800 Flashcards
What is the required pass
rate for the NMLS Test and
how long is it?
75% of 115 questions. The test has 125 questions with 10 questions that are ungraded.
What is important to
remember about taking the test?
Read the questions twice, slowly, but do not take over 30 seconds per question the first time through.
What is the requirement under Fair Lending, Fair Housing, and ECOA?
All consumers have the right to apply for a loan unless they are under 18 years of age
Which Law and Regulation is
Home Ownership Equity Protect Act (HOEPA) under?
Truth in Lending Act (TILA) and REG Z
Which items are restricted
under HOEPA?
Predatory Lending, Abusive Lending Practices, Negative Amortization, Prepayment Penalties, Balloon Lending, Subprime Lending, Equity
Stripping, and not meeting Ability to Repay (ATR)
requirements.
What is the minimum period
for a Balloon mortgage?
A 30-year amortized loan that is due in 60 months.
What is the Average Prime
Offered Rate?
APOR – an index that is published weekly. It is added to High-Cost and Higher-Priced Triggers.
Who publishes the APOR
Index?
FFIEC, the Federal Financial
Institutions Examination Council
What is the Regulation for
High-Cost Loans?
Section 1026.32
What are the three triggers for High-Cost Lending?
6.5% on a first Mortgage, 8.5% on a second Mortgage, and a 5% fee trigger for loans over $20,000
What are the triggers for
Higher-Priced lending?
1.5% for first Mortgages, 3.5% for 2nd mortgages and no fee trigger
How do you calculate whether a loan exceeds the Higher-Priced mortgage limits?
Add the APOR index to 1.5% on a first mortgage. The Annual Percentage Rate (APR) cannot exceed the two numbers together.
What are the requirements for a High-Cost Loan?
Tax and insurance escrows for the first five years of
the loan, mandatory counseling and possibly two appraisals. Cannot use an Appraisal Waiver from
Fannie or Freddie. No Balloons are allowed.
What are the requirements for a Higher-Priced Loan?
Tax and insurance escrows for the first five years of the loan. Cannot use an Appraisal Waiver from Fannie or Freddie.
Prepayment Penalties are not allowed by which agencies?
Fannie Mae, Freddie Mac,
USDA, FHA, and VA
What is collateral?
Property that is used as security against a debt
What is Net Monthly Income?
Take-home pay after taxes and payroll deductions.
What is a non-liquid asset?
A type of asset that is not easily turned into cash. Real estate is considered non-liquid.
What are the 5 parts of ECOA?
Age, Discrimination, Underwriting, Appraisal and Adverse Action.
What is the minimum age under ECOA to obtain a mortgage loan?
18 years or older
ECOA has discriminatory items. What can’t you do with them?
You cannot use them to make or decline a loan.
What are the discriminatory items under ECOA?
Sex, Marital Status, Race, Color, Age, Religion, National Origin, Public Assistance, and Sexual Orientation.
What can you ask on Marital Status?
Married, unmarried, or separated.
Which 4 areas should you never ask about?
Race, Color, Religion and Nationality.
What is the requirement for Public Assistance?
It must be considered, even though you may not be able to use it for qualifying.
How long, after a complete underwriting package is delivered to the underwriter, does a decision have to be made?
30 days, but this may be extended if the package is not complete.
How many days before closing must the appraisal be delivered to the borrower?
Three business days before, unless there is an appraisal waiver issued, then the borrower must be informed that an appraisal will not be done unless they request it.
How long after a loan is declined or cancelled must an adverse action notice be sent?
30 days from the decision, explaining the reason.
Under the Fair Housing Act, what are three protected bases that are different from those covered by ECOA?
- Disability
- Familial Status
- Age
Why is Disability considered discriminatory under Fair Housing Act?
You cannot discriminate against a borrower because they are physically or mentally disabled
Why is Familial Status considered under Fair Housing Act?
You cannot discriminate because of the size of family or if a woman is pregnant
Why is age not considered discriminatory under Fair Housing Act?
Reverse mortgages require a borrower to be 62 years of age or older, and a 55 and over subdivision requires the borrower or purchaser of property to be 55 and over
What is the Reg Letter for Fair Credit Reporting Act?
REG V
How many free credit reports does every consumer have the right to get each year?
At least one
Which credit score do you use when considering a borrower?
Three credit scores are issued on each credit report for each borrower: High, Middle, and Low. You will use the Middle unless the program states differently
Which credit score do you use if the loan is declined because of credit and there are three borrowers?
