Nmls Federal Law

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RESPA

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Real Estate Settlement Procedure Act

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(HUD)

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Housing & Urban Development

Created Regulation X to implement RESPA

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CFPB

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Consumer Financial Protection Bureau

Created under the Dodd-Frank Act and the Consumer Protection Act

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Purpose of RESPA

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To help consumers become better shoppers for settlement services (aka - closing services like title & escrow)

Eliminate kickbacks and referral fees the unnecessarily increase the cost of settlement services.

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RESPA Covers Loans:

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1. Made by federally related lenders

2. Secured with a mortgage on a 1-4 family residential property.

Including condo units, cooperative share, time share or manufactured home. located on real property securing the lender's interest

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Types of loans covered by RESPA

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FHA, VA or other government sponsored loans & most conventional.

Purchase loans, assumptions, refinances & reverse mortgages

subordinate lien loans such as (home equity loans & home equity line of credit) which in addition to the 1st mortgage are secured by the owners equity in the property.

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What is equity

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Equity is the difference between the amount owed on the first loan and the value of the property.

prop. value - loan amount = equity

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Home equity loan VS. home equity line of credit

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HOME EQUITY LOAN is a one time loan of a fixed amount

HOME EQUITY LINE OF CREDIT allows the borrower to borrower over and over up to the line of credit limit like a credit card

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Transactions not covered by RESPA

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*Temporary construction loans

*Cash sale

*Purchase money mortgage (seller takes back the mortgage)

*Line of credit primarily for use in business, Commercial or Agricultural purposes.

*Loan secured by vacant or unimproved property unless having a home (manf. home) within 2 years

*loan on property of 25+ acres.

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LOAN ESTIMATE

(LE)

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Replaced the (GFE) Good Faith Estimate & Truth in Lending Disclosure

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Closing Disclosure

(CD)

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Replaced the Final (TIL) Truth in Lending Disclosure & the HUD-1 Settlement Statement.

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When is a Mortgage Servicing Disclosure Statement, a Special information booklet & an Affiliated business arrangement disclosure statement required to be given to a loan applicant?

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Either at the time of loan application or within 3 business days or receiving a loan application.

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Mortgage servicing Disclosure Statement

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Discloses whether the servicing of the loan (collection of payments) may be assigned, sold or transferred to any other person at any time while the loan is outstanding.

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Special Information Booklet

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is required by RESPA to be provided to borrowers if the loan is intended to finance a home purchase

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When is the Special Information Booklet not required?

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-If prior to the 3-day period the creditor determines the loan application will be denied

-If the transaction is for a Home Equity Line of Credit

-Refinance

-Larger than 1-4 family residential property

-Reverse Mortgage

Closed-end subordinate-lien loans

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What is Settlement Services:

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Settlement services include fees from:

-Originating the loan (loan app, processing, underwriting & funding)

-Rendering an inspection (appraisal)

-Rendering Credit report

-Preparing Documents (notarization, delivery or recording)

-Conduction settlement by a settlement agent

-providing services involving mortgage insurance, Hazard insurance, property taxes or assessments

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What is (AFBA)

Affiliated Business Arrangement Disclosure Statement

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An AfBA is an arrangement in which a person or his associates is in a position to refer real estate settlement service business for a mortgage loan.

If referring a borrower - the AfBA must be given at or before the referral is made.

The disclosure must specify the affiliation

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Escrow Account:

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Established on behalf of the borrower to pay Property Taxes, Mortgage Insurance, Property Insurance (hazard or flood) to ensure they are paid on time.

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Escrow Analysis of Escrow Accounts

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Is completed at the end of the escrow account computation year (not a calendar year - but the year date of when the loan closed)

statement must be given to the borrower within 30 calendar days of the computed year.

includes summary of deposits & payments, notifies of any shortage or surplus & the action being taken

refund any surplus of $50+ if the borrower is current, & credit or refund any surplus that is less than $50

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SERVING TRANSFER

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When a loan is sold or assigned to another loan servicer the borrower must be notified within 15 days before the effective date of transfer.

Borrower can not be penalized for making on time payments to the prior servicer for the first 60-days following the transfer.

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When is servicing transfer exempt from REPSA's coverage?

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When the sale of a loan happens within 1-7 days after closing. This is a secondary market transaction.

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The special information booklet contains

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Information regarding real estate settlement services in a home purchase

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According to RESPA, when two applicants jointly apply for a home purchase loan, a special information booklet has to be given to:

1 applicant, both applicants, neither or only if requested

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Needs to be given to only one

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The Shopping for your Home Loan Settlement Cost Booklet ( special info booklet) must be provided in a loan transaction involving what?

