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92 Cards in this Set

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What are the penalties for violation of the GLB Act?
Gramm-Leach-Bliley doesn’t include any specific penalties but authorized regulating agencies to bring enforcement actions and impose penalties. The FTC can bring action against mortgage brokers under the Federal Trade Commission Act. This Act provides for penalties of up to $10,000.
An Opt-Out Notice is due…
At the same time as the Initial Privacy Notice – when a customer relationship is established. The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an Opt-Out Notice with a method for customers to opt-out of the sharing of their personal information.
Nonpublic personal information is…
Information derived from a credit report or provided with respect to loan application. Examples might include loan balances, account numbers, unlisted phone numbers, etc. Nonpublic personal information is protected by the provisions of the Gramm-Leach-Bliley Act.
The Gramm-Leach-Bliley Act does NOT protect…
Publically available information. This includes information that can be found in government real estate records, information available from the phonebook and information included on a public, unrestricted website.
The Gramm-Leach-Bliley Act requires…
Financial institutions to provide customers with a privacy notice as well as an opt-out notice. This is aimed at protecting their nonpublic personal information.
The Safeguards Rule and Disposal Rule are…
Concerned with preserving the confidentiality of personal financial information. The FTC’s Disposal Rule and the Gramm-Leach-Bliley Safeguards Rule outline the manner in which financial information must be protected when it is maintained and when it is disposed of.
TILA was enacted to…
Protect consumers in credit transactions. Congress enacted TILA in 1968 as an attempt to help inform consumers about the cost of credit. TILA includes disclosure requirements on the terms of credit transactions in order to protect consumers from unfair treatment by creditors.
YSP must be disclosed on…
Both the GFE and HUD-1. Updated versions of the documents issued by HUD include a mandatory section for the disclosure, although it is not specifically called “YSP.”
Yield spread premium is…
An amount paid by the lender to a third party originator for locking a borrower’s interest rate at a rate higher than par. The intent of YSP is to help subsidize closing costs for a borrower in exchange for taking a higher rate.
The Good Faith Estimate must…
Reasonably reflect closing costs. Although it is considered an estimate and is subject to change, the ethical expectation is that the figures are as close as possible.
Disclosures due within three business days of loan application…
Good Faith Estimate (RESPA)
Truth-in-Lending Disclosure Statement (TILA)
Mortgage Servicing Disclosure Statement (RESPA)
CHARM Booklet (TILA)
Variable rate program disclosures (TILA)
Settlement Cost Booklet (RESPA)
What is the definition of “creditor?”
The Equal Credit Opportunity Act (ECOA), the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA) [including the FTC Red Flag Rules] all use the same definition of creditor. A creditor is any person who regularly extends, renews or continues credit. Loan originators, lenders and other mortgage professionals are included in this definition.
Transactions reported under HMDA…
Purchases
Refinances
Home improvement loans
Pre-qualifications must also be reported, along with their disposition
When a borrower’s LTV reaches 80%...
He/she is permitted to request discontinuation of PMI (private mortgage insurance). The Homeowner’s Protection Act sets the requirements for discontinuation of PMI. It is at the lender’s discretion to permit the discontinuation at 80% LTV – the borrower must be current on payments.
An initial privacy notice is due…
At the time a customer relationship is established. The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an initial privacy notice “…not later than when you establish a customer relationship….” The initial privacy notice should also be accompanied by the opt-out notice.
HMDA requires loan originators to…
Request information on an applicant’s race, ethnicity and sex. The applicant may decline to answer, in which case the loan originator must make a best guess based on visual observation. This information is necessary to meet the reporting requirements of HMDA.
A permissible purpose is required…
When obtaining a credit report. Under FCRA, lenders and mortgage professionals (also known as “users”) must provide the consumer reporting agency with a certification of permissible purpose in order to pull credit. Loan qualification is considered a permissible purpose.
