any consumer to have a notice placed in his credit file, with any credit reporting agency, to alert any prospective creditor that the consumer was suspicious, that he may have been (or is about to be) a victim of identity theft and/or fraud. Any prospective creditor is then required to confirm the identity of the applicant and verify he is one and the same with the consumer, before issuing any new credit. A fraud alert will generally last 90 days, but can be extended by the consumer to seven (7) years, by filing an identity theft report with the credit agency(ies).

Front 66

FACTA requires mortgage lenders (brokers) to disclose the following

Back 66

- A copy of the credit report received along with the credit scores,
- A notice containing the name, address and phone for each credit agency and score that was used,
- A notice allowing the applicant to "opt out" from any solicitation by affiliates of the mortgage lender or company,
- If the lender and/or loan program has "risked based" pricing based on credit scores, the lender must provide a disclosure to the applicant if he is being offered terms that are substantially less favorable as a result.

Front 67

FACTA requires the following identity theft provisions:

Back 67

- Banks or other credit card companies are required to truncate the credit card or debit card number that gets printed on a receipt (at the point of sale) to no more than 5 digits.
- FACTA also requires banks or other credit card companies to quit printing the expiration date of the card on those receipts.
- FACTA requires all financial institutions to implement reasonable procedures to protect customer's identity from being stolen or otherwise compromised. This includes the timely destruction of personal information relating to the consumer that was obtained in connection with a credit transaction.
- FACTA requires the credit reporting agencies to block the reporting of any credit entries that resulted from identity theft, upon request from the affected consumer

Front 68

Purpose of RESPA

Back 68

Congress found that significant reforms in the real estate settlement process were needed to insure that consumers throughout the nation were timely provided with more information on the nature and costs of the settlement process, and were protected from unnecessarily high settlement charges caused by certain abusive practices.
Congress also wanted to affect a change in the settlement process such that:
There would be an "effective" advance disclosure to home buyers and sellers of settlement costs.
There would be an elimination of kickbacks and/or referral fees that unnecessarily increase settlement costs.
There would be a reduction in the amounts required to set up escrow accounts for tax and insurance (at that time).
There would be a substantial reform and modernization of local recordkeeping of land title records.

Front 69

Loans/Transactions Covered

Back 69

RESPA covers any "federally related mortgage loan" AND any "Settlement Services." RESPA covers these two categories regardless of whether the transaction is a purchase, refinance or home equity loan

Front 70

Federally Regulated Mortgage

Back 70

A first or subordinate lien on residential real property, designed principally for the occupancy of from one to four families. This includes any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property.
Any loan which is made by any lender, the deposits or accounts of which are insured by any agency of the Federal government, or is made in whole or in part by any lender which is regulated by any agency of the Federal government. This includes any loan made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal government.

Front 71

Settlement Services

Back 71

any service provided in connection with a real estate settlement including, but not limited to:
- Title searches,
- Title examinations,
- The provision of title certificates,
- Title insurance,
- Services rendered by an attorney,
- The preparation of documents,
- Property surveys,
- The rendering of credit reports or appraisals,
- Pest and fungus inspections,
- Services rendered by a real estate agent or broker,
- The origination of a federally related mortgage loan (including, but not limited to; the taking of loan applications, loan processing, and the underwriting and funding of loans), and
- The handling of the processing, and closing or settlement.

Front 72

Exempt Transactions

Back 72

- Loans extended for business, agriculture or commercial purposes,
- Loan transactions to the government or any government agencies, and
- Temporary loans like construction or bridge loans.

Front 73

RESPA requires that a lender provide certain disclosures and information to borrowers within a specific time frame-what are they

Back 73

1. Good Faith Estimate – Mortgage brokers must provide a written estimate of the amount or range of charges for specific settlement services that the borrower is likely to incur in connection with a real estate settlement.
2. Good Faith Estimate Provider – Mortgage brokers must provide a Good Faith Estimate Provider Relationship disclosure if the lender requires the use of any specific service provider. That disclosure must:
- Provide information about the nature of the relationship between the lender and service provider,
- Confirm that using the required service provider is a requirement to obtaining the loan, and
- Include the contact information for said provider.
3. Servicing Disclosure – As a mortgage broker you are required to provide the consumer with a disclosure, as to whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.
This disclosure must also contain (among other things) a record of the percentages of loan servicing that the lender has sold during the last three (3) calendar years, an estimate of what percentage of servicing it expects to sell in the next twelve (12) months, and a summary of information the borrower will receive if the loan is transferred.

