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98 Cards in this Set
- Front
- Back
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Implementing regulations for the SAFE Act |
Regulation H
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SAFE Act purposes
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-Increase Uniformity
-Reduce regulatory burden -Enhance consumer protection -Reduce fraud |
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Effective supervision by a state regulator includes...
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-Participating in the NMLS
-Writing rules and regulations or adopting procedures -Conducting background checks -Setting and accepting licensing fees -Setting or resetting renewal or reporting dates -Approving or denying loan originator applications and renewals -Implementing laws for amending or surrendering licenses |
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State supervisory authority includes
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Additional state supervisory authority
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Regulatory agencies have authority to examine...
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-Any licensed loan originator
-Any individual required to have a loan originator license |
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Regarding examinations, it is a violaotion to knowingly...
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Withhold, abstract, remove, mutilate, destroy, or secrete books, records, or other information
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Regulatory agencies may conduct examinations for...
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-Initial licensing or license renewal
-License suspension, conditioning, revocation, or termination -Detrmining compliance with the law |
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Regarding examinations, regulatory agencies may access..
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-Criminal, civil, and administrative history information
-Personal history and experience information -Any other documents or evidence relevant to an investigation |
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Regulatory authority may require reports including...
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-Accounting compilations
-Information lists -Data concerning loan transactions |
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In conducting examinations, regulatory authority authorized to...
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-Administer oaths
-Subpoena witnesses -Require the production of relevant documents -Control access to records of person under investigation |
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During period of control of records, no person may..
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Remove the records without a court order or the regulatory agency's consent
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During period of control of records, owner of records may...
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Access them in order to conduct regular business affairs
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Regarding examinations, regulatory agencies may also...
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-Retain attorneys, accountants or other professionals to assist with examination
-Enter into agreements with other gaovernment officials to reduce regulatory burden -Use, hire, contract, or employ analytical systems, methods or software -Accept or rely on reports from other government officials or audit reports by independent CPA |
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Information provided to NMLS may be...
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Shared with other state and federal officials involved with mortgage industry oversight without the loss of privilege and confidentiality protections provided by law
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Information provided to NMLS is not subject to...
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-Disclosure under federal or state law allowing for disclosure to the public of information held by a government officer or agency
-Subpoena, discovery, or admission into evidence in civil action or administrative process |
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Information not protected by confidentiality
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-Employment history
-Disciplinary and enforcement actions |
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NMLS stands for...
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Nationwide Mortgage Licensing System and Registry
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Definition of "state"
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Any state of the United States, the District of Columbia, any territory of the United States. Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Island, and the Northern Mariana Islands
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Definition of "individual"...
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A natural person
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Definition of "person"
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A natural person, corporation, company, limited liability company, partnership, or association
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"Loan Origination" includes individuals who for compensation...
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-Take a residential mortgage loan application
-Offer or negotiate the terms of a residential mortgage loan |
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Definition of "application"
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Request for an offer of residential mortgage loan terms and the information about the borrower that is necessary in a decision on whether to make such an offer
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Definition of "residential mortgage loan"..
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Any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other security interest on a dwelling or residential real estate upon which is constructed or intended to be construted a dwelling
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A "dwelling" is a residential structure that...
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Contains one to four units, whether or not the structure is attached to real property
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Definition of "residential real estate"
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Any real property located in a state upon which is constructed or intended to be constructed a dwelling
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"Assisting a consumer in obtaining a loan" includes...
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-Advising on loan terms
-Preparing loan packages -Collecting information on behalf of the consumer |
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"Assisting a consumer in obtaining a loan" does not include
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-Individuals engaged solely as loan processors/underwriters performing clerical tasks
-Persons or entities only performing real estate brokerage activities, unless compensated by a mortgage professional -Persons or entities solely involved in extensions of credit relating to time share plans |
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Definition of "real estate brokerage activity"
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-Acting as a real estate agent/broker for a buyer, seller, lessor, or lessee of real property
-Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property -Negotiating any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property -Engaging in any activity for which a person engaged in the activity is requried to be licensed as a real estate agent/broker |
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Definition of "loan processor" or "underwriter"
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Individual who performs clerical or support duties at the direction of and subject to the supervision of a licensed loan originator
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Definition of "clerical or support duties"
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-The receipt, collection, distribution, and analysis of information used for the processing and underwriting of a loan
-Communicating with a consumer to obtain information necessary for the processing and underwriting of a loan |
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Loan Processors/underwriters may not..
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-Offer or negotiate loan rates or terms
-Counsel consumers about loan rates or terms -Represent to the public tha tthey can perform the acitivites of a loan originator |
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"Origination of a residential mortgage loan" involves...
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All residential mortgage loan-related activities frmo the taking of a loan appliation through the completion of all loan closing documents and funding of the loan
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A "registered loan originator" is an individuals who...
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-Meets the definition of a loan originator
-Is an employee of a depository institution or an institution regulated by the Farm Credit Adminstiration -Is registered with, and maintain a unique identifier through, the NMLS |
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An "employee" is an individual whose..
