Ab Flashcards
A number permanently assigned by the NMLS to individuals and companies is called what
A (UI) unique identifier
NMLS
Nation wide multistate licensing system and registry
TILA
Truth in lending act
CFPB
Consumer financial protection bureau
The federal government is responsible for regulating the mortgage industry federally through a variety of agencies like
HUD,CFPB AND FTC
The CFPB enforces many federal mortgage related acts and laws like-
Equal credit and opportunity act (ECOA)
Fair credit and reporting act (FCRA)
Home mortgage disclosure act (HMDA)
Home ownership and equity protection act (hoepa)
Truth in lending act (TILA)
Real Estate Settlement Procedures Act (RESPA)
Secure and fair enforcement for mortgage licensing act (safe act)
Regulation z requires you to maintain all compensation to a MLO for how long
3 years
Creditors must maintain (CD) Closing documents for how long
5 years
FHFA
Federal housing finance agency
Under the safe act, MLO must used ther UI
On ____ adds
All
True or false
All entities require MLO’s to use their UI on documents
True
What does FHFA do
(FHFA) provides supervision, regulation, and housing mission oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
Federal Housing Finance Agency
Dodd frank act did what
This act created more safety and transparency through many reforms including the creation of CFPB
Dodd-Frank was established in part to provide stricter regulation and oversight of the financial services industry.
TRID
TILA-RESPA integrated disclosure
A set of updated mortgage disclosures that are meant to eliminate confusion for all parties and improve compliance with requirements
TRID
What are the 3 ways CFPB protects consumers
Education, enforcement and research
CID
Civil investigative demands
Enforced by The CFPB on investigations
True or false, In 1965, President Lyndon B. Johnson signed the law that established the U.S. Department of Housing and Urban Development (HUD)
True
Department of Housing and Urban Developmen
HUD
What is HUD’S purpose
Its purpose then, as it is now, is to administer programs that address America’s housing needs and to enforce fair housing laws.
FHA
Federal housing administration
Insurers mortgages in fha loans
CDBG
Community development block grant
FHEO
The Office of Fair Housing and Equal Opportunity (FHEO) aims to eliminate housing discrimination, promote economic opportunity, and achieve diverse, inclusive communities through enforcement, administration, public education, and development of federal fair housing policies and laws
ONAP
Office of Native American Programs (ONAP) administers housing and community development programs that benefit Native American and Alaska Native tribal governments, tribal members, the Department of Hawaiian Home Lands, Native Hawaiians, and other organizations with the goal of increasing the availability of safe and affordable housing to Native American families.
BSA/AML
The BSA (bank secrecy act)works in conjunction with the federal government’s Anti-Money Laundering (AML) InfoBase to fight fraud.
CTR
Currency transactions report
A bank form to report a 10k transfer of money in 1 day
(SAR)
Suspicious activity report
BSA/AML TYPES OF REPORTING INCLUDES
SAR- suspicious activity report
CTR- currency transaction report
FBAR- foreign bank and financial account report
DOEP-designation of exemption person
GLBA
The Gramm-Leach-Bliley Act (GLBA or GLB Act) is also called the Financial Services Modernization Act of 1999.
requiring standards for safeguarding consumers’ nonpublic personal information (NPI).
NPI
Nonpublic personal information
TRUE OR FALSE
GLBA requires financial institutions to provide all customers with a written notice of their privacy and practices regarding their NPI
True
RESPA specifically prohibits what
RESPA expressly prohibits the payment of kickbacks or other unearned fees between settlement service providers, such as when a lender gives a real estate agent a fee for using the lender, or vice versa.
TRUE OR FALSE
Regulation Z requires lenders to disclose information about all charges and fees associated with a loan
And to use a standardized measure for interest rates Lenders must disclose the APR
True
Lenders must provide consumers with a LE within how many days of receiving the application?
3 days
True or false
Disclosure statements must contain
Interest rate
Apr
And all financial charges
True
YSP
Yield spread premium
is a fee (i.e., commission) a lender pays to a mortgage broker in exchange for a higher interest rate or an above-market market rate.
As a result, in 2010, HUD adopted a rule that decreed the following:
The YSP must be deducted from the loan origination charges.
The credited YSP amount must appear on the Loan Estimate.
how many days do lenders have to tell a clients if their loan credit decision?
30
Lenders are allowed to ask age only if it is to determine what?
The amount and continuance of income
Which 3 terms can you ask
Married
Separated
Divorced
Unmarried
Married
Unmarried
Separated
HMDA
Home mortgage disclosure act
HMDA enacted in 1975
Codified in regulation c
HMDA states that lenders must collect voluntary, self-reported demographic information from loan applicants, including whether an applicant is part of a protected class. Borrowers may opt out of disclosing HMDA information, but that doesn’t always protect them from the information being collected and reported.
