Dodd-Frank Wall Street Reform and Consumer Protection Act Flashcards
Dodd-Frank Wall Street Reform and Consumer Protection Act Purpose
Address a wide range of financial and investment activities, including mortgage lending and investing
- What is the primary purpose of the Dodd-Frank Act?
- a) To regulate agricultural activities
- b) To address a broad range of financial and investment activities, including mortgage lending and investing
- c) To manage social security benefits
- d) To provide healthcare reforms
To address a broad range of financial and investment activities, including mortgage lending and investing
- Which title of the Dodd-Frank Act focuses on creating the Consumer Financial Protection Bureau (CFPB)?
- a) Title IX
- b) Title X
- c) Title XIV
- d) Title II
Title 10 (X)
Title XIV: Mortgage Reform and Anti-Predatory Lending Act has Subtitles A,B,C,D,E,F,G,H.
Subtitle A Residential Mortgage Loan Origination Standards is about the prohibition on _____________ in order to earn extra __________________ by steering consumers toward specific loans or terms. It also puts _____________ on Loan originator compensation.
- Prohibition on incentives for loan originators to earn extra compensation by steering consumers toward specific loans or terms.
- Limitations on loan originator compensation.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act , Subtitle B: Minimum Standards for Mortgages Establishes standards for determining a borrower’s _______ __ _____ _ ____ ___. It creates a rebuttable presumption of the borrowers ability to repay if the loan meets “qualified mortgage standards”.
- Establishes standards for determining a borrower’s ability to repay a home loan.
- Creates a rebuttable presumption of the borrower’s ability to repay if the loan meets “qualified mortgage” standards.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act, Subtitle C: High-Cost Mortgages does many things with HOEPA. Home Ownership and Equity Protection Act (HOEPA).
1) Extends HOEPA provisions to purchase money mortgages and open-end home equity lines of credit.
2) Lowers interest rate and points and fees thresholds for HOEPA loans.
3) Adds a prepayment penalty trigger for high-cost loans.
4) Imposes homeownership counseling requirements.
5) Strengthens prohibited lending terms and practices.
Now regarding number 1 explain what this means?
Purchase Money Mortgages:
Previously, HOEPA primarily applied to refinance loans and home equity loans. This extension means that HOEPA protections now also cover loans used to purchase a home, not just those used to refinance or take equity out of an existing home.
Open-End Home Equity Lines of Credit (HELOCs):
HOEPA protections are extended to HELOCs, which are revolving credit lines secured by the borrower’s home. This means that the same consumer protections and regulations for high-cost loans now apply to these types of credit.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act, Subtitle C: High-Cost Mortgages
2) Lowers interest rate and points and fees thresholds for HOEPA loans.
Explain what this means?
Lowering of Interest Rate and Points and Fees Thresholds for HOEPA Loans:
Interest Rate Threshold:
The Act lowers the APR thresholds that determine whether a loan is considered high-cost under HOEPA. This means more loans will be subject to HOEPA protections because the interest rate trigger is lower.
Points and Fees Threshold:
Similarly, the Act lowers the points and fees threshold, meaning that if the total points and fees paid by the borrower exceed a lower percentage of the loan amount (or a fixed dollar amount), the loan will be classified as high-cost. This also increases the number of loans covered by HOEPA protections.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act, Subtitle C: High-Cost Mortgages
3) Adds a prepayment penalty trigger for high-cost loans.
Addition of a Prepayment Penalty Trigger for High-Cost Loans:
Prepayment Penalty Trigger:
A new trigger is added based on the presence of prepayment penalties. If a loan includes prepayment penalties that exceed certain thresholds or are applicable beyond the early years of the loan, it will be classified as high-cost under HOEPA.
This provision aims to protect borrowers from excessive costs if they repay their loans early.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act, Subtitle C: High-Cost Mortgages
Imposes homeownership counseling requirements.
Imposition of Homeownership Counseling Requirements:
Counseling Requirements:
Borrowers must receive counseling from a HUD-approved counselor before obtaining a high-cost mortgage.
This counseling helps ensure that borrowers understand the terms of the loan and the potential risks, promoting informed decision-making and reducing the likelihood of borrowers entering into loans they cannot afford.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act, Subtitle C: High-Cost Mortgages
Strengthens prohibited lending terms and practices.
Strengthening of Prohibited Lending Terms and Practices:
Prohibited Terms and Practices:
The Act further strengthens the list of prohibited lending practices for high-cost loans.
These include:
No Balloon Payments: Balloon payments (large, lump-sum payments due at the end of a loan term) are generally prohibited for high-cost loans with terms less than five years.
No Negative Amortization: Loans that allow the principal balance to increase over time (negative amortization) are prohibited.
Restrictions on Prepayment Penalties: Prepayment penalties are limited, particularly beyond the early years of the loan.
No Due-on-Demand Clauses: Loans cannot include clauses that allow the lender to demand full repayment under certain conditions, except in specific, limited circumstances.
Ability to Repay: Lenders are required to ensure that borrowers have the ability to repay the loan, based on verified and documented information.
Subtitle E: Mortgage Servicing,
Which of the following is a requirement under Subtitle E for mortgage servicing?
- a) Monthly mortgage statements
- b) Annual interest rate adjustments
- c) Bi-annual payment summaries
- d) Weekly loan status updates
Subtitle E: Mortgage Servicing
- CFPB’s servicing rules cover:
- Monthly mortgage statements.
- Interest rate reset reminders.
- Forced-place insurance options.
- Foreclosure avoidance options.
- Prompt crediting of payments and error correction.
- Delinquent borrower access to servicer personnel.
- Foreclosure options evaluation for delinquent borrowers.
What is a key focus of Subtitle F related to appraisal activities?
- a) Lowering the cost of appraisals
- b) Ensuring the independence of appraisers
- c) Speeding up the appraisal process
- d) Eliminating the need for appraisals in certain loans
- b) Ensuring the independence of appraisers
According to the Dodd-Frank Act, which rule focuses on the proper delivery of appraisal copies under ECOA?
- a) TILA HPML Appraisals
- b) Loan Originator Compensation Rule
- c) ECOA Valuations Rule
- d) TILA Escrow Requirements
ECOA Valuations Rule
CFPB Rules Mandated by the Dodd-Frank Act
- Ability-to-Repay/Qualified Mortgage Rule: Sets standards for determining a borrower’s ability to repay under TILA (Regulation Z).
- 2013 HOEPA Rule: Amends high-cost mortgage and homeownership counseling requirements under TILA (Regulation Z) and RESPA (Regulation X).
- Loan Originator Compensation Rule: Sets compensation requirements under TILA (Regulation Z).
- ECOA Valuations Rule: Requires disclosure and delivery of appraisal copies under ECOA (Regulation B).
- TILA HPML Appraisals: Requires appraisals for higher-priced mortgage loans.
- TILA Escrow Requirements: Establishes escrow requirements under TILA (Regulation Z).
- TILA and RESPA Servicing Rules: Sets servicing rules under RESPA (Regulation X) and TILA (Regulation Z).
true
What does the TILA and RESPA Servicing Rule cover?
- a) Mortgage loan origination standards
- b) Appraisal independence standards
- c) Mortgage servicing rules
- d) Home equity line of credit regulations
Mortgage servicing rules. The TILA and RESPA Servicing Rules set regulations for mortgage servicing under RESPA (Regulation X) and TILA (Regulation Z).