Lowest of the Middle score for all the borrowers.
Example: Borrower 1 has a score of 780, borrower 2
has a credit score of 720, and borrower 3 has credit
score of 660. You would use 660.
What additional information is required on the Credit Score Disclosure?
Listing of all three national credit agencies, with
contact information, so the borrower can contact
them in case of an error or dispute. Agencies are
Experian, TransUnion, and Equifax
What are the three national Credit Agencies?
- Experian
- TransUnion
- Equifax
Which law did the Fact Act amend?
Fair Credit Report Act (FCRA)
What is a fraud alert?
An alert put on the credit report, indicating the
borrower may have had their identity stolen or
credit card or bank accounts compromised
What happens with a Credit Freeze?
No one will be able to access the borrower’s
credit without them unfreezing their account.
Credit issuers will be able to report credit
payments
What is the cost for a fraud alert or credit freeze?
Zero cost and should be applied to
all three credit agencies
What is Truncation?
When credit card, debit card, or bank deposit
receipts are given, they cannot show more than
the last four digits of the account numbers
What are the two parts of Red Flag Rules?
(1) Before the request for change of personal information, the company must send a letter or email asking if the person requested the change.
(2) All employees are to be trained on how to identify a breach of security and what the company’s requirement is once the breach has been determined.
Which agency regulates Red Flags?
Federal Trade Commission (FTC)
What is a Homeowner’s Warranty?
A warranty and insurance program that insures a new home for ten years against major structural defects
If a breach is determined, what is the requirement?
It must be reported to Compliance Officer or Senior Officer and, 30 days from that point, the company must send a notice to all people in their database notifying them of the breach and what the company has done to protect them
What does GLB stand for?
Gramm-Leach-Bliley
What is the REG for Gramm-Leach-Bliley?
REG P
What is the main emphasis of Gramm-Leach-Bliley?
Privacy of consumers’ personal information
What does NPPI stand for?
Non-Public Personal Information
What is “Opt-Out” under GLB?
The consumer has the right to opt-out of a company sharing, selling, or giving their NPPI to anyone. The Opt-out stays on as long as their name is in the company’s data base.
What is Phishing or Pre-Texting?
Obtaining personal information by illegal process, like a text, claiming to be from the IRS, asking for your SSN
What is required under Safe Guard Rules?
Whenever you are not using your files, they are to be locked up in a desk drawer or filing cabinet. If your files are on a computer, there must be a lock out after a few minutes.
What regulates Safe Guard Rules?
FTC – Federal Trade Commission
What is the required retention of Loan Information?
3 years for all loan files and 5 years for the CD
Can the hard files be destroyed?
Once the files are digitized, they can be destroyed, but that does not mean throwing them away
Who is required to file a HMDA report?
All companies that underwrite or fund loans must file a HMDA report annually. This includes banks, credit unions, and mortgage bankers.
What does HMDA stand for?
Home Mortgage Disclosure Act
What is the REG letter for HMDA?
Reg C
Which agency is responsible for overseeing HMDA data?
FFIEC - Federal Financial Institutions Examination Council
What does CRA stand for?
Community Reinvestment Act
What does CRA require?
To encourage depository institutions to help meet the credit needs of the communities in which they operate
Do Mortgage Brokers have to report HMDA data?
No, because brokers do not underwrite or fund loans
When does the HMDA data have to be reported?
In 2019, by March 1st of each year. In 2020, it is quarterly.
What does PENCIL stand for?
P= Property address E=Estimated value N= Name C = Credit or Social Security number I = Income L = Loan amount
When is an application considered a loan?
When you have collected all the items in PENCIL
What agency regulates and enforces Do-Not-Call?
FTC – Federal Trade Commission
How often do you have to pull new data from the Do-Not-Call website if you are using the data to solicit consumers?
The data cannot exceed 31 days. The data incudes phone numbers for any person that registers their phone number with DNC.
How long are you to retain your solicitation records?
2 years from the date of solicitation
What times can you solicit?
8:00am – 9:00pm, depending on where the person being solicited is located
What are the 2 exemptions for solicitations under Do-Not-Call?
- 18 months for someone with whom you have an existing business relationship
- 90 days for a Pre-qualification
What is an in-house Do-Not-Call List?
If a consumer sends a letter or an email to the company
indicating they want no solicitations, the company must put that person on an internal do-not-call list, so not one contacts that person. This overrides the 18 month and 90-day exemption.
