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NMLS > Affinity Video / Artricia Woods > Flashcards

Affinity Video / Artricia Woods Flashcards

1
Q

What is ECOA?

A
  • The Equal Credit Opportunity Act / Regulation B
  • This law is regarding discrimination on credit applications
  • Lenders/Creditors must extend credit in a fair and equal way. They have to B equal
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2
Q

What is HMDA?

A
  • Home Mortgage Disclosure Act / Regulation C
  • The law that allows regulators to see (C) where possible discrimination takes place
  • Found on Section 10 (X) of the 1003 LA
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3
Q

What is RESPA?

A

-The Real Estate Settlement and Procedures Act / Regulation X (REXPA)
-The purpose of RESPA is to become better shoppers for settlement services
-Deals with 1-4 unit residential property only
-Penalty: 10,000 and up to 1 Year in Jail
Section 6: Mortgage Servicers and Servicing Abuses
Section 8: Kickback, Referral Fees, Fee Splitting, Unearned Fees
SEction 9: Title Insurance
Section 10: Escrow Accounts
-RESPA deals with timing on disclosures sent

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4
Q

What is TILA?

A
  • Truth in Lending Act / Regulation Z (Godzilla)
  • Deals with credit, APR, and advertising of consumer loans
  • Requires lenders to disclose the complete cost of credit (All costs, Total Interest Paid)
  • The 3-Day Right of Rescission Rule (For Helocs and Refinance NOT Purchase)
  • MDIA Act/373 Rule
  • Qualified Mortgages
  • The ATR Rule
  • HOEPA
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5
Q

What is HPA?

A
  • Homeowner’s Protection Act
  • Deals with PMI not MIP (FHA)
  • PMI protects the lender not the borrower
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6
Q

What is HOEPA?

A
  • Homeownership Equity Protection Act / Regulation Z
  • Section 32:High Cost Loan
  • Section 35: High Price Loan
  • Part of TILA / Regulation Z
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7
Q

What is the SAFE Act?

A
  • Secure and Fair Enforcement Act / Regulation H

- Mandates a nationwide licensing and registration system for residential mortgage loan originators (MLOs).

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8
Q

What is HERA?

A
  • Home Economic Recovery Act

- The law that created the SAFE Act

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9
Q

What is FCRA?

A
  • Fair Credit Reporting Act / Regulation V

- Deals with credit reports and CRAs

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10
Q

What is FACTA?

A
  • Fair and Accurate Credit Transaction Act / Regulation
  • Deals with identity theft
  • Red Flag Rules (Section 114)
  • This is an Amendment to FCRA
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11
Q

What is GLBA?

A
  • Graham Leech Bliley Act / Regulation P
  • Deals with protecting consumer financial info
  • SPF (Safeguarding, Pretensing, Financial Privacy)
  • The Do-Not-Call List
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12
Q

What is an Affiliated Business Arrangement Disclosure?

A
  • Disclosure to be told to customer regarding affiliated business arrangement
  • If you have 1% or more ownership in the business referral you must let them know
  • The disclosure must be made immediately
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13
Q

What is the answer regarding questions on the exam regarding the Civil Rights Act?

A

-The answer is always about race

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14
Q

What is the CFPB?

A
  • The Consumer Financial Protection Bureau
  • The two laws that created the CFPB -> The Dodd Frank Act and The Consumer Protection Act
  • The new sheriff in town that regulates HUD, FTC, FDIC (any entity that deals with the money and banking) *not the Fair Housing Act
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15
Q

What 6 items make a complete application?

A
  • Borrower’s Name
  • Social Security Number
  • Monthly Income
  • Property Address
  • Loan Amount
  • Appraised Value
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16
Q

What are all the initial disclosures sent by the lender once the application is complete?

A
  • Loan Estimate (TILA Document but RESPA = Timing)
  • Homeloan Toolkit (Purchases Only)
  • Mortgage Servicing Disclosure Statement
  • List of HUD Counselors
  • Must be sent within 3 Days of Application - Unless the app was withdrawn or declined within 3 days*
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17
Q

What are disclosures sent before doc signing/settlement?

