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101 Cards in this Set
- Front
- Back
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What is the Safe Act? |
The SAFE Act is Secure and Fair Enforcement act for mortgage lending of 2008 and enacted by Congress setting forth requirements for the licensing and registration of all mortgage loan originators. |
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Who is required to be registered under the SAFE act? |
Loan originators who work for an insured depository or its owned or controlled subsidiary are required to become registered. All other loan originators are to be licensed by the states. |
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Which exams are state licensed loan originators required to pass? |
A written exam, including a National Component and a state specific component for each state that they wish to become licensed in. |
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Who oversees the creation and administration of the entire examination? |
The Nationwide Mortgage Licensing System and registry. (NMLS-R) |
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How many test questions are on the national test? |
125 |
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What are the sections of the national exam? |
Federal mortgage related laws General mortgage knowledge Mortgage loan origination activities Ethics Uniform State Content |
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What is RESPA? |
The Real Estate Settlement and Procedures Act. |
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What is the purpose of RESPA? |
Allows borrowers to receive pertinent and timely disclosure regarding the closing fees and protects consumers against abusive practices. It also places limitations on reserve accounts. |
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When must a mortgage professional obey RESPA? |
When a loan is being secured for a 1 to 4 residential property. |
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What kinds of transactions does not apply to RESPA? |
Commercial properties, vacant land, or properties with 25 or more acres. Temp financing, bridge loans and construction loans are also exempt. |
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Where are the rules for RESPA found? |
Regulation X |
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Who is responsible for enforcing RESPA? |
The Consumer Financial Protection Bureau. |
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What are the penalities associated with not complying with RESPA? |
Still financial and criminal penalties. Suspension or revokation of an MLO's license. |
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How many days after a loan app do lenders have to issue documents? |
3 business days |
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What are the documents required within 3 days of receiving a loan application? |
Good Faith Estimate Mortgage Loan Servicing Disclosure Hud's info booklet on Settlement Costs (if purchasing) |
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What is a business day described at in RESPA? |
Any date on which the creditor is open to the public for carrying on substantially all of the creditors business functions.
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What pieces of information must a loan application contain? |
Borrower name, ss#, property address, income, estimate of value of the home, loan amount? |
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What is the GFE? |
Good Faith Estimate |
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What are the items with zero tolerance as a difference on the GFE and HUD-1?` |
Origination Charge Credit/charge for interest rate Tax Transfer |
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What are the items with 10% tolerance as a difference on the GFE and HUD-1? |
Required services selected by originator Title Services Owner's title insurance Required services borrower can shop for Gov't recording charges
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What are the items with unlimited tolerance as a difference on the GFE and HUD-1? |
Escrow deposit Daily interest charges Homeowners insurance
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What are the items the borrower can shop for? |
Title services Owners title insurance Required services Gov't recording charges |
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When is the 10% tolerance not in affect? |
Only applies if a service provider appearing on the originator's service provider list is used. If another provider is used, the tolerance does not apply. |
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What is another name for the Uniform Settlement Statement? |
HUD-1 |
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What does the HUD-1 set forth? |
A complete list of the actual settlement costs that will be charged at the closing. |
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How far in advance does the lender have to have the HUD-1 available for the borrower to review? |
One business day prior to settlement. |
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What does UDAAP stand for? |
unfair, deceptive or abusive act or practice |
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What must the lender do if any of the tolerances are exceeded? |
The loan originator must cure the tolerance violation by reimbursing the borrower the amount by which the tolerance was exceeded. |
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How long does the lender have to reimburse the borrower if a tolerance is exceeded? |
Within 30 calendar days after settlement |
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What is a changed circumstance? |
A changed circumstance is an event or piece of information that is discovered after the issuance of a GFE. |
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What are some examples of changed circumstances? |
A war, disaster or act of God or other emergency Inaccurate information originally provided to the loan originator Information not given to the loan originator |
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Occurences that could lead to a changed circumstance are: |
Borrower's income changes or was stated incorrectly Property appraises for less that the borrower's estimate of value The loan amount requested by the borrower changes Previously undisclosed liens are discovered Aspects of a government program change Inaccurate property address Use of property changes from primary to non owner occupied Borrower's credit score changes Property dispute or environmental issue materializes |
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What are some events that do NOT amount to a changed circumstance under RESPA? |
A GFE issued by a mortgage broker is not accepted by a lender A GFE is based on one lender's products and fees but the loan is done by another lender Fluctuations in the market occur |
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If the terms or cost of the GFE change because of a changed circumstance, how long does the lender have to provide a revised GFE to the borrower? |
3 business days from learning of the changed circumstance |
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What is the Mortgage Loan Servicing Disclosure? |
It provides notice regarding the lender's practices of transferring or retaining the servicing of the loan. |
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What does it mean to service a loan? |
Servicing refers to the process of collecting the principal, interest, and escrow account payments on the loan, sending required notices and handling all borrowers inquiries. |
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How long does the lender have to provide the borrower with the Mortgage Loan Servicing Disclosure? |
Within 3 business days of the loan application. |
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What is the Servicing Disclosure Disclosure? |
Informs the borrower that his or her loan has been transferred to another servicer. |
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What is the name of the booklet that must be provided to all borrowers on purchase transactions? |
HUD's Special Information Booklet on Settlement Costs. |
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When must the HUD Special Information Booklet on Settlement Costs be given to a borrower? |
Within 3 business days of the loan application |
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What are the other 2 disclosures that RESPA requires? |
Affiliated Business Arrangement Disclosure (AfBA) Service Transfer Disclosure |
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What is the Affiliated Business Arrangement Disclosure? |
Informs mortgage applicants of any service providers that may be used in the loan transaction that are affiliated with the lender. |
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When does an affiliate business arrangement exist? |
When the referring party has a greater than 1% ownership interest in the business receiving the referral, |
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When does the law require that the Affiliated Business Arrangement Disclosure be provided to the borrower? |
The disclosure must be provided to the borrower no later than the time the referral to the affiliated business is made.
