Agencies - Chapter 3 Flashcards

1
Q

NMLS

A

Nationwide Multistate Licensing System & Registry

The system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and U.S. Territories of Puerto Rico, the U.S. Virgin Islands, and Guam.

The states work together with the federal government to regulate the mortgage industry.

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2
Q

The Tenth Amendment to the Constitution

A

“The powers not delegated to the United States by the Constitution nor prohibited by it to the states, are reserved to the states respectively, or to the people.” To simplify that - states are allowed to make their own laws as long as they do not contradict federal law.

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3
Q

The State Model

A

A template, not a law, written by the Conference of State Bank Supervisors (CSBS).

These standards ensure that state law governing mortgage loan originators follow certain guidelines consistent with the rules of the SAFE Act.

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4
Q

CSBS

A

Conference of State Bank Supervisors

CSBS was organized in 1902 as the National Association of Supervisors of State Banks. In 1971, the name was changed

Supports state regulators in advancing the system of state financial supervision by ensuring safety, soundness, and consumer protection; promoting economic growth; and fostering innovative, responsive supervision.

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5
Q

State Standards And The SAFE Act

A

State Standards And The SAFE Act

The following are standards expressed in the State Model that states are expected to incorporate into their own
laws:
• The requirement for licensing and/or registration of mortgage loan originators (MLOs)
• The application for and issuance of licenses or registries
• Education requirements
• Testing requirements
• License renewal
• Enforcement, Authority, Violations, and Penalties
• Surety Bond, State Fund, and Net Worth Requirements
• Investigation and Examination Requirements
• Prohibited Acts and Practices
• Mortgage Call Reports
• Use of the NMLS
• Requires unique Identifiers on all advertising
• Maximum penalty for violations of the SAFE Act is $30,058

Remember U-PULSE METER:
Use of NMLS
Prohibited acts
Unique identifiers on advertising
Licensing
Surety bond
Education
Max penalty of SAFE Act is $30,058
Enforcement of penalties
Testing
Examination requirements
Renewal of license
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6
Q

The State Authority (Common Titles):

A
Remember DDT SCABS:
D •	Department
D •	Director
T  •	The State
S  •	Superintendent
C •	Commissioner
A •	Authority
B •	Bureau
S •	Secretary
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7
Q

State Authority Responsibilities

A

State Authority Responsibilities

The state has the authority to apply, interpret, and enforce the SAFE Act within that particular state. The state also has the authority to put into action rules and regulations that aid in implementing this Act.
Among the numerous regulatory responsibilities of the state authority, the following are the most significant:
• Registration and licensing for mortgage loan originators
• Enforcing the SAFE Act at the state level
• Reporting MLO actions to the NMLS
• Fines
• Mortgage education requirements for the state
• State examinations
• Orders and directives

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8
Q

Prohibited Conduct

A
  • Directly or indirectly employ any scheme, device, or cunning trick to defraud or mislead borrowers, lenders, or any person
  • Engage in any unfair or deceptive practice toward any person
  • Obtain property by fraud or misrepresentation
  • Earn a fee or commission to obtain a loan when no loan is obtained for the borrower
  • Solicit, advertise, or enter into a contract for specific interest rates or financing terms that are unavailable at that time
  • Aid and abet any person conducting business without a valid license
  • Fail to make disclosures
  • Negligently make any false statement or omission of information requested in connection to an investigation conducted by a governmental authority
  • Make monetary bribes or threats to any person to influence their judgment related to a residential mortgage loan
  • Make monetary bribes or threats to any appraiser of a property to influence the appraiser’s judgment regarding the property’s value
  • Collect, charge, attempt to collect or charge, or use any agreement with the intention to collect or charge any prohibited fee
  • Cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of improvements
  • Fail to truthfully justify monies of a party in a residential mortgage loan transaction
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9
Q

The Consumer Financial Protection Bureau (CFPB)

A

A federal agency, the Consumer Financial Protection Bureau (CFPB) was created as part of the Dodd-Frank Act with the express responsibility of providing a single federal regulator for consumer financial protections.

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10
Q

Mortgage-Related Law Regulated By The CFPB

A

REGULATIONS:

B: Equal Credit Opportunity Act (ECOA)
C: Home Mortgage Disclosure Act (HMDA)
G: Secure and Fair Enforcement for Mortgage Licensing Act: Federal Registration of Residential Mortgage Loan Originators (SAFE Act)
H: Secure and Fair Enforcement for Mortgage Licensing Act: State Compliance and Bureau Registration System (SAFE Act)
N: Mortgage Acts and Practices - Advertising (MAP)
P: Privacy of Consumer Financial Information (Gramm-Leach Bliley Act, GLBA)
V: Fair Credit Reporting Act (FCRA)
X: Real Estate Settlement Procedures Act (RESPA)
Z: Truth in Lending Act (TILA)

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11
Q

Regulation B

A

Equal Credit Opportunity Act (ECOA)

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12
Q

Regulation C

A

Home Mortgage Disclosure Act (HMDA)

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13
Q

Regulation G

A

Secure and Fair Enforcement for Mortgage Licensing Act: Federal Registration of Residential Mortgage Loan Originators (SAFE Act)

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14
Q

Regulation H

A

Secure and Fair Enforcement for Mortgage Licensing Act: State Compliance and Bureau Registration System (SAFE Act)