Front 74

What is the time frame for these disclosures?

Back 74

At the time of application, or within three (3) business days of receipt of an application,

Front 75

Before closing/settlement, a mortgage broker must provide the consumer with the following disclosures:

Back 75

- Affiliated Business Arrangement Disclosure
- HUD-1 Settlement Statement
-

Front 76

what is an Affiliated Business Arrangement Disclosure

Back 76

An "affiliated business arrangement" is any arrangement in which a person is in a position to refer business incident to or as part of a real estate settlement service (or an associate of such person), has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent (1%) in a provider of settlement services; AND directly or indirectly refers such business to that provider, or affirmatively influences the selection of that provider.



As a mortgage broker, you MUST disclose any such affiliated business arrangement to the consumer. The disclosure needs to describe the business arrangement, estimate the costs of the second provider, and let the consumer know they are NOT required to use the second provider. Finally this disclosure must be given at or before the service is ordered. So you could also include the Affiliated Business Arrangement Disclosure at the time of application.

Front 77

what is a HUD-1 Settlement Statement

Back 77

This is a standard form used at all real estate closings, involving a new mortgage. It clearly shows all charges assessed to both the borrowers and sellers in connection with the settlement. RESPA allows the borrower to request to see the HUD-1 Settlement Statement one (1) day before the actual settlement. The title company prepares this form based upon all charges known at the time

Front 78

At the time of closing or settlement the mortgage broker must provide the following statements:

Back 78

FINAL HUD-1 Settlement Statement – This is the same form mentioned above. However, this is a final corrected version upon which closing is based. The borrower's final closing figure is tallied, to determine the exact amount of good funds that the borrower must bring to closing.


Initial Escrow Statement - RESPA was amended in 1997 to require lenders to fully disclose escrow accounting and limit how much lenders can legally keep in the account. They must itemize the estimated taxes, insurance premiums and other charges anticipated to be paid from the escrow account during the first twelve months of the loan. It lists the escrow payment amount and any required cushion. The cushion may not to exceed two (2) months of either tax or insurance.


Although the statement is usually given at settlement, the lender actually has 45 days from settlement to deliver it. If this initial analysis results in a balance higher than the allowed cushion, the lender will credit that amount to the borrower. This will be shown as an aggregate adjustment (credit) to the borrower on the HUD-1 settlement statement.

Front 79

After closing or settlement the lender has additional reporting requirements under RESPA

Back 79

- Annual Escrow Statement – RESPA required lenders to provide an escrow statement on an annual basis with the same information that was provided on the initial escrow statement.
- Servicing Transfer Statement (if applicable) – According to RESPA, any servicer of a mortgage loan must notify the borrower in writing of any assignment, sale, or transfer of the servicing of that loan to any other company. That notice should be provided to the borrower not less than 15 days before it takes affect. Further, any such notice should contain all the following information:
-The effective date of transfer of the servicing of the loan.
-The name, address, and toll-free or collect call telephone number of the transferee servicer (new mortgage company).
-A toll-free or collect call telephone number for an individual employed by the transferor servicer (old mortgage company), or the department of the transferor servicer, who can be contacted by the borrower to answer inquiries relating to the transfer of servicing.
-The name and toll-free or collect call telephone number for an individual employed by the transferee servicer, or the department of the transferee servicer, who can be contacted by the borrower to answer inquiries relating to the transfer of servicing.
-The date on which the transferor servicer who is servicing the mortgage loan before the assignment, sale, or transfer will cease to accept payments relating to the loan.
-The date on which the transferee servicer will begin to accept payments related to the loan.
-Any information concerning the effect the transfer may have, if any, on the terms of or the continued availability of mortgage life or disability insurance or any other type of optional insurance. This information should include what action, if any, the borrower must take to maintain coverage.
-A statement that the assignment, sale, or transfer of the servicing of the mortgage loan does not affect any term or condition of the security instruments other than terms directly related to the servicing of such loan.

