Becoming an MLO - Chapter 1 Flashcards
What established a federal charter for banks that permitted them to make real estate loans, which established a framework for government involvement in mortgage lending?
The Federal Reserve System
What year was the Federal Reserve System created?
1913
What year was the Dodd-Frank Wall Street Reform Act passed?
2010
What is a mortgage loan originator?
An individual who, for compensation or gain, or in expectation of compensation or gain takes a mortgage loan application or offers or negotiates terms of a residential mortgage loan.
Name a few real estate brokerage activities
Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property
bringing together parties interest in sale, purchase, lease, rental, or exchange of real property
negotiating on behalf of any party
engaging in any activity for which a person engaged in the activity is required to be licensed
offering to engage in any activity or act described above.
What is a registered MLO?
Someone who is registered with the NMLS and maintains a unique identifier.
True/False - NMLS does not approve a license application
TRUE - NMLS is merely a database. it’s job is to assign a unique identifier
True/False - processors and underwriters are required to be licensed.
FALSE
Loan processors and underwriters who are not licensed are prohibited from doing what?
advertising or presenting to the public that they are MLOS or negotiating rates/terms.
What is a mortgage broker?
a company or firm that brings borrowers and lenders together for loan origination.
What is a mortgage lender?
the entity that provides funds for a mortgage.
What is a mortgage servicer?
the firm that performs servicing functions including collecting mortgage payments, paying the investor, collecting and paying the borrower’s taxes and insurance, and generally managing borrower escrow accounts.
Name some big players on the secondary market
Fannie, Freddie, Ginnie
What is the SAFE Act?
Secure and Fair Enforcement Act for Mortgage licensing Act of 2008
federal law that regulates the licensing process and responsibilities of mortgage loan originators.
How many hours of pre-licensing education must you take?
20 hours
3 hours of federal law
3 hours of ethics
2 hours of training related to lending standards for non-trad mortgage product market place
12 hours of elected
To pass the National Test with UST you must receive a score of what?
75%
If you fail the MLO exam 3 times, how long must you wait to take it again
6 months
True/False - if an MLO leaves the business for more than 2 years, they must retake the exam.
False - if an MLO leaves the business for more than FIVE years they must retake the exam. This does not apply to MLOs who switch from being a licensed MLO to a registered MLO.
Name a few factors that go into the decision on whether or not you will get your MLO license.
No license Revocation
no felony conviction in the last 7 years or EVER if the crime involved an act of fraud, dishonesty, breach of trust, or money laundering.
must demonstrate financial responsibility
completed pre-licensing requirements
passes testing
must satisfy net worth, surety bond, or state fund requirement.
What are some things that are a marker of not being financially responsible?
non-medical judgements
tax liens
Foreclosure within 3 years
pattern of serious delinquencies within 3 years
some states require child support to be up to date.
How often must an MLO renew his/her license?
Every year. License expires on Dec 31st.
How many hours of continuing education must an MLO complete?
8 hours
3 hours of federal law
2 hours of ethics
2 hours of training related to the lending standards for nontrad mortgage products
1 hour of electives.
True/False - continuing education only counts in the year when it was taken
True
True/False - an MLO cannot take the same continuing education course in successive years.
True
What is the Model Law?
Most states use the Model law to implement their SAFE Acts. The model law has a list of what should AT LEAST be considered prohibited.
prohibited practices in the Model law are?
defraud or mislead
unfair or deceptive practices
obtaining property by fraud or misrepresentation
earning a fee or commission through best efforts
soliciting based on financing terms that are not actually available
not holding a valid license
Failing to make disclosures
failing to comply with state/federal law
making false or deceptive statements
bait and switch
false statements
making a payment, threat or promise to any person that influences the application process
collecting/charging/attempting to collect a prohibited fee
mismanagement of monies
requiring excessive property insurance
What is the difference between an examination and investigation?
Examination is generally a yearly reviewed of files and business practices to ensure they are compliant. An Investigation usually arises from a complaint or suspicion that an entity or individual is breaking the law.
How long must licensed lenders retain records related to the loans originated?
Three years
How long must the closing disclosure be retained after consummation to be compliant with TRID?
Five years
Upon the request of documentation needed for an examination, the licensee must provide the documents within how many days?
Within the prescribed timeframe, but generally no longer than 30 days.
What is the maximum penalty for a violation of the SAFE Act?
$25,000 per violation
True/False - The LO originator compensation rule (LO comp) DOES NOT prohibits compensation based on terms/fees of a transaction or a proxy of a term of a transaction
FALSE
True/False - LO comp rules permits some bonus and retirement and profit sharing plans to be based on the terms of multiple loan originator transactions.
True
Funds can be used for:
contributions to tax advantaged retirement plans
bonuses if the individual LO originated 10 or fewer mortgage transactions
bonuses and other types of non-deferred profit based compensation that do not exceed 10% of the individual loan originator’s total compensation.
True/False - you can receive compensation based on the single term of a transaction
FALSE
you cannot receive compensation based on:
a single term
the terms of multiple transactions by the same MLO
the terms of multiple transaction conducted by multiple MLOS
What are some safe harbor LO compensation types?
Dollar volume long term performance of the loans hourly rate based on number of actual hours worked loans made to new customers fixed payment for every loan originated % of loans that close quality of loans submitted
When is Steering a problem?
When an MLO steers a borrower into a loan that could harm the borrower
How long must lenders/brokers keep information regarding LO compensation?
Three years
Who implemented MLO compensation rules, created the CFPB and the MLO contact of appraisers?
Dodd-Frank
Who implemented NMLS, registration of all MLOS and the licensing of MLOS working for non-financial companies?
SAFE Act - Secure and Fair Enforcement
Every MLO under the Safe Act must have what?
A unique identifier