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When must the Servicing Transfer Disclosure be provided to the borrower? |
No later than 15 days BEFORE servicing rights are transferred to the new institution. |
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By what other name is the Servicing Transfer disclosure known? |
The goodbye letter. |
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True or False? RESPA prohibits kickbacks and unearned fees. |
True |
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What is a changed circumstance? |
A changed circumstance is an event or piece of information that is discovered after the issuance of a GFE. |
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Give some examples of a changed circumstance. |
A war, a disaster, act of God or other emergency. Information about the borrower or property that was inaccurately provided to the loan originator at the time of initial application, and information given to the loan originator that he could not have known at the time of the application. |
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Give some examples of occurrences that could lead to a changed circumstance. |
borrower's name changes or was stated incorrectly, property appraises for less that borrowers estimate of value, the loan amount requested by the borrower changes, previous undisclosed liens are discovered, government loan program changes, incorrect property address, use of property changes from owner occupied to non-owner occupied, borrowers credit score changes, environmental issue materializes. |
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Give some examples of events that do NOT amount to a changed circumstance under RESPA. |
A GFE issued by a mortgage broker that is not accepted by a lender, fluctuations in the housing market, or GFE is based on one lenders products and fees but the loan is funded by another lender. |
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HUD's Special Information Booklet on Settlement Costs must be given to whom and when? |
Borrowers on purchase transactions within 3 business days of the loan application. |
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What is a kickback? |
A kickback is generally payment, either monetary or something of value, to a 3rd party in return for the referral of a client, customer or business. |
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What are possible penalties for providing kickbacks? |
A violator may be fined up to $10K and/or imprisoned for up to one year for providing kickbacks. |
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What kinds of things does a thing of value constitute? |
Gift cards, advertising space, marketing materials bearing a real estate agent's information to give to his/her clients and donations to a favorite charity, among others. |
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True or False...RESPA does not prohibit joint marketing efforts on the part of loan originators and real estate agents. |
True. |
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What is the maximum cushion for escrow accounts according to RESPA? |
1/6th or 2 months. |
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What is the Notice of Escrow Analysis? |
A summary of the account at closing and once per year for as long as the loan is in force. The summary form shows payments into and disbursements from the account. |
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What is the type of insurance that protects against defects in title that were not listed in a title report and protects the lender from claims against the priority of the lien of the lender's mortgage? |
Title Insurance |
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According to RESPA, can a lender require a borrower to use a particular title insurance company? |
NO. |
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What is the ECOA? |
The Equal Credit Opportunity Act prohibits discrimination in the granting of all types of credit on the basis of: Race, color, religion, National Origin, Sex, Marital Status, Age, Receipt of income from public assistance. |
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What is the Federal Regulation that implements ECOA? |
Regulation B |
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Who does rulemaking and enforcement power regarding ECOA belong to? |
Consumer Financial Protection Bureau. |
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Under ECOA, is it legal to ask a borrower whether any portion of their income is derived from alimony, child support or public assistance? |
No, it is illegal to do so. And a borrower does not need to disclose them if they chose not to. |
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Give an example of the proper way to ask a borrower about additional income they may want to disclose? |
Are there any other sources of income you wish to disclose to me? |
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Is it permissible to ask the applicant marital status? |
Yes, but if they are not legally married, you may not ask if he/she is divorced, widowed, etc. |
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What are the only 3 choices on the loan application in regard to marital status? |
Married, unmarried and separated. |
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What is the time frame for notifying borrower of an adverse action or denial? |
30 days after receiving the completed loan application. |
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What is Overt Discrimination? |
Discrimination that is explicit or obvious. An example would be advertising that indicates that members of a particular class are not welcome at an institution. |
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What is Disparate Treatment? |
Treating different classes differently. For example, shaking the hand of one race and not another. |
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What is Disparate Impact? |
It is a method of identifying discrimination through statistical analysis. |
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What is the Truth in Lending Act? |
The purpose of TILA is to promote the informed use of customer credit by requiring disclosure about it's terms and cost. |