HMDA also lets MLOs know what they may not ask borrowers. (Race, sex, ethnic)
HMDA requires financial institutions to report the 4 things that are
geographic location, race or national origin, sex, and income of each applicant
FCRA
Fair credit reporting act
passed in 1970 as another federal law that protects consumers who apply for credit. The FCRA regulates what information creditors can collect and use and how this credit report data must be protected.
Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit in use – 10%
How fico determines a credit score
RMCR
Residential mortgage credit report
RMCR is used when there are more than one or two inaccuracies on the borrower’s credit report or additional information must be added to the report. When the credit reporting company produces an RMCR, all credit reference information is updated and verified. Employment and rental history can be included in the RMCR, as well.
FACTA
Fair and accurate credit transaction act
an amendment to the FCRA that serves to protect consumers from identity theft by requiring all credit reporting agencies (CRAs) to provide consumers with credit reports for no cost, and allowing consumers to place a fraud alert on their files when necessary.
HOEPA
Home Ownership and Equity Protection Act
focuses on predatory practices relating to home equity lending and includes requirements for certain loans with high interest rates or high fees. HOEPA (often pronounced ho-E-puh) loans also are referred to as Section 32 mortgages after the section of the law that addresses them.
USA PATRIOT ACT
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
The PATRIOT Act requires MLOs to authenticate borrowers’ identities and file reports of any suspicious activity during mortgage transactions.
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
USA patriot act required financial institutions to create/ implement what type of program
AML
Anti money laundering programs
Have a CIP
requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account or changes an existing account
CIP Consumer identification program
CDD. (Act)
Customer due diligence act
The CDD Rule requires banks to:
Verify customer identity.
Verify the beneficial owners of companies opening accounts.
Understand the nature and purpose of customer relationships to develop customer risk profiles.
Conduct ongoing monitoring to identify and report suspicious transactions and update customer information.
E-sign act
Electronic Signatures in Global and National Commerce Act (E-Sign Act)
is a federal law that enables mortgage lenders to obtain electronic signatures on contracts and disclosures so long as the consumer consents to receiving electronic documents. If the consumer doesn’t consent or withdraws previously given consent, electronic records are off the table.
HPA
Homeowner protection act
called the PMI Cancellation Act, is an important law that you need to understand, because it impacts borrowers who may be required to pay for private mortgage insurance (PMI). Like many of the other acts you’ve already learned about, the HPA is enforced by the CFPB, thanks to the Dodd-Frank Act.
3 category’s of QM
Qualified mortgage
General qualified mortgage: A loan that meets all the requirements and has a debt-to-income ratio of 43% or less.
Small creditor qualified mortgage: A loan that meets all the requirements and is originated by a lender that makes 500 or fewer mortgages annually and has $2 billion or less in assets.
GSE-eligible qualified mortgage: A loan that meets all the requirements and can be purchased, insured, or guaranteed by a GSE, FHA, VA, or USDA.
What is a QM
Qualified mortgages are loans that have terms of 30 years or less and a maximum debt-to-income ratio of 43%. They also can’t include any risky loan features. Like
Interest-only
Negative amortization
Balloon payments
Loan terms longer than 30 years
TRUE OR FALSE
Nontraditional mortgages include any mortgage product other than 30-year fixed loans.* They are often referred to as alternative or exotic mortgage loans and are predominantly found in markets with large increases in home market values that pushed many buyers out of the market. Those buyers have no choice but to take on the risk of a nontraditional loan because it’s the only way they can afford to buy a home.**
True
TRUE OR FALSE
Nonconforming loans don’t meet all qualifying guidelines set by Fannie Mae and Freddie Mac. They’re frequently called jumbo loans, which means they are above the loan limit for government-backed loans.
True
Negative Amortization
monthly payment isn’t sufficient to cover the monthly principal and interest. The deficit is then added to the remaining principal balance
Non QM
Nonqualified (non-QM loan): This is commonly referred to as reduced documentation, low doc, no doc, no income, no asset, stated income, or stated asset loans. The qualification criteria for reduced documentation loans are based on creditworthiness and the increased risk to loan providers due to the reduced or minimal documentation standards and verification needed to demonstrate the borrower’s financial information.
ARM
Adjustable rate mortgage
An ARM is a loan with a rate that is adjusted, usually annually, based on the behavior of the economic index with which it is associated (e.g., the Consumer Price Index). So, if an ARM has an interest rate of 5% and a lifetime cap of 7%, the maximum that may be charged is 12%.
