Dodd-Frank Flashcards

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1
Q

What is the full name for Dodd Frank?

A

Dodd-Frank Wall Street Reform and Consumer Protection Act

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2
Q

What is the purpose of Dodd-Frank?

A

To stop abusive financial practices.

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3
Q

The Dodd-Frank Act is divided into 16 titles. What two titles impact mortgage lending and investing?

What are their functions?

A

Title X - authorized the creation of the CFPB and outlines the bureau’s regulatory and enforcement responsibilities. It was intended to create accountability and transparency.

Title XIV - specify provisions that apply directly to originators, servicers and appraisers.

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4
Q

TItle XIV, Subtitle A addresses MLO standards. What are the two primary things it does?

A

Places limitations on loan originator compensation
-and-
Defines an MLO

It subsequently prohibits steering.

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5
Q

What are the three things an MLO does?

A
  • Takes a residential mortgage loan application
  • Assists a consumer in obtaining or applying to obtain a mortgage loan
  • Offers or negotiates terms or a mortgage
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6
Q

What are three (3) things that classify someone as NOT being an MLO?

A

When someone:

  • Performs purely admin or clerical tasks
  • Performs only real estate brokerage activities
  • Provides mortgage financing for the sale of 3 properties or less in any 12 month period.
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7
Q

TItle XIV, Subtitle B addresses minimum standards for mortgages. What are the two primary things it does?

A

Establishes standards for determining a borrower’s ability to repay (ATR)
-and-
Establishes rules for a loan to be considered a “Qualified Mortgage”

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8
Q

What eight (8) underwriting factors are evaluated when determining a borrrower’s ability to repay (ATR)?

A
  • Current or reasonably expected income or assets
  • Current employment status
  • Monthly mortgage payment (fully amortizing)
  • Monthly payment on simultaneous loans secured by the same property
  • Monthly payments for taxes and insurance
  • Debts, alimony & child support obligations
  • Monthly DTI ratio or residual income
  • Credit history
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9
Q

Who overseas the CFPB?

A

A director who is appointed by the President, with the advice and consent of the Senate for a term of five (5) years

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10
Q

A loan is considered a “qualified mortgage” if it…

A
  • Does not result in negative amortization
  • Does not have a balloon payment feature
  • Has verified and documented income & financial resources
  • Has a fully amortizing payment that takes into account all applicable taxes & insurance
  • Was underwritten based on the maximum rate permitted under the loan during the first five (5) years
  • Complies with monthly DTI ratios
  • Does not exceed 3% total points and fees
  • Does not exceed a 30 year term
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11
Q

A prepayment penalty on a “qualified mortgage” cannot be greater than what? Name two…

A

2% of the outstanding loan balance prepaid during the first two years of the loan
-or-
1% of the outstanding loan balance prepaid during the third year of the loan

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12
Q

How long must creditors retain records to show compliance with ATR and QM?

A

For at least 3 years

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