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A loan to purchase a home.

not required for a HELOC, Second Loan, Reverse or Refi

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TRUE OR FALSE.....

The special information booklet can be reproduced in any form, translated into other languages and stamped with the mortgage broker company name

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TRUE

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TRUE OR FALSE......

The special information booklet can be included in part of other larger documents?

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FALSE

The special information booklet can not be included in other larger documents. it has to be it's own document

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According to RESPA, who is responsible for issuing the special information booklet to an applicant of a residential mortgage loan?

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the Loan originator (lender or mortgage broker) is responsible for providing the booklet to the borrower within 3 business days of receiving a mortgage loan application

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When must an annual escrow statement be provided to the borrower?

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Within 30 calendar days of the end of the escrow account computation year.

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RESPA applies to what type of loans?

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Loans made by federally related lenders that are secured with a mortgage placed on a 1-4 family residential property, condo unit, cooperative share, time share or manufactured home located on real property securing a lenders interest

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When is a construction loan covered by RESPA?

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when it is used as, or may be converted to permanent financing by the same lender, it's term is 2+ years or the lender issues a commitment for permanent financing.

Temporary construction loans that are solely for construction on a borrower's home (remodel) are not covered.

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Is the following a violation of RESPA?

Mortgage broker conducts a free seminar to inform real estate brokers about it's new mortgage products.

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No, it is permissible for service providers to market & promote their services as long as they are not offering things of value for referrals.

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A title insurance company provides a computer to a mortgage lender. If the computer is used partly to transmit electronic documents from the lender's office tot he title insurance company, who is violating RESPA?

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Both the Title & Mortgage company. Because the computer will defray the mortgage lender's costs, both parties are in violation of RESPA.

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What is the lowest month-end target balance for an escrow account at the end of its computation year?

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Zero plus a 2-month cushion.

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What does RESPA require to be included in a AfBA Disclosure?

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A statement that the use of the affiliated service provider is not required.

Disclosure of names & costs of competitors is not required.

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Can a mortgage broker rent office space from a real estate agent?

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Yes, as long as the rental agreement is to rent space at the prevailing market rate.

Market rate is $30 = rent has to be $30 not more

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TILA-RESPA RULE

(Real Estate Settlement Procedures Act and the Truth in Lending Act Rule)

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In 2010, The Dodd-Frank Act, directed the CFPB to develop the new Integrated Mortgage Disclosures. Known as the TILA-RESPA Act.

This consolidated 4 confusing disclosures into 2....The Loan Estimate issued with in 3 days of loan application and the Closing Disclosure issued with in 3 days of consummation.

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What 6 items are required for a "Completed Application" and start the 3-day rule for delivery of the Loan Estimate?

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1. Borrower's Name

2. Borrower's SSN

3. Borrower's Income

4. Property Address

5. Estimate value of property

6. Loan amount

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The creditor is responsible for maintaining evidence that the disclosures required have been provided for how many years?

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3 years - Loan Estimate

5 years - Closing Disclosure

2 years - for all other documents

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ZERO TOLERANCE FEES - the actual charge at settlement (closing) may not exceed the amounts included on the Loan Estimate without a valid change in circumstance.

These fees include:

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* Transfer of Taxes

* Lender or Mortgage Broker Origination Charge

* Fees paid to an unaffiliated 3rd party service if the creditor did not permit the consumer to shop

* If interest rate is locked -

- the credit or charge of the interest rate

- the adjusted origination charge

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10% TOLERANCE FEES - Fees related to 3rd party service providers & recording fees. Creditor may charge more for these service fees than initially disclosed as long as the total for all charges added together does not exceed 10%

These fees include:

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* Recording Fees

* Charges for 3rd party provider services:

- the charge is not paid to the creditor or it's affiliate

- and the consumer is permitted to shop for a service provider & chooses a provider from the creditor's written list

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NO TOLERANCE RESTRICTION FEES - Fees with no tolerance limitation. creditor may charge more than disclosed on the Loan Estimate as long as the original estimate was based on the best available information at the time.

These fees include:

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* Prepaid Interest

*Property Insurance Premiums

Amounts placed into escrow, impound or reserve account

* Fees charged by a 3rd party service chosen by the consumer & not on the creditors written list

* Charges paid to 3rd party service for services not required by the creditor

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Over payment at consummation VS what was disclosed on the Loan Estimate must be refunded to the consumer within how many days?

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with in 60 calendar days of consummation.

For Zero Tolerance fees - the full amount in excess

for 10% Tolerance fees - the difference between charges disclosed on the LE VS. charges actually paid

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Loan Estimate is binding for how many days?