Info on the cost of credit results in…
The informed use of credit by consumers. The Consumer Credit Protection Act (CCPA) states “Congress finds that economic stabilization would be enhanced by the informed used of credit. The informed use of credit results from an awareness of the costs thereof by consumers.”
Exemptions under ECOA…
Although ECOA prohibits inquiries about protected personal characteristics, mortgage professionals are permitted to ask about race, ethnicity, sex and marital status for the purposes of compliance with government monitoring programs (such as HMDA). Inquiries about protected characteristics may also be used to determine eligibility for special-purpose credit such as assistance programs through non-profits.
Purpose of the Homeowner’s Protection Act…
The Homeowner’s Protection Act was enacted to facilitate the cancellation of private mortgage insurance (PMI). Borrowers can request cancellation when their loan reaches 80% loan-to-value (20% equity) but the law requires automatic discontinuation of PMI at 78% LTV (22% equity).
What is the Mortgage Servicing Disclosure Statement?
The Mortgage Servicing Disclosure Statement discloses to a loan applicant if servicing may be sold during the term of their loan. It applies to first-lien mortgages only and must be provided within 3 business days of application.
Regulation B…
Is the regulation for the Equal Credit Opportunity Act.
Disclosures due within 30 days of application…
All required by Equal Credit Opportunity Act (ECOA):
Notice of Action Taken
Notice of Adverse Action (if applicable)
Notice of Incomplete Application (if applicable)
Notice of Right to Receive an Appraisal Report (with Notice of Adverse Action)
Credit NOT covered by TILA…
Business or agricultural credit
Credit in excess of $25,000, UNLESS it is secured by a dwelling/real property
Public utility credit
Student loans
Home fuel budget plans
When a borrower reaches a 20% equity position…
He/she is permitted to request discontinuation of PMI (private mortgage insurance). The Homeowner’s Protection Act sets the requirements for discontinuation of PMI. It is at the lender’s discretion to permit the discontinuation at 80% LTV – the borrower must be current on payments.
What purpose does escrow analysis serve?
An aggregate escrow analysis (Annual Escrow Statement) is provided to borrowers annually, pursuant to Section 10 of RESPA. Its purpose is to prevent escrow overages. According to Section 10, the cushion of funds maintained in the escrow account cannot exceed 1/6th (2 months) of the annual cost of taxes and insurance.
Regulation X…
Is the regulation for the Real Estate Settlement Procedures Act.
Who issues regulations for TILA?
The Board of Governors of the Federal Reserve (Federal Reserve Board) issues regulations for the Truth-in-Lending Act. Enforcement is handled by the various federal banking agencies. The Federal Trade Commission (FTC) has overall enforcement authority for compliance with TILA – particularly for mortgage professionals who are not employed by a federally regulated/depository institution.
When must APR be re-disclosed?
Mortgage professionals/lenders are required to re-disclose the APR prior to closing if there are any changes which make it vary by more than 1/8th of 1%. Regardless of any variance, the TIL Disclosure Statement, which includes APR, must be re-disclosed 3 business days prior to settlement.
A three year right of rescission may occur when…
A loan originator/lender fails to correctly provide a Notice of the Right to Cancel or fails to provide the borrower with proper material notices required under TILA. This includes the APR, finance charge, amount financed, number of payments and payment schedule.
Protected characteristics under ECOA…
Marital status
Sex
Race
Color
Religion
National origin
Age
Purpose of HMDA…
The Home Mortgage Disclosure Act is a reporting law that helps the federal government identify discriminatory lending practices. It also ensures that depository institutions are meeting the needs of their communities. HMDA requires mortgage professionals to report information about loan transactions and demographics (race, sex, etc.) of applicants.
When multiple parties have rescission rights…
Any one of them may exercise the right to terminate the transaction. Under TILA/Reg Z an individual has rescission rights when he/she has an ownership interest in the property. The individual does not necessarily have to be a party to the loan transaction.