Hybrid ARM
Hybrid ARM
This type of interest rate is fixed for a period of time and then adjustable for a period of time. For example, a 5-1 ARM is fixed for the first five years, and then may adjust every year after that until it reaches the highest allowed interest rate. Often the hybrid ARM will have a larger first adjustment of 2% and then allow an adjustment up or down a maximum of 1% per year after that.
Payment option arm
Payment option ARM
This allows the borrower to choose from several different payment options. For example, each month, the borrower may choose a minimum payment option based on a “start” or introductory interest rate, an interest-only payment option based on the fully indexed interest rate, or a fully amortizing principal and interest payment option based on a 15-year or 30-year loan term, plus any required escrow payments.
Simultaneous second-lien loan
Simultaneous second-lien loan
This option is often used in place of a borrower’s down payment, and is either a closed-end second lien or a home equity line of credit (HELOC) that is originated simultaneously with the first loan. It helps the buyer avoid paying for mortgage insurance that could last for the life of the loan, but may limit the borrower’s ability to access the home’s equity in the future. The second mortgage would need to be paid in full if the borrower wants to access additional equity as the home’s value increases, because very few lenders will accept a third lien position.
Construction mortgage summary
construction mortgage is a form of temporary financing for construction purposes. The developer submits plans for a proposed project, and the lender makes a loan based on the value of the property (its appraised value) and the construction plans.
The entire loan is not given at once; disbursements are made at intervals as phases of construction are completed. Upon completion, the lender makes a final inspection, closes the construction loan, and converts the loan into permanent, long-term financing.
Guarantee fees
Guarantee Fees
Loans that carry risks must provide certain legal protections for lenders, which are called guarantee fees or g-fees. It works like this: Fannie Mae and Freddie Mac charge lenders mortgage g-fees so that principal and interest payments on mortgage-backed securities (MBS) are guaranteed.
The g-fee covers administrative costs, losses in the event of borrower default, and a return on capital. The g-fees are usually a certain percentage of the MBS or a fixed amount. And, of course, lenders pass on g-fees to consumers by charging higher interest rates.
Unlike document and origination charges and other upfront fees, g-fees are imposed during the entire length of the loan.
Alt-a loans/a paper loans
Alt-a loans are riskier than prime loans but not as risky as subprime ones; therefore, in order of descending risk are:
Subprime loans (highest risk)
Alt-a loans (medium risk)
Prime loans (lowest risk)
The “alt-a” stands for “alternative a-paper”; prime loans are also called “a-paper” loans. Alt-a loans can be a good solution for borrowers who have good credit scores but low income levels. These loans feature lower down payments and higher debt-to-income ratios (for example, an alt-a borrower may only have 15% or 10%, or even less, for a down payment).
Alt-a borrowers also usually have higher debt-to-income ratios than borrowers who qualify for prime loans. Historically, these loans required less documentation than did prime loans, meaning that they had a higher rate of default.
HPML
A higher-priced mortgage loan (HPML) is a loan secured by the borrower’s principal residence with an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) depending on the lien type:
First-lien mortgage: If the first mortgage has an APR that is 1.5 more percentage points higher than the APOR.
Jumbo mortgage: If the loan is a jumbo mortgage and has an APR that is 2.5 or more percentage points higher than the APOR.
Subordinate-lien mortgage: If the loan is a subordinate lien and has an APR that is 3.5 or more percentage points higher than the APOR.
CSBS/AARMR
Conference of State Bank Supervisors (CSBS), a national organization dedicated to protecting and advancing the nation’s dual banking system. The CSBS doesn’t work alone but instead oversees the industry, along with the American Association of Residential Mortgage Regulators (AARMR). The AARMR is a national organization that represents state residential mortgage regulators. The AARMR assists with exchanging information during the administration and regulation of residential mortgage lending, servicing, and brokering.
Their guidance focuses on the higher risk elements of certain stringent underwriting guidelines and adequate risk management.
COE
Certificate of eligibility
A COE is a document provided by the VA stating whether an individual is eligible for the VA loan, and the dollar amount of eligibility.
True or false
The VA Fee is waiver completely if the buyer is putting down 5 percent or greater disability
False
Must be 10 percent or greater va disability
UMDP
United mortgage data program
Fannie mea form 1003
The standardized uniform residential mortgage application that is required by Fannie Mae if selling the loan to Freddie Mac
How may a MLO take a application?
Writing
Face to face
Email
Fax
Internet
Phone
VOD
Verification of deposit
lenders will ask the consumer’s bank to complete a verification of deposit (VOD). After verifying the consumer’s account balance and history, they’ll sign the form and return it to the MLO
TRUE OR FALSE
If consumers receive money as a gift, they’ll need to provide a gift letter. If they’ve withdrawn from their retirement account, they’ll need to provide evidence of the withdrawal.