Front 80

RESPA also requires that you know about certain acts that are prohibited. They are:

Back 80

1. Section 8 – Kickbacks, Fee Splitting and Unearned Fees
2. Section 9 – Seller Required Title Insurance
3.Section 10 – Escrow Limitations

Front 81

Section 8 – Kickbacks, Fee Splitting and Unearned Fees

Back 81

RESPA strictly forbids the payment of any (referral) fee, kickback, or thing of value, in exchange for a referral. It is illegal for any one associated with a real estate transaction to give or receive any of these forms of compensation. Likewise, it is illegal to split a fee with another service provider. This has also correctly been interpreted to include "padding" another service provider's fee at closing and pocketing the difference, as it would result in a split of the inflated fee.



The penalties for violation of this section could result in both civil and criminal proceedings. On the criminal side, you would be exposing yourself to a potential fine of up to $10,000, and up to one (1) year in jail. On the civil side, a court may award up to three (3) times the amount of the charge paid, back to the consumer. And in both cases, you would be subject to all costs and attorney fees paid by the consumer.

Front 82

Section 9 – Seller Required Title Insurance

Back 82

No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property that title insurance covering the property be purchased by the buyer from any particular title company.



Any seller who violates the provisions of Section 9 will be liable to the buyer in an amount equal to three (3) times all charges made for such title insurance.

Front 83

Section 10 – Escrow Limitations

Back 83

As was discussed above, no lender may keep an escrow account such that anytime over the course of a calendar year, there is more than a two (2) month pad of tax and insurance. Lenders must produce an annual escrow analysis, similar to the initial escrow disclosure at closing. Finally, they must also notify the borrower at least once a year, if there is a shortage in the escrow account.



Penalties for failure to comply with this section can result in the Secretary of HUD assessing a $55 fine per incident, up to a total of $110,000 per year. If the failure was intentional, the fine is $110 per incident with no annual limit.

Front 84

Enforcement - Regulation X

Back 84

Regarding RESPA enforcement matters, it is the policy of the Secretary of HUD to cooperate with Federal, State and/or local agencies having supervisory powers over lenders or other persons with responsibilities under RESPA. Federal agencies with supervisory powers over lenders may use these powers to require compliance with RESPA. In addition, failure to comply with RESPA may be grounds for administrative action by the Secretary of HUD, either under part 24 of Regulation X concerning debarment, suspension, ineligibility of contractors and grantees, or under part 25 of Regulation X concerning the HUD Mortgagee Review Board. Nothing in this paragraph is a limitation on any other form of enforcement which may be legally available.

Front 85

Filing a Complaint

Back 85

The complaint should outline the violation and identify the violators by name, address and phone number. Complainants should also provide their own name and phone number for follow up questions from HUD. Requests for confidentiality will be honored. Complaints should be sent to:

Director, Office of RESPA and Interstate Land Sales
US Department of Housing and Urban Development
Room 9154
451 7th Street, SW
Washington, DC 20410

Front 86

TRUTH-IN-LENDING ACT (TILA)

Back 86

In 1968, the Federal Consumer Credit Act was passed. Title 1 of this act related to Consumer Credit Cost Disclosure, the short title of which was called the Truth-in-Lending Act" (TILA).

Front 87

Purpose of the Truth-in-Lending Act

Back 87

Under the purpose section of the Truth-in-Lending Act, Congress finds: …that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this title to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.

Front 88

Who TILA Protects

Back 88

covers all consumers, where the term consumer is defined as: …The party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes.

Front 89

Regulation Z

Back 89

Under the Consumer Credit Protection Act, Congress gave authority to the Federal Reserve Board of Governors (Fed) to create a set of regulations, "…to carry out the purposes of this Title."



This set of regulations in the Truth-in-Lending Act became know as Regulation Z. Regulation Z has been mandatory since 1982.

Front 90

Provisions of Regulation Z -Regulation Z, which in essence regulates issuance of consumer credit in three main areas

Back 90

First, it created the standard Truth-in-Lending disclosure form used by all mortgage companies. This format was deemed the best way to ensure the informed use of consumer credit, by requiring very specific disclosures about a loan's terms and related cost.
Second, this regulation gave consumers the right to cancel or rescind certain credit transactions that involve a lien on a consumer's principal dwelling.
Third, it created specific regulations related to advertising mortgages, rates and terms. These regulations were obviously necessary to prevent false and/or misleading advertising, and discourage predatory lending.