If an ad states the rate of finance, it must…
include “annual percentage rate.” APR is required in advertisements which use trigger terms. The goal is to ensure consumers are advised of all terms of a loan and not just the most attractive ones.
Under TILA, business days are…
Every day except for Sundays and federal holidays. Saturdays are included in business days. This is very important when calculating the time period allotted for rescission.
What is the Servicing Transfer Statement?
Required under Section 6 of RESPA, the Servicing Transfer Statement advises a borrower when the servicing on their loan has been transferred to another servicer. It must be provided 15 days prior to the servicing transfer. The new servicer must also provide notice within 15 days after the transfer and may not assess late fees for a period of 60 days following the transfer.
When is the GFE provided?
Within 3 business days following application. If the loan application is completed in a face-to-face interview, the disclosure is due at the time of application.
Title charges (on the GFE) include…
Cost of the title search
Title insurance premiums
Notary fees
TILA covers loans when…
The borrower’s dwelling secures the mortgage debt
The homeowner uses the proceeds of the loan for personal, family or household purposes
Prohibitions under ECOA…
Inquiries about protected characteristics
Discouraging applicants from applying for a loan (also called steering)
Refusing to consider public assistance, alimony/child support or pension/retirement benefits as income
Assuming a woman will stop work to raise children
What is PMI?
Private mortgage insurance is required by conventional lenders when a borrower makes a down payment less than 20% (or has less than 20% equity). It is governed by the Homeowner’s Protection Act and must be discontinued when the loan reaches 78% loan-to-value (22% equity).
Regulation Z…
Is the regulation for the Truth-in-Lending Act.
What is the Notice of Right to Cancel?
It is a disclosure providing notice of the right to rescind certain lending transactions. It is due at closing for refinances and other types of home equity loans such as HELOCs. Two copies must be provided to each person with ownership interest in the property.
When is the Mortgage Servicing Disclosure provided?
Within 3 business days following application. If the loan application is completed in a face-to-face interview, the disclosure is due at the time of application.
Requirements for the Settlement Cost Booklet…
Only one copy required for multiple borrowers
Can be reproduced in any form
Can be translated into other languages
Can be stamped with business/mortgage professional’s name
Can NOT be made part of other larger documents
What is APR?
The Annual Percentage Rate is the cost of credit expressed as a percentage. It includes the interest on the loan as well as any charges financed. It must be disclosed to a consumer within 3 business days of loan application, and at least 7 business days before closing, along with the finance charge, and must be accurate within 1/8th of 1%.
Loans NOT covered by RESPA…
Loans for:
25 acres or more
Business, commercial or agricultural purposes
Temporary financing (bridge loans)
Vacant land
Loan conversions
Prepaid items (on the GFE) include…
Costs due at closing which are payable at some point in the future (funds are placed in escrow):
Pro-rated real estate taxes
Homeowner’s insurance premiums
Flood insurance premiums
Private mortgage insurance premiums
Interim interest (per diem interest)
What are the penalties for violations of ECOA?
Violators of ECOA can face civil penalties of $5,000 per day. A pattern of misconduct can result in civil penalties of $25,000. Punitive damages can result in fines of up to $10,000 in individual actions or the lesser of $500,000/1% of the violator’s net worth.
Purpose of FCRA…
The Fair Credit Reporting Act (FCRA) is aimed at ensuring the accuracy, fairness and privacy of consumers’ personal information that is assembled and used by consumer reporting agencies.
When a borrower reaches a 22% equity position…
PMI must be automatically discontinued. The Homeowner’s Protection Act sets the requirements for discontinuation of PMI.
Phone #’s remain on the Do-Not-Call Registry….
Indefinitely. Amendments to the Telemarketing Sales Act in 2007 permit consumers to place their telephone numbers on the Registry indefinitely.
Prepayment penalties appear on what documents?
The Truth-in-Lending Disclosure Statement and the promissory note.
What is the TIL Disclosure?