What are the 8 items covered under TILA?
1) MDIA – Mortgage Disclosure Improvement Act
2) Advertising
3) HOEPA
4) Loan Estimate (LE)
5) Annual Percentage Rate (APR)
6) Qualified Mortgage (QM)
7) Loan Officer Compensation
8) CHARM Booklet
What Does MDIA stand for?
Mortgage Disclosure Improvement Act
What does Mortgage Disclosure Improvement Act (MDIA) cover?
MDIA is a part of Reg Z and covers timing and delivery
requirements for initial disclosures, LE, intent to proceed, and changes to the mortgage loan program, prepayment penalty, or APR calculations. MDIA also addresses when the CD needs to be issued, as well as the waiting period involved.
What is a Changed Circumstance?
Any borrower-requested change due to an extraordinary event beyond anyone’s control. A new LE must be received by the borrower within three business days from the change.
What are the requirements for advertising under TILA?
All marketing materials must have the company name,
company NMLS number, phone number, address, equal housing logo, and an APR. All advertising must be kept for two years from the last date used.
What is the definition of Annual Percentage Rate (APR)?
APR is expressed as a percentage that represents the total costs paid over the term of a loan. This includes any fees or mortgage insurance associated with the transaction.
What does APR stand for?
Annual Percentage Rate – the cost of the loan over the life of the loan, quoted as a percentage rate
What is a CHARM booklet?
A booklet that is required for all ARM loans. It is issued at least three days from the signed application
What is the Loan Estimate (LE)?
A disclosure of all terms and costs of the loan, to be issued when you have all the items under PENCIL, and within three business days of the signed application
What does QM stand for?
Qualified Mortgage – all conforming conventional loans must meet the standards
What are the two ways a conventional conforming loan can meet QM Standards?
Option #1: 43% maximum DTI and maximum
3% in fees.
Option #2: Approved eligible from Fannie or Freddie and meet the Higher-Priced Lending triggers
What is Safe Harbor?
If you meet either of the two options under QM that showed you proved Ability to Repay requirement, you are protected from a lawsuit
What is the punishment if you do not meet QM Standards?
Up to three years interest, all loan costs, and legal costs for both sides
If an MLO is paid commissions, what can the commissions based on?
Basis points under your Loan Originator Agreement, times the loan amount. No terms or costs of the loan can be counted.
What does UDAAP stand for?
Unfair, Deceptive, or Abusive Acts or Practices
What Does Unfair, Deceptive, or Abusive Acts or Practices state?
It is unlawful for any provider of consumer financial products or services or a service provider to engage in any unfair, deceptive, or abusive act or practice
If a company pays a bonus or retirement donation, what are the criteria for determining the amount?
Number of loans, dollar amount originated for a specific time, and/or the closing rate on your applications. Bonuses are limited to 10% of the last 12 months’ compensation.
What does Reg N Cover?
Mortgage Acts and Practices
What does Mortgage Acts and Practices require?
If you don’t have a program or rate, do not advertise it, and do not use Bait and Switch tactics, or language or terms that would indicate to a borrower you do not want them to apply
What is Bait and Switch?
Advertising a lower rate or a program that may not exist to entice consumers, and then when they call, you offer them another less-attractive program.
What is not included in Digital Delivery?
Faxing or e-mail. Docu-sign or E-sign are acceptable where the person can be verified, and the documents are time stamped as they are sent back and forth.
What are the requirements for Digital Delivery?
The borrower must give you written approval, have the right to go back to hard copy, and you must determine, to the best of your ability, if the borrower is technically able to do the process
What does CFPB stand for?
Consumer Financial Protection Bureau
What are duties of the Consumer Financial Protection Bureau?
They have the power to write, implement regulations, investigate, and issues fines or other penalties as needed
Who does the CFPB answer to?
The President
What is a Consumer?
Someone who obtains a financial product or service from a financial institution that is to be used primarily for personal, family, or household purposes, like applying for a loan (whether they accept the loan or not).
How many days do you have to send an adverse action notice?
30 days, mailed or verbal
TILA Trigger terms
Balance, term, APR (rate), payment
Flood Insurance
Stays until the loan is paid off
How many months reserves are needed for non-owner-occupied properties?
6 months
What is excessive value?
An appraisal term to express a value higher than the highest in the neighborhood
What is the flood insurance requirement?