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-Manner and means of performance of work are subject to the right of control of a person
-Compensation for federal income tax purposes is reported on a W-2 form issued by the controlling person |
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A "federal banking agency" include the ...
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-Board of Governors of the Federal Reserve System
-Comptroller of the Currency -National Credit Union Administration -Federal Deposit Insurance Corporation |
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A "state-licensed loan originator" is any individual who is..
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-A loan originator
-Not an employee of a depository institution, a subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration -Licensed by a state or by the CFPB and maintains a unique identifier |
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A "unique identifier" is a number that ..
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-Permanently identifies a loan originator
-Is assigned by the NMLS to track and identify loan originators |
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A unique identifier mustbe shown on all..
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-Residential mortgage loan application forms
-Solicitations or advertisements, including business cards and websites -Other documents established by rule or order of the licensing agency |
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Business of a mortgage loan originator includes..
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-Taking a residential mortgage loan application
-Offering or negotiating the terms of a residential mortgage loan for compensation or gain -Representing to the public tha the/she can or will perform these activities |
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"Taking a residential mortgage loan application" means..
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Receiving an application for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower
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"Offering or negotiating loan terms" includes..
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-Presenting for consideration particular loan terms
-Communicating with a borrower or prospective borrower to reach a mutual understanding of loan terms -Recommending, referring, or steering a borrower or prospective borrower to a particular lender or loan terms |
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An "independent contractor" cannot...
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Engage in residential mortgage loan origination activities as a loan processor/underwriter unless a state-licensed loan originator
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Loan originator exemptions...
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-Loan processor/underwriter
-Registered loan originator employee of a bank/credit union -Only real estate brokerage activities -Only extensions of credit related to timeshare plans -For an immediate family member -For a dwelling that served as the individual's residence -Licensed attorney negotiating on behalf of a client -Employee of a governement agency or housing finance agency -Employee of a nonprofit organization |
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"Immediate family member" includes...
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-Spouse
-Child -Sibling -Parent -Grandparent & Grandchild -Stepparent, stepchild, stepsibling -Adoptive relationship |
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"Housing finance agency" is any authoriy..
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-Chartered by a state to help meet affordable housign needs of residents
-Supervised by the state government -Subject to audit and reveiw by the state -Whose activities make it eligible to be a member of the NCSHA |
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For a bona fide nonprofit, state must..
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-Periodically examine its books and activities
-Revoke its status if it doesn't continue to meet criteria |
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Background checks include..
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-Fingerprints
-Personal history and experience |
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Minimum pre-licensing education requirement
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20 hours
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20 hours of pre-licensing education must include...
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3 hours federal law and regulation, 3 hours ethics, 2 hours non traditional mortgage products
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Written test measures knowledge of..
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-Ethics
-Federal and state law and regulation relating to mortgage origination -Fraud, consumer protection, nontraditional mortgage, and fair lending |
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If an applicant fails initial test attempt..
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He/she may retake twice with at least 30 days between each attempt
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After failing an exam 3 times, an individual must..
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Wait at least 6 months before retesting
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Each loan originator must be covered by
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A surety bond
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Surety bond amount must reflect...
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The dollar amount of loans originated
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Some states require a minimum...
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Net worth in an amount that reflects the dollar amount of loans originated
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A state fund makes funds available for..
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Claims resulting from violations of state or federal laws and regulations
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Minimum licensing requirements
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-No prior license revocation
-No felony conviction or guilty/nolo contendere plea durin gthe 7-year period preceding application date, or at any time if the felony involved fraud, dishonesty, a breach of trust, or money laundering -Completion of pre-licensing education -Passage of the written test -Satisfaction of the surety bond/net worth/state fund requirements -Demonstration of financial responsibility, character, and general fitness |
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Lack of financial responsibility includes..
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-Current outstanding judgements
-Current outstanding tax liens -Foreclosures or pattern of seriously delinquent accounts in past 3 years |
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Minimum continuing education requirement..
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8 hours
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8 hours continuing education must include...
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3 hours federal law and regulation, 2 hours ethics, 2 hours non traditional mortgage products
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Regarding continuing education, orginator may..
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-Only receive credit for a course int he year which the course is taken
-Not take the same approved course in the same or successive years |
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Instructor may receive CE credit at the rate of ..
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2 horus for every 1 hour taught
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License renewal requirements..
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-Continue to meet minimum standards for initial licensure
-Satisfy annual continuing education requirement -Pay required fees |
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Failure to satisfy renewal requirements will result in..
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An expired license
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Reports of condition also referred to as
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Mortgage call reports
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Registration system required for originator employed by..
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-Depository institutions
-Subsidiaries controlled by depoitory institutions and regulated by federal banking agenceis -Institutions regulated by the Farm Credit Administration |
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SAFE Act addresses compliance by establishing..
