Crass Course Flashcards
1
Q
What does HERA stand for?
A
Housing and Economic Recovery ACt
2
Q
What is the most significant conponent of HERA?
A
Title V which is beter know as Secure and Fair Enforcement for Mortgage Licensing Act of 2008
3
Q
What does the SAFE Act provide?
A
It establishes national minimum standards for mortgage training, including pre-licensing and annual continuing eduction.
4
Q
What legislation transfers power to Bureau of Consumer Financial Protection?
A
Title X of the Wall Street Reform and consumer Protection Act of 2010
5
Q
What does NMLS stand for?
A
Nationwide Mortgage Licesing System & Registry
6
Q
What is the purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act?
A
To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end too big to fail, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes
7
Q
What the two title with greatest impact of the Dodd-Frank Wall Street Reform and Consumer protection Act?
A
- Title X: Consumer Financial Protections Act
2. Title IX : Mortgage Reform and Anti_Predatory Lending Act.
8
Q
What does title X of Dodd-Frank creates?
A
It creates the Consumer Financial Protection Bureau as an independent entity within the Federal Reserve and transfers to it the rule-making and enforcement authority over many consumer financial laws
9
Q
What is the expected timeline for complete implementation Dodd-Frank?
A
As much as 3 1/2 years from passage of the act. To transfer or responsibility to the consumer Financial PRotection Bureau and the issuing of final reles and regulation.
10
Q
What time frame is most is provisions of Dodd-Frank required to occur?
A
18 months, however this depend os transfer authority to Consumer Financial Protection Bureau and issuing of final rules and regulations
11
Q
SAFE Act is a key component of what?
A
Housing and Economic Recovery Act of 2008. HERA
12
Q
SAFE stands for?
A
Secure and Fair Enforcement for Mortgage Licensing Act
13
Q
Minimum standard is established through ?
A
Namtionwide Mortgage Licensing System & Registry
14
Q
Which agencies work to fulfill the mandates of the SAFE Act?
A
!. Conference of State Bank Supervisors (CSBS)
- Aerican Associaton of Residential Mortgage Regulators (AA RMR)
- HUD
15
Q
HOw does CSBS and AARMR comply with SAFE Act? Also HUD
A
CSBS and AARMR develop a model state law that met the minimum standards in the SAFE act, including definitions, educations and testing requirements and financial responsiblity and criminal background standards for mortgage loan originators. HUD reviews the model legislation and determines that it did indeed meet the requirements of the SAFE Act. Therefore any stat legislation that follows the model will also have met the applicable minimum requirements of the SAFE act.
16
Q
SAFE ACT defines a mortgage loan originator as:
A
An individual who for compensation or gain or in the expectation of compensation or gain:
A) Takes a residential mortgage loan application, or
B) Offers or negotiates terms of a residential mortgage loan.
17
Q
Can a independent processor or underwriter contractor need a license?
A
Yes, if they work as an independent contractor the must be state-licensed loan originator.
18
Q
According to SAFE Act who not need a state license as loan originator?
A
- Any individual who performs purely administrative or clerical tasks on behalf of a licensee
- A person or entity that only perfumes real estate brokerage activities and is licensed or registered in accordance with applicable state law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker or other mortgage loan oringinarot.
- a license real estate agent or broker unless the compensated by lender
- A loan processor or underwriter who does not represent to the public, through advertising or other means of communication shall not be required to be state-licensed loan originator
19
Q
Nontraditional Mortgage Product?
A
Any mortgage product other than a 30 year fixed rate mortgage
20
Q
State-Licensed Mortgage Loan Orininator
A
Any individual who: A) Is a mortgage loan originator B) Is not an employee of: i) A depository institution: II) A subsidiary that is Regulated by a Federal banking agency or III) An institution regulated by the FArm Credit Administration and C) Is licensed by a State or by the Secretary under section 1508 and register as mortgage loan originator
21
Q
Unique Identifier must on all what?
A
The NMLS unique identifier is required on all marketing material, application, required disclosures, and business cards. If the marketing materials are referencing the company only, the company’s unique identifier must be used. if the marketing materials and business card are issued in the make of the mortgage loan originator, then the marketing materials and business card require theMLO unique identifier. All disclosures require the MLO unique identifier.
22
Q
Federal Reserve Loan Originator Compensation Rule pertains to what type of properties?