Enough to cover the loan amount
What is the hazard insurance requirement?
Enough to cover the loan amount
What are the payment options for ARMs?
15 years, 30 years, Negative/Minimum
Servicing loan estimates need to be given within what time frame?
3 days
What are the manufactured home financing
requirements?
Home must be on a permanent foundation and
the land must be titled as real property. The HUD Data Plate must be on the home
What is the VA back-end ratio?
41%, including housing, utilities, and all other debts
How much hazard insurance is required on a reverse
mortgage?
100% of the loan amount
What is the minimum down payment?
FHA: 3.5%
Conventional: 3%
What does the cost approach include?
Depreciation, Square Footage, and Replacement Cost
With the Sales Comparison Approach, what adjustments are allowed?
Net adjustments of 15% and gross adjustments of
25% to comparables
What do riders include?
PUD, ARM, Balloon Payment, Prepayment Penalty
What is a Hybrid Loan?
A loan that performs like a fixed and adjustable-rate
loan. It has a fixed rate for an initial period before turning into an ARM
What is a non-warrantable condo?
FNMA will not do the loan
Condo-conversion= non warrantable
HOA, 51% owner occupied
FHA loans are only for what types of properties?
Owner-Occupied Properties
What is a grace period?
A period of extra time allowed for making a payment without incurring a late penalty
What does Title VII include?
Discrimination, Sexual Harassment, Hostile Workplace
What is the FHA loan verification of child support?
Divorce decree and 3 months of cancelled checks
What are the types of title policies?
Final, Termite, Engineer Certification of Foundation
What must happen in order to transfer an FHA case number?
Request must come from borrower
What is the UFMIP %? (Up Front Mortgage Insurance Premium - FHA)
1.75%
How is monthly MIP calculation done?
On base loan amount before UFMIP
What is the active-duty vet 1st time funding fee at 100%?
2.3%
What is the FHA loan minimum living time before resale?
91 days from consummation with second appraisal
How is a GLBA notice delivery given out?
Mailed, given personally, or faxed
How do tenants in common mortgages work?
Each owner has their own share of the property that they can pass on in their will
What information is covered in the privacy rule of GLBA?
Non-public information, including any information an individual gives you to get a financial product or service; i.e., credit reports, banking info, unlisted home telephone numbers
What is on the deed of trust agreement?
Metes and bounds, legal description, attached riders, name of borrower
What is an ongoing business relationship?
Customer
How long is the FIRREA statute of limitations loan fraud?
10 years
How often must the aggregate accounting escrow be reviewed?
Every 12 months, cushion up to 2 months
What is a Chain of Title?
The ownership history of a piece of land, from its first owner to the present one
Which types of loans are Assumable?
VA, FHA if stated in the deed
How much is title insurance coverage on reverse?
150% of original loan amount
What is AQB?
National appraiser group
What percentage of a VA loan is guaranteed?
Up to 50% of a loan up to $45,000.
Between $45,000 and $144,000, the minimum is
$22,500 and the max of up to 40% of the
loan up to $36,000.
What is a notice of transfer?
Includes toll free number of new and old servicer and effective date, 15 days before transfer
When are LE requirements not required?
They are not required on commercial loans, loans denied within three days, or bridge/swing loans
What is a “due on sale” clause?
A clause in a loan or promissory note that stipulates that the full balance of the loan may be called due (repaid in full) upon sale or transfer of ownership of the property used to secure the note
How often do telemarketers update the DNC?
31 days
After someone requests you to put them on your DNC list, how many days do you have to do so?
30 days
How long does a conventional loan owner agree to occupy the
property?
1 year
What are the guidelines for
appraisers?
USPAP
Where is the Prepayment
penalty disclosed?
Rider to trust deed LE/CD
Which loan requires a large final loan payment, as it does not fully amortize?
Balloon
What is included in typical
property inspections?
Verification that required repairs have been made, termite, well, septic, and roof
Joint Tenants
Ownership automatically
transferred on death to other
owners, cannot be a corporation
What is a Bridge loan?
A loan which occurs between the termination of one mortgage and the
beginning of the next.
What affects mortgage
interest rates?
Unemployment report,
consumer price index, federal reserve board
What affects PMI?
LTV, ARM, Term, FLCO
What is an indemnity
agreement?
With a real estate indemnity agreement, one party is pledging to protect another from any kind of financial loss or from a lawsuit of some kind
What is the required
fire/hazard insurance amount?