A

-Closing Disclosure (TILA Document but RESPA = Timing)

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18
Q

What disclosures are sent at settlement/doc signing?

A

-Closing Disclosure (TILA Document but RESPA = Timing)

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19
Q

What disclosures are sent after settlement/doc signing?

A
  • Annual Escrow Statement

- Servicing Transfer Statement

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20
Q

How long is the loan estimate good for?

A

10 Days

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21
Q

Information about the rate lock is found on what closing disclosure?

A

-Loan Estimate

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22
Q

In what instance would you get a new closing disclosure and have to wait a new 3 day period?

A
  • Change in APR (1/8 or 1/4 change)
  • Change in Loan Product
  • Addition of Prepayment Penalty
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23
Q

Under TILA, If one borrower wants to exercise their right of rescission can the loan be cancelled. Or must it be a unanimous decision?

A

One borrower can cancel the entire loan. It does not need to be a unanimous decision.

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24
Q

How many installments of payment is needed for TILA to kick in and for disclosures that need to be made?

A

More than 4 installment payments (e.g. car notes, homes etc.)

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25
Q

How long must TILA disclosures be kept on file?

A 
2 Years (All
*Loan Estimate (3 Years) and Closing Disclosure (5 Years)
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26
Q

What are all of the TILA Disclosures?

A
  • Loan Estimate
  • Closing Disclosure
  • CHARM Booklet (only when they get ARMs)
  • When Your Home is on the Line (only when you get HELOC or Refinance)
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27
Q

What is another word for APR?

A

Effective Rate

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28
Q

What are two other words used for interest rate?

A
  • Nominal Rate

- Note Rate

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29
Q

What are the penalties for violating TILA?

A
  • 5K a day for single violations
  • 20K a day for reckless violations
  • 1M for violating TRID
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30
Q

What is the MDIA Rule?

A
  • Also called the 373 Rule
  • 3 Days for Initial Disclosures to go out
  • 7 Day gap needed between closing and initial disclosures going
  • 3 Day waiting period for significant changes to CD/LE
  • 3 Day Rule Redisclosure not required for Bonafide Financial Emergency*
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31
Q

What is a business day according to TILA?

A

All Calendar Days except for Sundays and Legal Holidays

For purposes of Initial Loan Estimate Business Day is any day the bank is open for business

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32
Q

What is the difference between calendar days and business days?

A

0-9 days - Business Days

10-30 days - Calendar Days

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33
Q

Under TILA, what type of numbers trigger additional term disclosures on an ad?

A

Under TILA, If an ad uses a number to describe credit terms, and that number is NOT APR, then it triggers.

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34
Q

Under TILA, What is a qualified mortgage?

A
  • Also called safe-harbor

- Government protects lenders from foreclosure and repays lenders if the borrower meets the QM terms

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35
Q

What are the QM terms?

A
  • 43% DTI Back End Ratio
  • No Doc Loans or NINA loans NOT ALLOWED
  • Loan originator cannot charge more than 3 discount points
  • Loan term cannot be more than 30 years
  • No Interest Only Loans
  • No Prepayment Penalties
  • No Negative Amortization
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36
Q

Under TILA, What are the 8 things looked at/verified to determine Ability to Repay (ATR Rule)?

A
  • Income and Assets
  • Employment Status
  • Monthly Mortgage Payment (PI)
  • Monthly Mortgage-Related Payment (TI and HOA)
  • Monthly Payment on Simultaneous Loan
  • Debts (on a credit report), Child Support, Alimony
  • DTI or Residual Income
  • Credit History
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37
Q

What is APOR?

A
  • Average Prime Offer Rate

- AKA What are the average rates today?

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38
Q

What are HOEPA Loans?

A

-Hard money loans

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39
Q

What two laws deal with discrimination?

A
  • ECOA (Discrimination on a credit application)

- Fair Housing Act (discrimination on sale and rental of property)

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40
Q

What is a protected class under ECOA?