A
to transactions involving closed-end extensions of credit or reverse mortgage secured by a consumer’s principal dwelling (1 to 4 unit) and must be followed by all person who originate loans.
23
Q
What are prohibited according to MLO compensation Rule(Federal Reserve Loan Originator Compensation RULE)
A
-Any compensation that is based on loan terms or condition such as interest rate, annual percentage rate APR, loan to valueLTV etc
24
Q
What are the objectives of the Federal Reserve Loan Originator Compensation Rule?
A
To protect consumers from unfair, abusive, or deceptive practices that can arise from mortgage loan originator compensation agreements
25
Examples of abuses the Federal Reserve Loan Originator Compensation Rule intended to protect us from
- Any change in compensation
- Changes in fees from the original good faith estimate (GFE)
- Any mortgage loan officer compensation changes because the borrower is charged additional discount fees
26
What is prohibited by the Federal Reserve Loan Originator Compensation Rule?
1) Any compensation that is based on loan terms or conditions such as interest rate, annual percentage rate (APR), loan-to-value (LTV)
2. Compensation received directly from consumer and from any other source on the same loan
3) Pricing consessions for any reason are prohibited
4) The practice of establishing "point banks" is prohibited
5) An MLO cannot be penalized for GFE violations or misquotes of fees
6) NEt branches may not allow compensation based on fees or income
7) Basing compensation on terms of previous transition is prohibited
27
According To Federal Reserve Loan Originator Compensation Rule allow compensation based on what triggers?
- Overall loan volume
- Long-term loan performance
- Hourly basis
- Existing/new customer
- Flat Fee
- Pull-through rate i.e quality of loan files
- legitimate business expense
28
A loan is considered "Safe Harbor" if?
If the consumer is presented with loan option for type of loan, including;
-lowest interest rate
-lowest interest rate without certain risky features
-lowest total for origination and discount
The mortgage loan originator
-Obtains options from creditors the MO regularly does business with.
-Believes in good faith that the consumer qualifies for options presented.
29
RESPA stand for
Real Estate Settlement Procedure Act
30
RESPA regulation?
Regulation X
31
RESPA is enforce by?
Enforce by HUD's office of RESPA and Interstate Land Sales, will be replaced by Consumer Financial Protection Bureau
32
What is the intended purpose of RESPA?
Intended to help consumer become better shopper for settlement services and to eliminate unnecessary increases in the costs of certain settlement services
33
What does loans are covered by RESPA?
1) Loans secured with a mortgage placed on a 1-4 family residential property.
2) Includes most purchase loans, assumption, refinances, property improvement loans , and equity line of credit
3) Amended in 1994 to cover subordinate lien loans
34
Transactions not covered by RESPA?
1) An all-cash sale
2) A sale where the individual home seller takes back the mortgage
3) A rental property transaction
4) Other business purpose transaction
5) Property of 25 acres or more
6) Vacant or unimproved land (unless dwelling will be constructed or mover onto the property within two years
35
Section 8 of RESPA covers what?
Prohibits giving or accepting a fee, kickback, or anything of valu in exchange for referrals of settlement service business involving a federally related mortgage loan ( allows a thing of minimal value used for promotional purposes, such as pens, momento,coffee cups, etc.
36
What is the consequence of violation of Section 8 of RESPA?
- Fines up to $10,000
- Imprisonment up to one year
- Liability up to three times the amount of the charge paid for the service (civil lawsuit)
37
What does section 9 of RESPA?
Title Insurance
- Prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.
- Allows buyers to sue for an amount equal to three times all charges made for the title insurance.
38
What does section 10 of RESPA entail?
It sets limits on Escrow Accounts
- 1-limits the amount that a lender may require a borrower to put into an escrow account- No more that 1/12 of the total disbursement payable during the year, plus an amount necessary to pay for any shortage in the account.
- 2- Allows lender to require a cushion which may not to exceed 1/6 of the total disbursements for the year.
- 3- Requires lender to perform an escrow account analysis once during the year and return shortages of excess of $50 so long borrow not delinquent
- 4-Does not require lender to impose an escrow account. However certain government may require a lender escrow accounts.
- 5- A loan that meets the definition of a "higher-priced" loan is required to have a lender-imposed escrow account for at least 12 months.
39
What is affiliated business arrangement?
It is a situation where a person is in a positon to refer settlement services - or an associate of that person - has either an affiliate relationship with or direct or beneficial ownership intere of more than !% in a provider of settlement services and who then refers business to that provider or in some way influences the selection of that provider.