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-Requirements for individuals to obtain a license before engaging in loan orgination activities
-Authority for the CFPB to determine whether a state licensing program for loan originators meets the standards established in the SAFE Act |
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Prohibited practices for loan originators..
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-Defraud or mislead borrowers or lenders
-Engage in unfair or deceptive practices -Obtain property by fraud or misrepresentation -Enter into a contract providing for fees earned through "best efforts" -Enter into a contract for specific loan terms that are not actually available -Conduct business iwthouth a valid license -Fail to make required disclosures |
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To enforec the SAFE Act, regulatory agency may..
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-Deny, suspend, revoke, condition, or decline to renew a license
-Order restitution -Impose fines -Issue orders or directives |
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Maximum civil penalty for each violation..
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$25,000
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Each failure to comply is a ..
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Separate and distinct violation
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Regulations H establishes a procedure for..
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The CFPB to follow if it determines that a state has not adopted laws satisfying the SAFE Act's licensing requirements
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Any time a state enacts legislation, it must..
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Notify the CFPB
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If requested by the CFPB, a state must submit..
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-Evidence of compliance with the SAFE Act
-Citations to relevant state laws and regulations -Information on the regulator's supervisory processes -Data on the regulator's investigations and enforcement actions |
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For inquireies on the cost of credit, the lender must
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State the APR
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The TIl must be delivered or mailed..
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-Within 3 business days after receipt of a written application, and
-No later than the 7th business day before the transaction is consummated |
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Disclosed APR may not vary by more than ..
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1/8 of 1% in a regular transaction
1/4 of 1% in an irregular transaction |
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The finance charge is
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The cost of consumer credit as a dollar amount
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A prepaid finance charge is
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Any finance charge paid separately before or at consummation, or withheld from the proceeds of the loan at any time
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The amount financed..
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is the actual amount of credit the borrower will receive from the creditor
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For an ARM, the interest rate will change based on...
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An index to which the rate is tied and the margin added to cover the creditor's expenses and profit
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What is the SAFE Act?
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Secure and Fair Enforcement act. Established a nationwide mortgage licensing system in 2008 and is designed to enhance consumer protection.
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What is the purpose of a regulatory authority/commissioner?
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To establish licensing rules and regulations.
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What is the regulatory authority/commissioner empowered to do?
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They are empowered to issue, revoke, deny.... licenses, and conduct enforcement actions necessary to carrying out the SAFE act. They can establish relationships with the NMLS registry. Peform background checks. Determine continuing education requirements. Collect fees/impose penalties. Order a cease and desist.
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What orders and directives can the regulatory authority/commissioner issue regarding cease and desist?
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They can order a cease and desist from performing activities in violation of the SAFE Act, or from conducting business altogether. Cease and desist orders are effective immediately.
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For what reason can the regulatory authority/commissioner issue penalties, and what can be the cost of such an act?
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The regulatory authority/commissioner can issue a civil penalty for anyone who has violated a regulation, after giving notice and an opportunity for a hearing. Penalties for each act can be as much as $25,000.
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What is a loan originator?
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Someone who takes a residential mortgage loan application and offers or negotiates terms of a loan for compensation or gain
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What is the difference between a mortgage banker and a mortgage broker?
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A mortgage banker is a person who engages in the mortgage loan business by originating and closing loans with its own funds. A broker negotiates or places mortgage loans for others.
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What entities developed and maintain the NMLS registry?
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The CSBS (Conference of State Bank Supervisors) and AARMR (American Association of Residential Mortgage Regulators)
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List the Federal Banking Agnecies.
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The Board of Governors of the Federal Reserve System
The Comptroller of the Currency The Director of the Office of Thrift Supervision The National Credit Union Administration The Federal Deposit Insurance Corporation |
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What is a nontraditional mortgage product?
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Any product other than a 30 year fixed mortgage.
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What is the difference between a statute and a rule?
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A Statute is a law passed by a legislative body. A rule is an interpretation of a statute. Rules set standards and requirements, and can subject persons to a penalty when a requirement is violated.
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What can the regulatory authority do with your personal information?
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The state may share information with other states and federal officials in charge of the mortgage industry, keeping existing confidentiality policies in place.
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In what circumstances would one be allowed to negotiate a mortgage loan without a license?
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When you are negotiating with or on behalf of an immediate family member, making less than 5 loans a year, acting as a mortgage broker less than 5 times every 2 months, negotiating a loan for your own residence, or are solely involved in timeshare plans.
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What are grounds for denying a license?
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If they have had a loan originator license revoked previously, If they have been convicted of a felony within the last 7 years, or if they have ever been involved in an act of fraud, dishonesty, money laundering, etc.
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When is it prohibited to broker a loan with a pre-payment penalty?
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When the loan amount is under $150,000
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When must a licensee disclose his NMLS number?
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At the time fee is paid by a loan applicant, within the loan application forms, and any solicitations/advertisements including business cards and websites.
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What must be clearly and conspicuously disclosed in advertisements?
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The business name, the word "broker" (if applicable), and license number.
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