A
  • Sex
  • Race
  • Color
  • Religion
  • National Origin
  • *Age
  • *Marital Status
  • *Receiving Public Assistance (Welfare, SS, Disability Child Support, Alimony)
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41
Q

What is a protected class under Fair Housing?

A
  • Sex
  • Race
  • Color
  • Religion
  • National Origin
  • *Familial Status
  • *Disability
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42
Q

Under ECOA, what is the proper way to ask about Marital Status?

A

-Are you married, unmarried or separated?

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43
Q

How long must ECOA records be kept?

A

25 Months

*Someone would need to sue within 24 months

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44
Q

What is the penalty for denying ECOA?

A

10K

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45
Q

Under ECOA, How long does the borrower have to request an appraisal if it’s denied?

A

They have to request it within 90 days and the lender has to provide it within 30 Days

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46
Q

Under ECOA, How long does the borrower have to request an appraisal if it’s approved?

A

They have to get it 3 days prior to doc signing/closing?

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47
Q

What 3 laws are under the Fair Housing Act?

A
  • Blockbusting (REAs trying to induce an owner to sell because minorities are moving in)
  • Steering (REAs trying to get someone to buy in a neighborhood because of their race, religion etc.)
  • Redlining (Lenders denying financial services in certain neighborhoods based on race, religion etc.)
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48
Q

What law lead to the creation of HMDA?

A

Redlining laws

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49
Q

How long does a person have to sue under the Fair Housing Act and ECOA?

A
  • FHA - 1 Year

- ECOA - 2 Y-ar

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50
Q

Under HPA, When can a borrower request for PMI to be removed? When must a lender cancel the PMI?

A
  • Request: When the LTV has reached at 80% or paid down by 20%
  • Cancel: When the LTV has reached at 78% or paid down by 22%
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51
Q

Under HMDA, How often must lenders complete a LAR?

A

-Every 30 days/Monthly

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52
Q

What is the difference between FCRA and ECOA?

A

-Don’t get this mixed up, FCRA is about a credit REPORT while ECOA is about a credit APPLICATION

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53
Q

Under FCRA, what are all borrowers entitled to receive?

A
  • Written Adverse Action Notice
  • Credit Report (free)
  • Credit Score (not free)
  • Dispute Incomplete/Inaccurate Info
  • Limit Pre-Screen Offers
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54
Q

Under FCRA, what information must a creditor give to the customer if they are denied due to their credit report?

A

-Name
-Address
-Phone Number
of Credit Reporting Agency

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55
Q

Under FCRA, what conditions allow you to get a FREE copy of your credit report?

A
  • Denial of credit
  • Victim of Identity Theft
  • Victim of Fraud
  • Unemployed
  • On Public Assistance
56
Q

Under FCRA, how long does negative information stay on your credit report?

A

7 Years

57
Q

Under FCRA, how long does bankruptcy information stay on your credit report?

A

10 Years

58
Q

Under FCRA, how long does an unpaid information stay on your credit report?

A

Never

59
Q

Under FCRA, how long do criminal convictions stay on your credit report?

A

Never

60
Q

What came first FCRA or FACTA?

A

FCRA, then it was determined more laws were needed to protect consumers so FACTA was introduced later.

61
Q

Under FACTA, what are common red flag rules?

A
  • Verify the validity of any change of address
  • Businesses must shorten your account number
  • Allows you to place a credit freeze or password on your credit report
  • Must burn, shred, or keep locked client information
62
Q

Under FACTA, what conditions allow you to get a FREE copy of your credit report?

A
  • No conditions but you can only get it once a year.

- Annualcreditreport.com

63
Q

Under the USA Patriot Act, what must lender ask for when customers are applying for a loan?

A
  • DOB
  • SS#
  • Ethnicity
64
Q

Under the GLBA, Under the Do-Not-Call List, what is required?

A

Make sure to remove names of people before cold-calling and make sure you update the list every 31 days

65
Q

What is the penalty for violating the Do-Not-Call law?

A

16K per violation

66
Q

Under the GLBA, who can you call even if they are on the Do-Not-Call List

A

People who you have an Established Business Relationship with (meaning they bought something from you)

67
Q

How long can you call someone with an Established Business Relationship?

