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MLO > Chapter 1: Becoming an MLO > Flashcards

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

1
Q

What is a mortgage?

A

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.

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2
Q

The creation of the Federal National Mortgage Association (FNMA or Fannie Mae) in 1938 increased the ___?

A

__liquidity___ in the market and allowed for more money to become available for lenders.

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3
Q

What are Fannie Mae and Freddie Mac are considered?

A

Government-sponsored entities.

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4
Q

What law created the Consumer Financial Protection Bureau (CFPB)?

A

The Dodd-Frank Wall Street Reform Act

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5
Q

A mortgage loan originator or MLO is:

A
  • 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.
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6
Q

What is the difference between an MLO and a registered MLO?

A

A registered MLO works for a depository institution and is not licensed.

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7
Q

The __unique identifier______ is

A

a number that will identify which MLO is originating a loan by appearing on the residential loan application.

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8
Q

Name three examples of “clerical or support duties.”

A
  • Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan
  • Receiving the appraisal
  • Collecting a VOE
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9
Q

An independent contractor is

A

is basically a loan processor or underwriter who is not under the direct supervision of a licensee.

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10
Q

To be licensed as an MLO an individual must be

A

sponsored.

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11
Q

Mortgage backed securities are

A

a type of asset-backed security that is secured by a mortgage or collection of mortgages

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12
Q

Name the two levels of regulatory authority that MLOs are subject to:

A
  • State regulatory authority
  • Federal regulatory authority
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13
Q

SAFE Act is

A

the key federal law that regulates the licensing process and responsibilities of mortgage loan originators.

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14
Q

What two things must an applicant give permission for at the time of application?

A

Criminal Background Check & Credit Report

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15
Q

How many hours of pre-licensing education are required for an MLO?

A

20 hours

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16
Q

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.

A
  • 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.
17
Q

Give two examples of things that would show financial irresponsibility.

A
  • Foreclosures in the past 3 years
  • Open tax liens
18
Q

TRUE OR FALSE. Bankruptcy automatically disqualifies an individual from licensure due to
financial responsibility.

A

False

19
Q

What are the three things that are required for renewal?

A
  1. Continuing Education
  2. Paying the Fees
  3. Maintaining the minimum requirements for initial licensure
20
Q

For most states the renewal period opens on _______________ and the licensee must have fulfilled all the requirements for renewal by ______________.

A

For most states the renewal period opens on November 1 and the licensee must have fulfilled all the requirements for renewal by December 31.

21
Q

How many hours of continuing education are required yearly?

A

8 Hours

22
Q

What are the two rules associated with continuing education?

A
  • MLOs cannot take the same course in the same or successive years
  • CE counts only in the year it is taken
23
Q

What are four things that are prohibited under the SAFE Act?

A
  • 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.
24
Q

What are three things that the Commissioner has the authority to do?

A
  • Investigate or Examine licensees
  • Punish licensees for violations
  • Require records be kept
25
Q

What is the difference between an examination and an investigation?

A

An examination is a routine review for compliance, while an investigation is triggered by a consumer complaint or other event that makes the Commissioner believe the licensee is in violation.

26
Q

Under the SAFE Act, the maximum amount for each act or omission is

A

$25,000

27
Q

What law does the Loan Originator Compensation amend?

A

The Truth in Lending Act

28
Q

Loan Originator Compensation went into effect in

A

2014

29
Q

LO Comp defines “a term of a transaction”

A

as “any right or obligation of the parties to a credit transaction.”

30
Q

LO Comp imposes duties on loan originator organizations to make sure that their individual loan originators are licensed or registered as applicable under the SAFE Act and other applicable law. In origination companies, such as; depository institutions and bona fide nonprofits, the rule requires them to:

A
  • Ensure that their loan originator employees meet the character, fitness, and criminal background standards, like existing SAFE Act licensing standards; and
  • Provide training to their loan originator employees that is appropriate and consistent with those loan originators’ origination activities.
31
Q

Give Three Examples of Compensation.

A

Compensation is considered annual or other period bonuses, awards or merchandise, services, trips, or similar prizes as well as salaries and commissions.

32
Q

What are two examples of “safe harbor” types of compensation?

A
  • The loan originator’s overall dollar volume.
  • The long-term performance of the originator’s loans.
33
Q

Give an example of steering.

A

An example of steering would be an MLO pushing a borrower to choose an ARM because that ARM even though an ARM is not a good choice for the borrower. Usually there is an incentive for the MLO to push that product – like higher compensation.

MLO (5 decks)

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