Chapter 1: Becoming an MLO Flashcards
Learning Objectives for Chapter 1 • Describe the roles of an MLO • Understand the mortgage cycle and the roles of each major player in the industry • List the requirements of obtaining and maintaining an MLO license • Restate what is considered prohibited conduct and how prohibited conduct is punished • Describe compensation, and what is required under the LO Comp Rule • Redefine key terms and acronyms (33 cards)
What is a mortgage?
A mortgage is a written instrument using real property to secure repayment of a debt.
It is a financial document that essentially binds the real property and its value as collateral to insure the repayment of the loan by the borrower.
If the borrower does not repay the debt, then that real property and its value would be used for the repayment of that debt.
It is considered a voluntary lien.
The creation of the Federal National Mortgage Association (FNMA or Fannie Mae) in 1938 increased the ___?
__liquidity___ in the market and allowed for more money to become available for lenders.
What are Fannie Mae and Freddie Mac are considered?
Government-sponsored entities.
What law created the Consumer Financial Protection Bureau (CFPB)?
The Dodd-Frank Wall Street Reform Act
A mortgage loan originator or MLO is:
- An individual who for compensation or gain or in the expectation of compensation or gain;
- Takes a residential mortgage loan application; or
- Offers or negotiates terms of a residential mortgage loan.
What is the difference between an MLO and a registered MLO?
A registered MLO works for a depository institution and is not licensed.
The __unique identifier______ is
a number that will identify which MLO is originating a loan by appearing on the residential loan application.
Name three examples of “clerical or support duties.”
- Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan
- Receiving the appraisal
- Collecting a VOE
An independent contractor is
is basically a loan processor or underwriter who is not under the direct supervision of a licensee.
To be licensed as an MLO an individual must be
sponsored.
Mortgage backed securities are
a type of asset-backed security that is secured by a mortgage or collection of mortgages
Name the two levels of regulatory authority that MLOs are subject to:
- State regulatory authority
- Federal regulatory authority
SAFE Act is
the key federal law that regulates the licensing process and responsibilities of mortgage loan originators.
What two things must an applicant give permission for at the time of application?
Criminal Background Check & Credit Report
How many hours of pre-licensing education are required for an MLO?
20 hours
Alexa is looking to become a licensed MLO, she is unsure about what she needs to know about the National Test. Tell Alexa three things that are important to remember about taking and passing the National Test.
- 75% is the minimum passing score
- She can take the test 3 consecutive times, 30 days apart
- If she becomes unlicensed for5 or more years, she has to retake the test.
Give two examples of things that would show financial irresponsibility.
- Foreclosures in the past 3 years
- Open tax liens
TRUE OR FALSE. Bankruptcy automatically disqualifies an individual from licensure due to
financial responsibility.
False
What are the three things that are required for renewal?
- Continuing Education
- Paying the Fees
- Maintaining the minimum requirements for initial licensure
For most states the renewal period opens on _______________ and the licensee must have fulfilled all the requirements for renewal by ______________.
For most states the renewal period opens on November 1 and the licensee must have fulfilled all the requirements for renewal by December 31.
How many hours of continuing education are required yearly?
8 Hours
What are the two rules associated with continuing education?
- MLOs cannot take the same course in the same or successive years
- CE counts only in the year it is taken
What are four things that are prohibited under the SAFE Act?
- Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person.
- Engage in any unfair or deceptive practice toward any person.
- Obtain property by fraud or misrepresentation.
- Solicit or enter a contract with a borrower that states that the MLO may earn a fee
or commission through “best efforts” to obtain a loan even though no loan closes.
What are three things that the Commissioner has the authority to do?
- Investigate or Examine licensees
- Punish licensees for violations
- Require records be kept