40
What information triggers minatory disclosures according to RESPA?
1) Borrower's name
2) Borrower's monthly Income
3) Borrower's social security number to obtain credit report
4) Property address
5) Loan Amount
41
What is Regulation x definition of business day?
business day includes any day on which the business entity is ope to the public for carrying on substantially all of the entity's business function.
42
What at the documentation that are required after loan is completed according to RESPA?
1) a HUD Settlement Cost Booklet - provided information of various real estate settlement services (required for purchase transaction only)
2) Good Faith Estimate of Settlement Costs-
3) Mortgage Servicing Disclosure Statement- Discloses to the borrower whether the lende intends to service the loan or transfer servicing to another lender, and provides information about complaint resolution
43
If the lender turns down the loan is disclosures required with-in three business day?
If the lender turns down the loan within three (3) business day, RESPA does not requre the mortgage loan originator to provide these documents
44
If the lender turns down the loan, is disclosures required with-in three business day?
If the lender turns down the loan within three (3) business day, RESPA does not requre the mortgage loan originator to provide these documents
45
What disclosures are required before settlement occurs according to RESPA?
1) Affiliated Business Arrangement (AfBA or ABA) Disclosure-
| 2) HUD-1 Settlement Statement
46
What are the main fact regarding ABA Disclosure?
1) The disclosure is required prior to the time of referral to another provider
2) - The disclosure must describe the business relationship that exists.
3) - The disclosure must also give an estimate of the second provider's charges?
47
Does the HUD -1 allow the borrower to get a copy of the HUD- !? If so when?
Allows the borrower to request the HUD- ! Settlement Statement on (1) business day before the actual settlement.
48
What are the disclosure that are required at settlement according to RESPA?
1) HUD-1 - that shows actual settlement cost of the loan transaction for both the buyer and the seller.
2) Initial Escrow Statement - itemizes the estimate taxes, insurance premiums, and other charges anticipated to be paid from the escrow account during the first 12 months of the loan including any cushion.
49
What is the timeframe for the lender to deliver the Initial Escrow Statement?
USually given at settlement, the lender has 45 days from settlement to deliver.
50
What are the disclosures required after settlement according to RESPA.
1) Anual Escrow Statement - a) summarizes all escrow account deposits and payments during the 12 month computation period.
b) notifies the borrower of any shortages or surpluses in the account.
C) advises borrow about the course of action being taken.
2) Serving Transfer Statement- required if the loan servicer sells or assigns the serving rights to a borrower's loan to another loan servicer.
51
Does the Serving Transfer Statement Include transfer of ownership into the secondary market?
It does not include transfer of ownership into the secondary market without corresponding transfer of servicing rights
52
When the Serving Transfer statement required?
Generally required 15 days before the effective date of the loan transfer
53
What must be included in the Serving Transfer Statement?
1) Name of new servicer
2) address of new service
3) Toll free number
4) date the new servicer will begin accepting payments
5) protects borrower who make a timely payment to previous service provider with 60 days of the transfer.
54
What is GFE
it serves as a clear and concise form showing the dollar amount of the settlement charges.
55
When must the GFE be provided
three (3) business days after receipt of a completed application.
56
How long must the settlement charges be available once they are issued in regard to GFE?
it is required that the settlement charges be available for at least ten (10) business days after it has been issued.
57
Does the GFE allow "average charge:" calculation?
yes, it allows average charge calculation for settlement services if based on the period of time between 30 days to 6 months if used requires the same average charge to be used for all loans within a specific loan classification.
2) -required lender to retain all documentation use to calculate the average charge for three years after settlement.
58
will the GFE be replaced?
Yes, it will be replaced with a new integrated GFE?truth in Lending Statement.
59
What are the charges that may not exceed the GRE amount?
1) Origination charges, which may be for any service involved in the creation of a mortgage loan application, loan processing and the underwriting and funding of loan and the processing and administrative services required to perform these functions.
2) Credit or charge for interest rate chosen/adjusted origination charge while interest rate is locked.
3) transfer taxes.
60
What charges on the GFE can not exceed 10% of GRE?
1) Lender-required settlement services, where the lender selects
2) Lender-required services, title services and required title insurance, and owner's title insurance when borrower uses provider identified by loan originator
3) Government recording charges
61
Can the amounts list in GRE be changed?
Besides the charges list in text that states the that GFE many not exceed amount and the part that can not exceed 10% may be changed at settlement.