A

18 months

68
Q

How long can you call someone with an Established Business Relationship but the deal or transaction didn’t go through?

A

3 months

69
Q

What is MARS?

A
  • The law that deals with foreclosures, short sales, loan mod scams
  • Bans the collection of fees until a buyer accepts an offer
  • Bans sellers telling buyers they can’t speak to their lenders
70
Q

What is the BSA/AML?

A

-Anytime you spend or deposit more than 10K you go on a list to track money laundering activity or terrorist activity

71
Q

According to the SAFE Act, what is a non-traditional mortgage vs a traditional mortgage.

A

A traditional mortgage is a 30-year fixed and a non-traditional is everything BUT a 30-year fixed.

72
Q

According to the SAFE Act, what are conforming loans vs non-conforming loans?

A

Conforming loans CONFORM to the standards of Fannie and Freddie, therefore they can sold on the secondary market. whereas non-conforming loans don’t conform and they cannot be sold on the secondary market. Non-conforming loans are AKA as jumbo loans.

73
Q

What are subprime loans vs prime loans?

A

Subprime loans basically allow for more risk, where as prime loans have less risk.

74
Q

What are the 4 main types of notes?

A
  • Interest Only Note AKA Straight Note
  • Partially Amortized Note - Balloon Payment
  • Negative Amortization Note - Principal grows
  • Fully Amortized - AKA Self Liquidating Loan
75
Q

What is the difference between an acceleration (due on sale) clause and alienation clause?

A

An acceleration cause speeds up when the payment is due because of default/late payments (immediately) while an alienation clause gives the lender the right to have loan payment due due to a transfer of ownership (sale or gift).

76
Q

What are the 3 parts of an ARM loan?

A

Index - This is what changes (LIBOR, COFI)
Margin - Stays the same, set by the lender
Rate - Index + Margin

77
Q

What are buydowns?

A
  • Discounts paid to get a lower rate
  • AKA Points
  • Based on loan amount (1% of loan amount)
78
Q

What are reverse mortgages?

A
  • Balances of the loan increases, while the equity decreases
  • Borrower has to at least be 62
  • FHA Reverse Mortgage is a HECM
  • Tenure Method - Monthly payments received vs a large lump sum
79
Q

What are the 4 reasons a reverse mortgage would go away/end?

A
  • Borrower passes away
  • Borrower sells the home
  • Borrower ceases to live in the property for consecutive 12 months
  • They don’t pay their taxes and insurance
80
Q

What is a balloon payment AKA partially amortized loan?

A

A loan that has smaller payments initially but then requires a larger payment be due at the end of the loan

81
Q

What is a Hybrid ARM?

A

A loan that can be fixed and adjustable. Typically will be fixed initially and then change to ARM

82
Q

What is a bi-weekly mortage?

A

A borrower has to make 26 payments instead of 12, every other weeks

83
Q

What is a blanket mortgage?

A

A blanket mortgage covers more than one parcel of land

84
Q

What is a bridge mortgage?

A

A bridge mortgage bridges the gap between mortgage and another. Typically happens when borrower is selling one house to move into another but they don’t yet have the proceeds of the home sale. So they take out a short term mortgage to cover the closing costs of the new home.

85
Q

What is a refinance or cash-out mortgage?

A
  • The loan starts completely over, meaning the terms change
  • Loan that requires a net tangible benefit, has to make sense for the borrower in the long run, meaning they are saving money
86
Q

What is a HELOC?

A

An open end HELOC means you can get more money over and over again (revolving) but a closed end means once you use the whole amount you were approved for, you cannot get more.

87
Q

What is a construction mortgage?

A
  • AKA an interim mortgage
  • Loan to build the house, and buy materials, labor but it’s not the loan on the house
  • You still have to get a loan for the house and that’s the permanent financing (called a take out loan)
88
Q

What is an Equity Participation Mortgage?

A
  • AKA Shared Appreciation Mortgage
  • Lender gets part of the equity of the home once it ever becomes sold
  • Typically a loan modification
89
Q

What is a package mortgage?