Front 91

Regulation Z applies to all individuals and/or businesses that offer to, or actually extend credit, when what four conditions are met:

Back 91

1. The credit is offered or extended to consumers,
2. The offering or extension of credit is done regularly,
3. The credit is subject to a finance charge or is payable by a written agreement in more than four (4) installments, and
4. The credit is primarily for personal, family, or household purposes (consumer loans).

Front 92

Regulation Z does not apply to certain exempted transactions which loan transactions would NOT be considered consumer loans

Back 92

1. Commercial loans made to partnerships, corporations, associations or government agencies,
2. Commercial loans also include construction loans, even residential construction loans made directly to consumers,
3. Loans made to finance rental properties that are not owner occupied, or not expected to be owner occupied within one year. (While not required, in practice a TILA disclosure is usually provided on investment property loans to consumers.)
4. Apartment loans made to finance rental properties having five or more units, even if owner occupied, or
5. Loans for more than $25,000 (except loans for the purchase or refinance of one's personal residence, which are always considered consumer loans, regardless of amount).

Front 93

Enforcement of TILA and Reg. Z is provided by what three government entities

Back 93

1. The Federal Trade Commission (FTC) enforces Regulation Z for the real estate industry, as well as most other industries, including the auto industry.
2. The Office of Thrift Supervision (OTS) enforces Regulation Z for savings and loans.
3. The Federal Reserve Board enforces Regulation Z for banks.

Front 94

When is the Truth-in-Lending (TIL) Disclosure provided?

Back 94

at the time of application or within three (3) business days.

Front 95

What other form is required within 3 days after application?

Back 95

Good Faith Estimate

Front 96

TIL must disclose

Back 96

1. finance Charges
2. Annual Percentage Rates (APR)
3. Right to Rescind

Front 97

What is an Annual Percentage Rate (APR)

Back 97

It is the nominal or actual interest rate being charged, plus the total finance charges as calculated above, divided by the total dollar amount of the loan

Front 98

In either of the following circumstances the consumer has a three (3) day right of rescission:

Back 98

Any loan transaction that takes place in the consumer's home. This rule applies even if the loan is for more than $25,000 and does not involve real estate.
Any loan using the consumer's primary residence as refinancing security for the loan must include three or more business days in which the transaction can be cancelled. However, this does not apply when the mortgage is being used by the consumer to purchase, (or for the construction of) his primary residence.

Front 99

The following loan transactions do NOT require a Right of Rescission:

Back 99

As mention above, any transaction used for the purchase of any type of real estate: primary residence, second home, commercial real estate or investment property.
Any loan transaction used in connection with the construction of one's primary residence.
Any loan transaction that refinances a commercial, investment or second home.

Front 100

If the lender fails to notify (disclose) the borrower of his right to rescind at the closing how much time does the borrower have?,

Back 100

The borrower gets three 3 full years to exercise his right to rescind, or until the property is sold (whichever comes first).

Front 101

Who is responsible for enforcing Regulation Z. Enforcement of TILA and Regulation Z?

Back 101

The Federal Trade Commission (FTC) enforces Regulation Z for the real estate industry, as well as most other industries, including the auto industry.

· The Office of Thrift Supervision (OTS) enforces Regulation Z for savings and loans.

· The Federal Reserve Board enforces Regulation Z for banks.

Front 102

What tests are required for a loand to be covered by the Home Ownership Equity Protection Act (HOEPA

Back 102

1. It is for a first-lien loan that is used to refinance a primary residence, the annual percentage rate (APR) exceeds the rates on Treasury securities of comparable maturity by more than eight (8) percentage points.

2. It is for a second-lien loan, that is a closed-end installment type of second, the APR exceeds the rates on Treasury securities of comparable maturity by more than by ten (10) percentage points.

3. The total fees and points payable by the consumer at or before closing exceed the larger of $561 or eight percent (8%) of the total loan amount. Credit insurance premiums for insurance written in connection with the credit transaction are counted as fees.