Enough to cover the loan
amount
What is LIBOR?
London Inter Bank Offered
Rate
What is the max seller paid
closing costs for Conventional,
FHA/USDA, and VA loans?
Down: S. P.
Conv:
<10% 3%
10-25% 6%
25+ % 9%
FHA/USDA: 6%
VA: 4%
What is the right of rescission?
A right, set forth by TILA, of a borrower to cancel a home
equity or line of credit with a new lender, or to cancel a
refinance transaction done with another lender other
than the current mortgagee, within three days of closing
Which form states that the borrower must occupy the property as primary residence within 60 days?
FNMA FHLML Form 3072
What are the different
appraisal types?
Cost: Cost to replace; usually newer construction
Income: Income producing properties
Sales Comparison (Market): Compare to other similar properties
When was the Dodd-Frank
Act created?
2010
What are Mortgage-Backed Securities?
A type of asset-backed security that is secured by a mortgage or collection of mortgages
Lower-cost MI with loan level price adjustment
Borrower with high credit scores. The borrower can have lower MI but FNMA will pay less for the loan.
What does plain language title insurance do?
Protects the buyer:
- Rights of claims of 3rd parties
- Easements or claims of it not in the public record
- Forced removal of existing structure
- Mechanics lien coverage (unrecorded)
What is the appraiser trainee period?
12 months
Who are the big players
on the Secondary Market?
FNMA, FHLMC, and
GNMA
Someone on the DNC list contacts you. How long can you continue to call?
3 months
What are the high-cost
limits with APR and point
fees?
APR:
6.5 on 1st or 8.5% on 1st less than 501c or 2nd
Points Fees:
5% + on $20,000+ loan or
8% on less than $20,000
Where can acceptable down payments come from?
- Selling an asset
- An employer
- Family
- A fiancé
Which financial and non-financial companies are covered by the Bank Secrecy Act?
Banks, Credit Unions, Mortgage Bankers, and Mortgage Brokers
Who is required to take the
AML and Fraud Training?
All staff and management
How often does the AML and fraud training have to be done?
Once a year
Does fraud or money laundering have to be proven or just detected?
Only detected
If AML or fraud is detected,
who do you report it to?
Compliance officer or Senior
Officer
What is the name of the report that is to be filed if fraud or AML is detected?
SAR – Suspicious Activity
Report
Which government agency is responsible for the Bank Secrecy Act?
FinCEN - Financial Crimes
Enforcement Network
If a SAR is reported, how long does the file have to be kept in a secure place?
5 years
Can the borrower be told a SAR has been reported on them?
No – information on SARs is to be kept confidential for a five year period
Who is allowed to see the file once it has been reported as a SAR?
Police Authority or anyone
approved by FinCEN to see the information
Who is the person responsible for SAR files and releasing information?
Compliance Officer or Senior Officer
What is the penalty for
violating the Bank Secrecy Act?
A person convicted of money laundering can face up to 20 years in prison and a fine of up to $500,000
What is required under the
U.S. Patriot Act?
All borrowers are required to show personal identification: either a driver’s license or passport
What does OFAC stand for?
Office of Foreign Asset Control
What is required if a borrower is on the OFAC watch list?
The lender must call OFAC and report the person and ask what is to be done with the loan
What does HPA stand for?
Homeowners Protection Act
What is required under the
Homeowners Protection Act?
All loans about 80% LTV must have Mortgage Insurance if they are
Conventional Conforming Loans
What is the purpose of
Private Mortgage Insurance?
To provide security to the lender in case of default. Also allows borrower to
make a smaller down payment
What does MIP stand for?
Mortgage Insurance Premium for FHA Loans
Under the Homeowners
Protection Act, what is available to the borrower at 80% LTV?
The borrower can request that the PMI be dropped but it is at the option of the lender
When is PMI required to be
dropped under the
Homeowners Protection
78% Loan to Value (LTV)
What does QM stand for?
Qualified Mortgage
What is one of the options for a loan to meet QM standards?
Approved eligible from Fannie Mae or Freddie Mac and higher-priced lending standards are met
What is the penalty if you close a Conventional Conforming loan without QM approval?
Up to three years interest, all loan costs, and legal costs for both sides of the lawsuit
What does Safe Harbor mean?
The lender has proven the
borrower has the Ability to Repay (ATR)
What does LO Comp stand for?
Loan Officer Compensation
What law is LO Comp covered under?
TILA – Truth in Lending Act