The housing ratio (also known as a front-end ratio) compares borrowers’ total monthly housing payments to their gross monthly income and doesn’t include other debt obligations. Housing expenses include the minimum required loan payment of principal and interest, property taxes, insurance, assessments, and HOA dues, if applicable.*
The housing ratio calculation is
monthly housing expenses ÷ monthly gross income) × 100
The housing ratio (also known as a front-end ratio) compares borrowers’ total monthly housing payments to their gross monthly income and doesn’t include other debt obligations. Housing expenses include the minimum required loan payment of principal and interest, property taxes, insurance, assessments, and HOA dues, if applicable.*
The housing ratio calculation is
monthly housing expenses ÷ monthly gross income) × 100
The 2 types of title insurance and what they provide are
The 2 types of title insurance are
Owners policy and lenders policy
They both provide protection on the title of the home
Both include protection from old unaware debts and obligations on the home
FNMA title insurance coverage requirements are
Terms of coverage
title is generally acceptable, and that the mortgage establishes a lien of priority with a fee-simple or leasehold estate in the property. If other liens exist, the policy must list them in the order that they are subordinate to the first lien.
Effective date of coverage
Must began at date of final disbursement
Amount of coverage
Must be equal to principal amount of the loan
homeowners insurance coverage is broken into six categories:
dwelling, loss of use, personal liability, personal possessions, medical payments, and other structures.
What are the 3 structures of a arm loan mean (2/3/7)
A = The first number is the maximum amount by which an interest rate may increase after the first adjustment
B = The second number is the maximum amount by which the interest rate may increase after all subsequent adjustments
C = The third number is the maximum interest rate that is allowed for the entire lifetime of the loan, above the initial rate.
For example, an ARM with a 2/3/7 cap structure indicates that the interest rate may not increase more than 2% after the first adjustment, by more than 3% on any subsequent adjustments, and may not exceed the initial rate + 7% at any time.
Formula to calculate LTV
(Loan amount divided by property amount ) x100
Calculating prorations with a statutory year and calendar year
360 divided by 30
365 divide by number of days in a month
What is a cloud on a title
A cloud on title is any encumbrance, such as a lien or inheritance claim, that prevents the seller from providing clear, marketable title. Clouds on title may be simple (such as unpaid taxes) and easily remedied. They may also be more complex, such as an outstanding ownership claim on the property.
Common clouds on title:
A simple foreclosure or inheritance claim may be resolved by having the owner sign a quitclaim deed, which releases any claim they have on the property.
More complicated clouds may be resolved through a quiet title suit, in which the property owner goes to court to attempt to remove (quiet) any claims to the property.
Title issues can be resolved by what 3 common documents?
Title issues can be resolved by filing one of three common documents:
A quitclaim deed removes an heir and clears up title among co-owners or spouses.
A release of lien/judgment removes a paid mortgage or spousal or child support lien.
A deed of reconveyance records payment of a mortgage under a deed of trust.
(Title) schedule B-1
Schedule B-1 lists requirements that must be satisfied prior to issuing the policy. Requirements that must be cleared before the title can be exchanged include clearing up the previous owner’s judgment liens and mortgages.
(Title) B-2
Schedule B-2 identifies standard exceptions, or flaws, that are not being insured in the policy. These exceptions typically include items such as current year taxes, easements of record, and restrictions shown on a plat map. They don’t need to be cleared before the property closes.
Right to rescind to do list and how long they have
An MLO should partner with the other service providers to ensure the rescission is fully effective by:
Within 3 days
Cancelling transaction documents
Filing release/termination statements of public record
Notifying related parties i.e., subcontractors
Conventional loan max dti and housing ratio
Conventional Loans
Total debt ratio: 36%
Housing ratio: 28%
Fannie Mae Conforming Loans
Total debt ratio: 36–45%
Housing ratio: 28%
FHA Loans max dti and housing ratio
Total debt ratio: 43%
Housing ratio: 31%
VA loan max dti
VA Loans
Total debt ratio: 41%
APOR
Average prime offer rate-
an annual percentage rate that is based on average interest rates, fees, and other terms on mortgages offered to highly qualified borrowers. In general a 1.5 percent over APOR is a high rate
HERA
The housing and economic recovery act
Create a licensing system and database for the mortgage industry
Give the government more oversight of mortgage lending
Help homeowners in financial trouble
Develop consumer Safeguards
Title V of HERA was the biggest change for state regulated Loan Officers and Brokers.
Title V of HERA is called The SAFE Act, the Secure And Fair Enforcement Mortgage Licensing Act.
The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) wrote the SAFE Act which created the NMLSR (The Nationwide Mortgage Licensing System & Registry).