62
Are the terms listed in the GRE binding?
The terms in a GRE are binding, unless a new GRE is provided. An updated GFE is required within three business days nof learning of changed circumstances. The reason for the change must be documented and retained for at least three years.
63
What are the main 4 reasons for changing the GFE?
1) Changed circumstances that increase settlement cost to exceed tolerances
2) Changed circumstances affecting eligibility for the specific loan terms identified in the GFE
3) Borrower-requested changes affecting charges/terms
4) Changes to the charges or credit for the interest rate chosen the adjusted origination charges per-diem interest, and loan terms related to the interest rate if the interest rate has not been locked by the borrower or ir a locked interest rate has expired.
64
What are changed circumstances as defined by RESPA?
1) Act of God, war, or other emergence
2) Information particular to the borrow or transaction that was relied on in proving the GFE.
3) New information particular to the borrower or transaction that was not relied on in providing the GFE
4) Other circumstances that are particular to the borrower or transaction - such as boundary disputes, the need for flood insurance, or environmental problems
65
According to RESPA what is not considered changed circumstances in the GFE?
1) name
2) monthly income
3) Property address
4) the amount of loan
5) value of property
6) mortgage loan amount sought
7) any information contained in credit unless inaccurate.
8) market price fluctuation by themselves.
66
If charges at settlement exceed the charges listed on the GFE within the 10 day period, how does the MLO cure the discrepancy?
MLO must cure the dicrepancy by reimbursing to the borrower amount of the excess either
A) At settlement
B) within thirty (30) calendar days after settlement.
67
When does the GFE expire?
the GFE expires in ten business day ( or longer as specified by MLO if borrower does not intend to continue with an application
68
Is a HUD-1 required for open-end home equity plans?
No settlement statement is required for open-end home equity plans subjet to the Truth in Lending Act and Regulation z. HUD-1 form may be used without being subject to RESPA provisions
69
Can HUD-1 form be used for loans not subject to RESPA?
The HUD-1 Form may be sed for loans not subject to RESPA without subjecting the transaction to the provisions of RESPA
70
Truth in Lending Act (TILA) is administered by whom?
it is administered by the Board of Vovernors of the Federal Reserve System and implemented by Regulation Z. It will be transfered to the consumer Financial protection Bureau.
71
TILA applies to what time of loans?
Applies to all real estate loans made to consumers (not companies) primarily for personal, family or household purposes (not for business or commercial purposes) if loan is
1) subject to a finance charge or
2) payable by written agreement in more that four installments.
72
What does TILA do?
1) Strengthens competition by the informed use of credit
2) Assure meaningful disclosure of credit terms
3) Does not set limits on interest rates or other finance charges imposed by lender, but regulates the disclosure of these items.
4) established a three day right of rescission in certain transactions?
73
According to TILA when are disclosures required?
Disclosures are required in two general areas
1) When creditors offer credit but before the transaction is consummated
2) When credit terms are advertised to potential customers.
74
What are the disclosures that are required by TIILA after application is received
These disclosures must be given 3 business days after application
1) Truth in Lending Disclosure Statement (TIL)
2) When you Home is on the Line Booklet only for home equity loans and lines of credit
3) Consumer Handbook on Adjustable Tate Mortgages- only for ARM loans
75
If nany estimated change over the course of the transaction. What must accure according to TIL?
New disclosures must be made at least three business days before business days before loan consummation, which could trigger an additional waiting period.
76
How long must a creditor keep disclosure in regard to TILA?
A creditor must retain evidence of compliance with these disclosure requirements for at least two years after the disclosures were required to be made.
77
What is the only fee that can be collected prior to disclosures being hand delivered?
The only fee that may be collected prior to these mandated disclosures is a fee for a credit report.Other loan oringination fee may be collected after these disclosures are hand-delivered to the borrower or three business days after they are mailed.
78
What are the three main points of TIL?
1) Is required for mortgage loans subject to RESPA secured by consumer's dwelling
2) Must be given (along with other required disclosures) no later than business days after consumer's application.
3) Must be delivered no later than 7th business day prior to loan consummation
no fee, other than credit report may be collected
79
The TIL must include what items?
1) Finance charge expressed as an annual percentage rate. The APR is labeled with a phase such as The cost of your credit as a yearly rate
2) Total finance charges
3) amount financed - total amount of credit the lender estens to the borrower
4) total of payments -paid at the end of the loan term
5) mandatory statement: ' You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.