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10 Days - the loan estimate must be available for 10 days allowing an applicant enough time to shop.

This does not apply to the interest rate or charges & terms that are dependent upon the interest rate.

- Discount points to reduce the rate

- Credit (YSP paid by the lender to the broker to increase the rate

- Adjusted origination charges

- Pre-diem interest

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BAIT AND SWITCH

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Using initial disclosures to entice a borrower and after collecting a significant application fee or making burdensome documentation demands, claiming that a material change has resulted in a more expensive loan offering

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Negative amortization

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an increase in the principal balance of the loan that occurs when the full amount of interest due for the period is not covered by the payment and that deficiency is then added to the principal balance

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Interest only payments

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when one or more periodic payments are applied to interest only and not the principal balance of the loan

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Step Payments

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Scheduled variations in the amount of the periodic payments not caused by a change in interest rate

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Balloon payment

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A payment that is more than two times the amount of the regularly scheduled periodic payments

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Seasonal Payments

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Periods of time specified in the loan contract during which periodic payments are not scheduled to be due

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The amount to be paid for property taxes is based on.....

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The assessed value of the subject property

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The amount paid for insurance premiums is based on.....

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The replacement cost of the property during the first year of the loan term

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Adjustable Payment Table

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Is included if:

* The amount of the periodic P&I may change after consummation as a result of something other than an adjustment to the interest rate

* The transaction involves adjustments in the payment schedule as a result of the borrower's seasonal income

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Adjustable Interest Rate Table

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Is included if the interest rate may increase after consummation based on changes to the index or scheduled changes to the interest rate.

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How to calculate the total interest percentage

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amount of interest payed over the term of the loan / the loan amount = total interest %

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What counts as a "changed circumstance" to issue a revised loan estimate?

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- A change that causes a settlement charge to increase

- Charges subject to the 10% tolerance rule, cause the total of all such charges to increase by more than the allowed 10%

an LO cannot use any information collected prior to issuing the loan estimate at a later time and count as a "changed circumstance"

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A new 3-business-day waiting period applies to a corrected (CD) Closing Disclosure if there are changes or corrections that relate to:

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- The annual percentage rate (APR)

- The loan product

- the addition of a prepayment penalty

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If the Loan Estimate is MAILED to the applicant. The applicant is considered to have received it when?

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3 business days after it is mailed.

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Interest, service charges, transaction charges, buyer's points, loan fees and mortgage insurance are examples of what is included in the dollar amount called WHAT?

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The finance charge.

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Disclosures after consummation must be provided to an applicant for a 30-year home loan when?

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If the loan is an adjustable rate mortgage.

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A borrower has paid the fee for the credit report before closing. How is this fee noted in a Closing Disclosure?

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"Services Borrower Did Not Shop For" even though it was prepaid. It does not go in the "prepaids" because it is a fee they did not shop the price on. It would however go in the before closing column.....not paid at closing column

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Who Administered the ECOA (Equal Credit Opportunity Act)

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The ECOA was administered by The Federal Reserve Board of Governors who issued Regulation B to implement ECOA. The (FTC) Federal Trade Commission enforces the law.

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When must a copy of the appraisal or other valuation be provided to the borrower?

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promptly upon completion or 3 business days prior to consummation

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(FCRA) Fair Credit Reporting Act & Regulation V

Ran by the (CFPB) Consumer Financial Protection Bureau

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* Regulates agencies that provide consumer reports

* Ensure the fairness, accuracy, timeliness & privacy of the information used in a consumer report

* Impose disclosure requirements on persons who use consumer reports

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What does FACTA Stand for?

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Fair and Accurate Credit Transaction Act

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What is the Disposal Rule

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a part of the Fair and Accurate Credit Transaction Act regulates the way consumer information is disposed of to prefect identity theft

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What federal Agency oversees the Federal Do-Not-Call Registry

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Federal Trade Commission

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A company can call a potential customer who has made an inquiry or submitted an application for ______months after the inquiry or application?

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3 months - unless he asks not to be contacted

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The Red Flags Rule implements what Act?

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(FACTA) The Fair and Accurate Credit Transaction Act

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With respect to money laundering techniques, what is "layering"?

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Layering is the process of separating the criminal proceeds from it's criminal origins using financial transactions in one or more accounts

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With respect to money laundering techniques, what is "Placement"?

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Placement is the process of introducing unlawful proceeds into the financial system

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With respect to money laundering techniques, what is "Integration"?

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Integration is the process of combining criminal proceeds with legal funds to provide legitimate ownership.