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15
Q

Regulation N

A

Mortgage Acts and Practices - Advertising (MAP)

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16
Q

Regulation P

A

Privacy of Consumer Financial Information (Gramm-Leach Bliley Act, GLBA)

17
Q

Regulation V

A

Fair Credit Reporting Act (FCRA)

18
Q

Regulation X

A

Real Estate Settlement Procedures Act (RESPA)

19
Q

Regulation Z

A

Truth in Lending Act (TILA)

20
Q

CFPB Oversight

A

CFPB Oversight:

The CFPB is charged with making protections easier to understand and more accessible to consumers. The SAFE Act establishes federal regulatory and enforcement responsibilities of mortgage loan originators that are similar to those of the state authority. These include:
• Examining MLO records and data
• Penalizing licensees
• Providing information about licensees and potential licensees to the NMLS

21
Q

Differences between CFPB and State Authority Responsibilities

A

The difference between the CFPB and the state authority are that the CFPB has jurisdiction in all 50 states, and can replace the NMLS system if needed.

The CFPB developed a system that allows for consumers to file complaints with the Bureau that are then quickly posted online for public access. Regardless of validity or resolution the complaint remains available as a matter of public record.

22
Q

Department of Housing and Urban Development (HUD)

A

Department of Housing and Urban Development (HUD) is a federal agency with a mission “to create strong, sustainable, inclusive communities and quality affordable homes for all.”

As the lead federal housing agency, HUD oversees:
• Federal Housing Administration (FHA) and Fair Housing laws

As the lead federal housing agency, HUD sponsors
• The Federal National Mortgage Association (FNMA, Fannie Mae),
• The Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
• The Government National Mortgage Association (Ginnie Mae).

23
Q

The Fair Housing Act

A

Ensure that all Americans have equal access to housing in strong and stable communities. The fair housing laws protect against discrimination in the provision of housing and the financing of housing.

24
Q

Government Sponsored Enterprises (GSE)

A

Fannie Mae, Freddie Mac, and Ginnie Mae operate as private entities that were created to serve a public purpose.

25
Q

Fannie Mae & Freddie Mac

A

Private entites that establish standards for conventional conforming mortgages that are then bundled as financial products and sold to investors in the secondary market.

26
Q

Ginnie Mae

A

A private entity that provides insurance to investors on bundles of non-conventional loans.

27
Q

The Department of Justice (DOJ)

A

The Department of Justice (DOJ) enforces Fair Housing and other federal laws and serves as the prosecutor in cases where the federal government sues a mortgage loan originator.

28
Q

The Financial Crimes Enforcement Network (FinCEN) and the Secretary of the Treasury

A

Regulate and enforce financial crime laws; such as the USA Patriot Act and Anti-Money Laundering laws. An example of FinCEN and the Treasury fighting financial crime can be found in their work battling terrorists’ use of money laundering as a tool to support their activities.

29
Q

The Federal Trade Commission (FTC)

A

Oversees mortgage transations that cross state lines

30
Q

The Federal Communications Commission (FCC)

A

Deals with the control of business-related telephone and internet communications

31
Q

Securities and Exchange Commission (SEC).

A

Regulation of the mortgage industry’s development of the secondary mortgage market where lenders and investors buy and sell packaged mortgages called mortgage-backed securities (MBS)

32
Q

Examinations by both CFPB and State Authorities:

A
  • Pre-Examination: Determine the scope of the investigation
  • Institution Licensing: Review the company’s ownership, structure, and affiliations
  • Human Resources: Review individual licenses and renewals
  • Compliance Management: Is the company compliant with NMLS rules and regulations?
  • Operational Management: Personnel, training, systems, reporting, and internal audits
  • Financial Condition Review: Does the company meet necessary financial standards?
  • Mortgage Call Review: Did the company meet quarterly and annual reporting requirements?
  • Interviews: With personnel and affiliates

It is the responsibility of the financial institution to comply with the request of the regulator as well as to pay for all costs associated with the examination.

33
Q

Reporting

A

In addition to the examination responsibilities, regulators are also responsible for reporting their findings to the NMLS and ensuring that mortgage loan originators file necessary documents with the appropriate regulator when due. The most common of these reports is the mortgage call report (MCR)

34
Q

Mortgage Call Report (MCR)

A

Filed both annually and quarterly, the NMLS receives and collects this information from the mortgage loan originator on behalf of the regulators

35
Q

Responsibilities That Both Federal And State Agencies Share

A
  • Enforcing the SAFE Act
  • Reporting MLO actions to NMLS
  • Assessing fines
  • Mortgage education and testing requirements
  • Holding examinations
  • Giving orders and directives
36
Q

Cease And Desist Order

A

A legal order that requires the recipient to immediately stop a specific action. For MLOs, all cease and desists are considered temporary until a hearing takes place.

The Director will send a notice regarding the proceedings and will set a hearing date. The notice will include a hearing date that is between 30 and 60 days of the MLO receiving it.

MLO can request Director or Judicial review:
• Director Review hearing can be requested within 10 days of temporary order served w/o a hearing
• Judicial Review can be applyed for at a district court system within 10 days after a hearing and decision on a temp order that was entered without a hearing

37
Q

Head of the CFPB

A

Director