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What is the broader piece of legislation TILA belongs to called? |
The Consumer Credit Protection Act of 1968. TILA is actually Title 1 of this Act. |
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What does TILA help consumers do? |
Helps consumers compare costs including rates and fees when shopping for a mortgage loan. |
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What is the best way for consumers to avoid abusive lending practices? |
PRICE COMPARING! |
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Which regulation is the federal regulation that implements TILA? |
Regulation Z |
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Who oversees rule making and enforcement power under TILA? |
The Consumer Financial Ptotection Bureau. |
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What does TILA require lenders do? |
Disclose the credit terms and conditions of a loan contract. |
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What is the disclosure outlining credit terms and conditions of a loan called? |
Truth in Lending (TIL) Disclosure |
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What must the TIL contain? |
APR of a loan, finance charge, amount financed, total of payments over the life of a loan, an interest rate and payment summary, information on any prepayment penalty and information on charges imposed for any late payments. |
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What is the APR? |
Annual Percentage Rate is the estimated total cost of credit over the live of the loan, expressed as an effective annual interest rate.
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What does the APR include? |
The interest, discount points, origination fees, mortgage insurance premiums and other costs of borrowing money. |
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What is the finance charge? |
It is the total cost of the loan in dollars, including interest, points, mortgage insurance, admin fees, or any other charge paid directly or indirectly by the consumer. |
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What does the finance charge not include? |
Deposits into escrow accounts, appraisal fees, or pest inspection fees paid prior to the closing. |
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What is an Adjustable Rate Mortgage? |
An ARM is a mortgage loan with an interest rate that can go up or down during the life of the loan. |
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What must lenders furnish to borrowers if offering ARMS? |
An additional special disclosure that provides a number of historical facts about ARMs as well as a CHARM (Consumer Handbook on Adjustable Rate Mortgages) booklet issued by the Federal Reserve. |
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The ARM disclosures must be provided within the same period as the TIL disclosure. How many days? |
3 business days |
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What are trigger terms? |
The amount or percentage of down payment The number of payments or period of repayment The amount of any payment The amount of any finance charge |
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When trigger terms are used, what must also be stated? |
The amount or percentage of the down payment, the terms of repayment, the annual percentage rate. |
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TILA requires that purchase or acquire mortgage loans to notify the borrowers and provide the name, address and phone number of the new owner of the mortgage as well as the location where the transfer of ownership in the mortgage loan is recorded in what time frame? |
Within 30 days of acquisition. |
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What is the right to cancel certain credit transactions called? |
Right of Rescission |
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For which type of transactions if the right of rescission required? |
For refinance transactions on a borrowers principal residence. |
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If a borrower rescinds, what refunds is he entitled to? |
Entitled to a full refund of any funds given to anyone connected with the transaction, including appraisal fees and credit report fees, even if the originating company has incurred an expense related to these charges. |
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The period within which the borrower may exercise the right to rescind runs through 3 business days from what 3 events? |
Signing of loan documents, delivery of all material disclosures, delivery to the borrower of 2 copies of the required rescission notice. |
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Which days cannot be counted in the 3 day count? |
Sundays and holidays. Saturdays may be counted if it is a regular business day for the lender. Day of signing is not included. |
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What is HPML? |
Higher Priced Mortgage Loans or Section 35 loans. |
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What are some requirements for HPML loans? |
Borrower must escrow for a minimum of 5 years, lender is prohibited from charging a pre-payment penalty if the loans interest rate can adjust in the first four years of the loan term. |
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What ability to repay requirements extended to all mortgage loans on primary residences and second homes beginning on January 10, 2014? |
Borrowers income, assets, credit and debt to income ratio. |
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When is a loan considered a Higher priced mortgage loan>? |
When it's APR exceeds the Average Prime Offer Rate (APOR) published weekly by the Federal Financial Institutions Examination Council (FFIEC) by 1.5% for first lien loans or 2.5% for jumbo first lien loans and 3.5% for subordinate liens. |
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What is HOEPA? |
Home Ownership and Equity Protection Act |
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What features can a loan subject to HOEPA not contain? |
Balloon payments, negative amortization or prepayment penalty. It can also not be refinanced within 1 year unless doing so would create a tangible benefit for the borrower. |