The Truth-in-Lending Disclosure Statement provides loan applicants with the cost of credit expressed as a percentage (the APR) and as a dollar amount (finance charge). It must be provided within 3 business days of loan application.
After loan servicing is transferred…
The new servicer CANNOT assess late fees for a period of 60 days if payment was made to prior servicer.
What is the finance charge?
The finance charge is the cost of credit expressed as a dollar amount. Finance charges include interest and other fees paid in conjunction with the loan transaction such as broker fees, points and property/liability insurance premiums. It must be disclosed to a consumer within 3 business days of loan application, along with the APR, and must not be understated by more than $100.
Who has the right to rescind a loan transaction?
Anyone who has an ownership interest in the property, even if they are not listed as a borrower on the mortgage.
Civil action under ECOA…
Must be taken by consumers within 2 years of a violation. An exception is if an Attorney General initiates civil within two years, the aggrieved consumer may take action within one year of the initiation of proceedings, even if it exceeds the initial two year requirement.
Disclosures due three business days prior to closing…
Truth-in-Lending Disclosure Statement – re-disclosure of APR.
When a borrower’s LTV reaches 78%...
PMI must be automatically discontinued. The Homeowner’s Protection Act sets the requirements for discontinuation of PMI.
What is the HUD-1A?
The HUD-1A is specifically used for refinance transactions. Just like the HUD-1 Settlement Statement, it provides the final disclosure of actual closing costs, expressed in dollar amounts. It is provided at settlement, although it must be made available one day prior if the borrower requests it.
ECOA’s purpose…
The Equal Credit Opportunity Act is aimed at promoting the availability of credit to all creditworthy applicants regardless of their race, color, religion, national origin, sex, marital status or age. It also prohibits discrimination against credit applicants based on receipt of public assistance or participation in credit counseling programs (exercise of rights under the Consumer Credit Protection Act).
Government charges (on the GFE) include…
Charges to record the mortgage
Transfer tax
Other charges established by the state or municipality
What are “things of value?”
Under RESPA, “things of value” are any payment, advance, loan or service including: money, discounts, commissions, salaries, stock, opportunities to participate in a money-making program, special banking terms, tickets to theatre or sporting events, services at special rates, and trips at another’s expense. Things of value are illegal when they are provided in exchange for referrals.
Payment of referral fees is…
A violation of RESPA/Regulation X. Referral fees are considered unearned fees under RESPA. Any “thing of value” (money, gifts, discounts, etc.) given in exchange for a business referral is illegal under Section 8 of RESPA.
The Notice of Right to Cancel is required…
For refinances and other home equity loans such as HELOCs. The loan must be secured by the borrower’s principal residence. The right to cancel (rescind) the loan must be exercised within three business days of closing.
Penalties for violation of the Telemarketing Sales Rule…
Violation of the Telemarketing Sales Rule (including Do-Not-Call provisions) is a violation of the Federal Trade Commission Act. Penalties are $16,000 for each violation – for continued violations, each day is considered a separate violation.
The APR and finance charge must appear on…
The Truth-in-Lending Disclosure Statement. It is due within 3 business days following application and no less than 7 business days prior to closing. TILA/Reg Z require these two terms to be displayed prominently and suggest that they are presented with a box around them.
What is the Notice of Adverse Action?
Under ECOA loan applicants must be advised of the status of their application within 30 days of application. If their application is turned down, they must receive a Notice of Adverse Action advising them of the reason for denial as well as a number of other rights.
RESPA’s purpose…
To protect consumers from excessive settlement costs and unearned fees. And to provide consumers with information on closing costs so they can shop for settlement services.
What must occur within 20 days of rescission?
The lender must return any money or property paid by the borrower in connection with the loan. This might include broker fees, application fees and third party settlement fees.
A Good Faith Estimate is NOT due…
Until the loan application has been completed and, in the case of a purchase money mortgage, until the subject property has been identified.