Front 103

TIL must disclose

Back 103

1. finance Charges
2. Annual Percentage Rates (APR)
3. Right to Rescind

Front 104

What is an Annual Percentage Rate (APR)

Back 104

It is the nominal or actual interest rate being charged, plus the total finance charges as calculated above, divided by the total dollar amount of the loan

Front 105

In either of the following circumstances the consumer has a three (3) day right of rescission:

Back 105

Any loan transaction that takes place in the consumer's home. This rule applies even if the loan is for more than $25,000 and does not involve real estate.
Any loan using the consumer's primary residence as refinancing security for the loan must include three or more business days in which the transaction can be cancelled. However, this does not apply when the mortgage is being used by the consumer to purchase, (or for the construction of) his primary residence.

Front 106

The following loan transactions do NOT require a Right of Rescission:

Back 106

As mention above, any transaction used for the purchase of any type of real estate: primary residence, second home, commercial real estate or investment property.
Any loan transaction used in connection with the construction of one's primary residence.
Any loan transaction that refinances a commercial, investment or second home.

Front 107

If the lender fails to notify (disclose) the borrower of his right to rescind at the closing how much time does the borrower have?,

Back 107

The borrower gets three 3 full years to exercise his right to rescind, or until the property is sold (whichever comes first).

Front 108

Who is responsible for enforcing Regulation Z. Enforcement of TILA and Regulation Z?

Back 108

The Federal Trade Commission (FTC) enforces Regulation Z for the real estate industry, as well as most other industries, including the auto industry.

· The Office of Thrift Supervision (OTS) enforces Regulation Z for savings and loans.

· The Federal Reserve Board enforces Regulation Z for banks.

Front 109

What tests are required for a loand to be covered by the Home Ownership Equity Protection Act (HOEPA

Back 109

1. It is for a first-lien loan that is used to refinance a primary residence, the annual percentage rate (APR) exceeds the rates on Treasury securities of comparable maturity by more than eight (8) percentage points.

2. It is for a second-lien loan, that is a closed-end installment type of second, the APR exceeds the rates on Treasury securities of comparable maturity by more than by ten (10) percentage points.

3. The total fees and points payable by the consumer at or before closing exceed the larger of $561 or eight percent (8%) of the total loan amount. Credit insurance premiums for insurance written in connection with the credit transaction are counted as fees.

Front 110

TIL must disclose

Back 110

1. finance Charges
2. Annual Percentage Rates (APR)
3. Right to Rescind

Front 111

What is an Annual Percentage Rate (APR)

Back 111

It is the nominal or actual interest rate being charged, plus the total finance charges as calculated above, divided by the total dollar amount of the loan

Front 112

In either of the following circumstances the consumer has a three (3) day right of rescission:

Back 112

Any loan transaction that takes place in the consumer's home. This rule applies even if the loan is for more than $25,000 and does not involve real estate.
Any loan using the consumer's primary residence as refinancing security for the loan must include three or more business days in which the transaction can be cancelled. However, this does not apply when the mortgage is being used by the consumer to purchase, (or for the construction of) his primary residence.

Front 113

The following loan transactions do NOT require a Right of Rescission:

Back 113

As mention above, any transaction used for the purchase of any type of real estate: primary residence, second home, commercial real estate or investment property.
Any loan transaction used in connection with the construction of one's primary residence.
Any loan transaction that refinances a commercial, investment or second home.

Front 114

If the lender fails to notify (disclose) the borrower of his right to rescind at the closing how much time does the borrower have?,

Back 114

The borrower gets three 3 full years to exercise his right to rescind, or until the property is sold (whichever comes first).

Front 115

Who is responsible for enforcing Regulation Z. Enforcement of TILA and Regulation Z?

Back 115

The Federal Trade Commission (FTC) enforces Regulation Z for the real estate industry, as well as most other industries, including the auto industry.

· The Office of Thrift Supervision (OTS) enforces Regulation Z for savings and loans.

· The Federal Reserve Board enforces Regulation Z for banks.

Front 116

What tests are required for a loan to be covered by the Home Ownership Equity Protection Act (HOEPA

Back 116

1. It is for a first-lien loan that is used to refinance a primary residence, the annual percentage rate (APR) exceeds the rates on Treasury securities of comparable maturity by more than eight (8) percentage points.

2. It is for a second-lien loan, that is a closed-end installment type of second, the APR exceeds the rates on Treasury securities of comparable maturity by more than by ten (10) percentage points.