80
What does the APR Tell you?
Tells a borrower the total cost of financing a loan in percentage terms, as a relationship of total finance charges to the total amount financed.
81
When must the APR be quoted?
Whenever a mortgage loan originator quotes an interest rate to a consumer - wheather orally or in writing, including advertisements, websites, etc - the truth in Lending ACT requires that APR must also be disclosed. Note that even when different interest rates may apply during the loan term, the loan only as one annual percentage rate.
82
Finance charge includes fees and amounts charge by someone other than the creditor if the creditor?
1) Requires the use of a third party as a conditon of or an incident to the extension of credit, even if the consumer can choose the third party
2) Retains a portion of the third-party charge, to the extent of the portion retained.
83
Fees charge by a third party that conducts the loan closing ( such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor?
1) Required the particular service for which the consumer is charged
2) Requires the imposition of the charge
3) Retains a portion of the third-party charge, to the extent of the portion retained
84
Regulation Z defines finance charge as?
Regulation Z defines finance charge as the cost of sonsumer credit as dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.
85
Are fees charged by a mortgage broker included in the finance charge?
Fees charge by a mortgage broker are finance charge even if the creditor does not require the consumer to use mortgage broker and even if the creditor does not retain any portion of the charge.
86
According to the Regulation Z, the final APR is generally considered accurate if it does not vary above or below the APR initially disclosed by what amount?
1/8% (0.125) for regular transaction
| 1/4% (.25) for irregular transactions
87
How does TILA defines an "irregular" transaction
TILA defines an "irregular" transaction as one that includes one or more of the following features
- multiple advances
- Irregular payments periods
- Irregular payment amounts (other than irregular first period or irregular first and final payment)
88
If the APR is inaccurate, what law requires the lender to give corrected disclosures with three business days?
The Mortgage Disclosure Improvement Act, 2009 amendment to TILA
89
According to Mortgage Disclosure Improvement ACt, a 2009 amendment to TILA, what is the waiting period?
- A waiting period of three business days after corrected disclosures are received before consummation of the transaction.
- If the corrected disclosures are mailed, the consumer is considered to receive the disclosures three (3) business days after mailing.
90
May A borrow waive the waiting period regarding Redisclosure?
- A borrow may be able to waive the waiting periods and expedite the closing if there’s a Bona fide personal financial emergency, such as to avoid foreclosure.
- This requires a dated written statement from the borrower with the details of the emergency.
91
3/7/3 is the disclosure rule of what regulation?
-it is the disclosure requirements of TILA
92
What does 3/7/3 Rule pertain to?
- Initial disclosure must be given ( or place in the mail ) within three business days of receipt of a completed application.
- The earliest a loan may be consummated is on the seventh (7th) business day after disclosures are delivered/mailed.
- Any corrected disclosures must be received by the consumer at least three (3) business days before the loan is consummated.
93
How does regulation Z define business day?
-Regulation z defines a business day to be all calendar days except Sundays and the legal public holidays specified in U.S.C . 6103.
94
The Right of rescission pertains to what type of loans according to Regulation Z?
- Loans of their existing principal residence for
- Home equity Loans
- Home improvement loans
- Refinances
95
. The right of rescission does not apply to the following?
- Purchase loans
- Construction loans
- Commercial loans
- Loans on vacation or second homes
- A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer’s principal dwelling unless the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the cost of the refinancing or consolidation.
- A transaction in which a state agency is a creditor
96
. When may a consumer exercise his right of rescission ?
-Consumers may exercise the right to rescind the credit transaction until midnight of the third business day following loan consummation, delivery of the required rescission notice, or delivery of all material disclosures, whichever occurs last.
97
How must the creditors inform borrowers of there right to rescind?
- Creditors must inform consumers of their right to rescind by providing two copies of a Notice of Right to Rescind document to each consumer entitled to rescind that is separate from the sale or cretic document at loan consummation.
98
The right to rescind must disclose information?
1. identify transaction or occurrence
2. The retention or acquisition of a security interest in the consumer’s principal dwelling
3. The consumer’s right to rescion
4. How to exercise the right of rescission, with form to use that designates the address of the creditor’s place of business
5. The effects of rescission
6. The date on which the rescission period ends
99
if a borrower choose to rescind when must the creditor return money it collected from borrower?
-within 20 calendar days – the borrower has no liability for the loan, including finance charges