Accepting a referral fee can lead to…
Fines of up to $10,000 and one year in prison. Accepting a fee in exchange for a referral is a violation of RESPA/Reg X.
TILA’s purpose…
The Truth-in-Lending Act is a consumer protection law aimed at providing consumers with disclosure of the cost and terms of credit. It also ensures advertisements are truthful and allows borrowers to rescind (cancel) certain types of transactions.
Purpose of Do-Not-Call provisions…
The Do-Not-Call Implementation Act was passed under the Telemarketing Consumer Fraud and Abuse Prevention Act/Telemarketing Sales Rule. It is a consumer protection law that permits consumers to restrict unwanted sales calls to their homes.
What is the Settlement Cost Booklet?
The Settlement Cost Booklet – or Information Booklet – provides information on the settlement process, explains consumer rights under RESPA and warns against the use of false information on the loan application. It applies to purchase transactions only and is due within 3 business days of application.
What is the HUD-1?
The HUD-1 Settlement Statement is the final disclosure of actual closing costs, expressed in dollar amounts. It is provided at settlement, although it must be made available one business day prior if the borrower requests it.
When is the HUD-1 provided?
At closing (also known as settlement). However, under RESPA, borrowers have the right to review the HUD-1 one business day prior to closing. They must make a request to do this.
What is the GFE?
The Good Faith Estimate (GFE) is an estimate of closing costs, expressed in dollar amounts. It must be provided within 3 business days of loan application – or at loan application if the interview takes place in person.
Who regulates RESPA?
The Real Estate Settlement Procedures Act is regulated by the Department of Housing and Urban Development (HUD).
What is an established customer relationship?
A transaction within the past 18 months. Under the provisions of the Telemarketing Sales Rule, mortgage professionals are permitted to contact consumers listed on the Do-Not-Call Registry if they have an established customer relationship.
What disclosure is due at the time of making a referral?
The Affiliated Business Arrangement Disclosure. Required by RESPA, it advises loan applicants that an affiliated business arrangement exists and lets them know they are not required to use the referred entity.
Lender charges (on the GFE) include…
Loan origination fees
Mortgage broker fees
Processing and underwriting fees
The Red Flag Rules require…
Creditors to create a policy to identify and mitigate the risks of identity theft. The Red Flag Rules were created by the FTC pursuant to FACTA.
What are the penalties for violations of TILA?
Penalties for violations of TILA are measured in actual damages plus attorney’s fees. Claimants (borrowers) may receive damages equal to twice the amount of the finance charge OR an amount not less than $400 or more than $4,000.
RESPA applies to…
Federally regulated mortgage loans. This includes 1st and 2nd liens and is such as broad definition that RESPA applies to virtually all residential mortgages secured by real property.
What fees are never included in finance charges?
Title insurance and title examination fees, doc prep fees, notary fees, seller’s points and appraisal/credit report fees (if they are charged to all applicants as part of loan application).
What is the Appraisal Report Notice?
Under ECOA, loan applicants who have been turned down (adverse action) have the right to receive a copy of their appraisal report. They must be provided with disclosure of this right using the Notice of Right to Receive an Appraisal Report. The notice is due at the same time as the Notice of Adverse Action – within 30 days of application.
When is the TIL Disclosure provided?
Within 3 business days following application and 7 business days prior to settlement. If the loan application is completed in a face-to-face interview, the disclosure is due at the time of application.
When is the Affiliated Business Arrangement Disclosure provided?
At the time of the referral. The Affiliated Business Arrangement Disclosure is required only if a referral is made to settlement service provider that is an affiliated business.
What fees are included in finance charges?
Finance charges include: interest, loan origination fees and points, mortgage broker fees, credit life insurance fees (when insurance is required.) Appraisal and credit report fees are NOT included if they are part of application fees which are charged to all applicants.
What happens when a loan is rescinded?
Each party to the transaction is restored to their previous position. The transaction is canceled and funds and property must be returned.