3. The total fees and points payable by the consumer at or before closing exceed the larger of $561 or eight percent (8%) of the total loan amount. Credit insurance premiums for insurance written in connection with the credit transaction are counted as fees.

Front 117

Enforcement of TILA and Regulation Z is provided by the following government entities:

Back 117

1. The Federal Trade Commission (FTC) enforces Regulation Z for the real estate industry, as well as most other industries, including the auto industry.

2. The Office of Thrift Supervision (OTS) enforces Regulation Z for savings and loans.

·3. The Federal Reserve Board enforces Regulation Z for banks.

Front 118

There are both criminal and civil penalties that apply in cases of violation of the Truth-in-Lending Act (TILA)

Back 118

Criminal Liability - For willful and knowing violation of TILA, you may be fined not more than $5,000, and/or imprisoned not more than one year.
*In the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $200 or greater than $2,000.
*In the case of a class action, such amount as the court may allow, up to the lesser of $500,000 or one percent of the net worth of the creditor




Civil Liability - You may be held liable for any actual damage sustained by the consumer, as a result of the failure. You may also be fined as follows:

Front 119

HOME MORTGAGE DISCLOSURE ACT 1975 (HMDA)

Back 119

In 1975, Congress passed the Home Mortgage Disclosure Act. The Act is implemented by the Federal Reserve Board's Regulation C.

Front 120

What is the purpose of the Home Mortgage Disclosure Act?

Back 120

purpose, according to the Home Mortgage Disclosure Act, is threefold. It is intended to:

- Help determine whether financial institutions are serving the housing needs of their communities;
- Assist public officials in distributing public-sector investment so as to attract private investment to areas where it is needed; and
- Assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes.

Front 121

Lenders are required to maintain records of the following pieces of data

Back 121

1. Loan Purpose
2. Loan Type
3. General Loan Information:
4. Property Location
5. How Application Was Taken
6. Applicant Information:
7. Purchased Loans
8. Pricing-Related Data
9. Lien Status
10. Denial Reasons and Other Data
11. Excluded Loans

Front 122

Loan Purpose

Back 122

Lenders must keep track of whether a loan is for a purchase, home improvement, or refinance; and if the property will be owner occupied, or an investment property.

Front 123

Loan Type

Back 123

Lenders must identify whether the type of loan request is for a conventional, FHA insured, VA guaranteed, or a Farm Service Agency loan.

Front 124

General Loan Information

Back 124

-Loan amount
-Application date
-Action date
-Type of action (approve, decline, etc.)

Front 125

Property Type

Back 125

-One to four family dwelling or multifamily
-Leasehold or fee simple
-Mobile, modular or manufactured housing

Front 126

Property Location

Back 126

The lender must identify the location of the property including the MSA (Metropolitan Statistical Area), MD (Metropolitan District), census tract, and/or state or county codes.

Front 127

How Application Was Taken

Back 127

The lender must note if the application was taken in person, by mail, by telephone, or via the internet.

Front 128

Applicant Information

Back 128

Ethnicity
Race
Sex
Gross annual income
Note: Applicants are not required to furnish information about race, ethnicity or sex. However, for applications taken in person, the interviewer must make an educated guess from the applicant's appearance and/or surname

Front 129

Purchased Loans

Back 129

When the lender originates and sells a loan in the same calendar year, it must note the type of entity that purchased the loan, but not the specific institution

Front 130

Pricing-Related Data

Back 130

Institutions must report the rate spread between the annual percentage rate (APR) on the loan at consummation of the transaction, and the yield on comparable term Treasury security.

Lender must keep track if the spread is equal to or greater than three (3) percentage points for first lien loans, and
If the spread is equal to or greater than (5) five percentage points for subordinate-lien loans.
Lenders must also report if the loan is subject to the Home Ownership and Equity Protection Act (HOEPA).
The lender is exempt from the rate spread requirement for the following transactions:

- Applications that are incomplete, withdrawn, denied, or approved but not accepted.
- Purchased loans
- Home-improvement loans not secured by a dwelling
- Home equity lines of credit
- Assumptions
- Loans not subject to Regulation Z

Front 131

Lien Status

Back 131

The lender must identify whether the loan will be secured by a first or subordinate lien (or in the case of a mobile home, not secured by real estate).