A
  • A mortgage that includes personal property
  • It includes the appliances, furnitures or upgrades in a home
  • Typically type of loan for new construction
90
Q

What is a wrap around mortgage?

A
  • The existing mortgage is retained by the lender and then the lender gives the borrower a new larger loan
  • This is not a refinance
  • Not common since it does not really make sense
91
Q

What is the process of home loan from beginning to the end?

A
  1. Loan Origination
  2. Processing
  3. Underwriting
  4. Closing/Funding
92
Q

What happens after the loans gets originated?

A

The loan is now in servicing which includes simply paying the principal, interest, taxes and insurance on a regular basis.

93
Q

What are the two different types of loan applications/URLAs?

A
  • Fannies uses Form 1003

- Freddie uses Form 65

94
Q

What are two different types of underwriting?

A
  • Automated Underwriting (AUS)

- Manual Underwriting

95
Q

What are the two different types of automatic underwriting systems?

A
  • Fannie uses Desktop Underwriter (DU)

- Freddie uses Loan Product Advisor/Loan Prospector

96
Q

What are conventional loans (conforming)?

A
  • They are not insured -> like FHA
  • They are not guaranteed -> like VA
  • DTI Ratios 28%/36%
  • PMI is required for <80% LTV
  • Late Fee is 5% of PI only not TI
97
Q

What are FHA Loans?

A
  • They are insured by FHA
  • They have MIP and UFMIP (1.75%)
  • Down Payment is 3.5%
  • DTI Ratios 31%/43%
  • Maximum seller credit is 6%
  • Brwr must move in within the first 60 days and agree to stay a year
  • Late Fee is 4% of PI only not TI
98
Q

What are VA Loans?

A
  • They are guaranteed (Max is 25% of the PP or Value)
  • Documents Needed: Discharge Paperwork and Certificate of Eligibility (shows eligible amount)
  • DTI Ratio 41%
  • VA Appraisals: Certificate of Reasonable Value
  • Non-refundable Variable Funding Fee (unless disables or surviving spouse)
  • No Down Payment Necessary
  • Brwr must move in within the first 60 days and agree to stay a year
  • Brwr must have residual income
  • Maximum Lender can charge in fees is 1%
  • Late Fee is 4% of PI only not TI
99
Q

What are USDA Loans?

A
  • 100% financing to buy in rural areas
  • Does not come from the bank it comes from the Department of Agriculture
  • No Max Loan Amount
  • Late Fee is 4% of PI only not TI
100
Q

What are the 3 Appraisal Approaches?

A
  1. Cost Approach - For Vacant Land, New Builds or Unusual (Weird Architecture) or Special Purpose (Hospital or School)
  2. Income Approach - Purpose of the property is to generate income (businesses)
  3. Market Approach/Sales Comparison - Most common and needs Min of 3 Comparables
101
Q

If a Borrower is Self-Employed what documents are required?

A

-2 Years of Tax Returns

102
Q

If a Borrower is a wage-earner what documents are required?

A
  • 2 Years of the same line of work

- If not must show certification of schooling for new industry

103
Q

If a Borrower has alimony or child support what documents are required?

A

Proof that payments will continue over the next 3 years

104
Q

What forms of income can be grossed up and by how much?

A

Fixed income/Tax-Free income like Social Security can be grossed up by up to 25%

105
Q

How much of rental income can be used?

A

75% of rental income

106
Q

What is a 4506T?

A

Form a lender uses to get a tax transcript of the borrower’s tax returns

107
Q

What is a 8821?

A

Form a lender uses to get the borrower’s complete tax returns

108
Q

What are some math tips?

A
  • Always start with a gross monthly income
  • Understand the difference between bi-weekly (26) and bi-monthly (24)
  • Always use the lesser of the sales price and appraised value
  • Question on Ratio = Division
  • Question on Monthly Payment = Multiplication
109
Q

What is the LTV Ratio?

A

Loan Amount / Lesser of Sales Price and Appraised Value

110
Q

What is the CLTV Ratio?

A

1st + 2nd Loan Amount / Lesser of Sales Price and Appraised Value

This one only uses what’s been disbursed from the Line of Credit Amount

111
Q

What is the HLTV Ratio?

A

1st + 2nd Loan Amount / Lesser of Sales Price and Appraised Value

This one uses the full Line of Credit Amount not just what’s disbursed

112
Q

What is the Front-End Ratio?

A
  • AKA Housing Expense Ratio

- PITI / Gross Monthly Income

113
Q

What is the Back-End Ratio?

A
  • AKA Back-End Ratio
  • PITI + Debts* / Gross Monthly Income
  • Debt that shows on a credit report, lease payments, and due for more than 10 months
114
Q

What is the Maximum Mortgage Payment?

A
  1. Gross x Front-End Ratio
  2. Gross x Back-end Ratio - Debt
  3. Pick the Lowest One
115
Q

What is the difference between actual fraud and constructed fraud?

A

Actual fraud is done on purpose (creating fake check stubs) while constructed fraud shows no intent and someone just following directions.

116
Q

What is the difference between fraud for property and fraud for profit?

A
  • Fraud for Property is committed by homeowner’s and borrowers with the intention of trying to obtain property not money (Lying on Applications, creating false documents, or using straw buyers)
  • Fraud for Profit is committed by Industry insiders with intention of trying to obtain money and not property (Charging a borrower to verify employment or Appraiser charging to change the value)
117
Q

What is an air loan?

A

Getting a loan on a property that does not exist

118
Q

What is deed fraud?

A

When you get scammed out of your deed for some benefit like fixing credit

119
Q

What is a double sold loans?

A

Selling one property to two different lenders on the secondary market without the other lender knowing and then dissolving the corporation

120
Q

What are unrecorded silent seconds?

A

A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the first mortgage. The second mortgage is called “silent” because the borrower does not disclose its existence to the original mortgage lender.

121
Q

What is equity skimming?

A

Making a rescue loan to a borrower who you know cannot repay that loan

122
Q

What is a straw buyer vs. a straw seller?

A
  • A straw seller is an individual who accepts a fee to falsely claim ownership to a property. Straw sellers are sometimes used in conjunction with straw buyers in elaborate mortgage fraud schemes.
  • A straw buyer is a person who accepts a fee for the use of his/her Social Security Number and other personal information on a mortgage application.
123
Q

What is a bait and switch?

A

Telling a borrower an alluring offer and once they commit switching the offer to something more costly to the borrower

124
Q

What is a bona fide offer?

A

Telling your customers you have an offer or deal for products/items you actually carry

125
Q

What 2 entities created the NMLS system?

A

AARM and CSBS

126
Q

What makes you a loan originator?

A
  • You are taking loan applications and negotiating on a mortgage
  • *Timeshare loans and loans for family members excluded
127
Q

What makes you a loan processor?

A

Only doing clerical or administrative duties under a loan originator

128
Q

What is the difference between a registered loan originator or licensed loan originator?

A

If you represent an FDIC insured bank you are REGISTERED but if you represent yourself or a company you have to be LICENSED. Ask yourself, How do they represent themselves?

129
Q

What stops you from being licensed when it comes to criminal activity?

A
  • Felonies from non-financial crimes 7 Years

- Felonies from financial crimes - NEVER

130
Q

How many hours of pre licensing education do you need?

A

20 Hours (3 Federal 3 Ethics 2 Non-Traditional)

131
Q

How many hours of continuing education do you need?

A

8 Hours (3 Federal 2 Ethics 2 Non-Traditional)

132
Q

What is the successive education rule?

A

You cannot take the same class year over year and get credit for it

133
Q

What can a state regulatory authority do and not do?

A
  • They can NOT issue prison sentences
  • They can take your license
  • They can give you a fine
134
Q

What are the 3 protection options that the state regulatory authority requires MLOs to have in place?

A
  • Required a surety bond or
  • Required to have a minimum net worth or
  • Required to give to a state fund
135
Q

What are some ways loan originators violate the SAFE act?

A
  • Defraud Borrowers
  • Practice without a license
  • Threaten the appraiser
  • Steal a borrowers deposit money

NMLS (41 decks)

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