Federal Law Flashcards
Any person wanting to apply for a mortgage must be allowed to do so, unless they are ________.
Under 18.
Fair Lending, Fair Housing & ECOA
What are the 8 ECOA (Reg B) protected classes:
- Sex
- Race
- Religion
- Color
- National Origin
*1-5 also protected by the Fair Housing Act
- Age
- Marital Status
- Public Assistance
*Last 3 only protected by ECOA
Related to marital status, you can only ask the borrower if they are one of 3 things:
Married, unmarried (refers to single, divorced or widowed) or separated.
____ days from when you have a complete UW package, the UW decision must be made, whether it is approved, cancelled, or rejected.
30 days.
Per ECOA, the appraisal must be delivered to the borrower no less than ___ business days before closing.
3 days.
Adverse Action, per ECOA: If a loan is being rejected or cancelled, a NOAT must be sent to the borrower, explaining why, within ___ days.
30 days.
How often must companies that underwrite or fund loans file a HMDA report?
Quarterly.
Mortgage brokers may be exempt.
HMDA - what agency collects the data?
FFIEC
*This is for every loan that has an application.
FHA and ECOA are very similar in regard to the discriminatory items with 3 exceptions:
- Disability - you cannot refuse a borrower from applying for a loan because they are physically or mentally disabled.
- Age - reverse mortgages require you to be 62 years of age or older.
- You cannot refuse a loan application because of the size of a family or tell a pregnant woman that you may not be able to count her income because she is going on maternity leave.
HOEPA Requirements:
Mandatory mortgage insurance over 80% LTV, escrows for taxes and insurances for 5 years, counseling, and a full appraisal are all required.
FACTA (Fair & Accurate Credit Transaction Act)
- Amended FCRA
- Implemented Credit freezes and Fraud Alerts
Who enforces the red flags rule under FACTA?
FTC
What is the Red Flags Rule?
If you call into your bank, credit card company, or other companies to change your personal information, they cannot change it unless the company sends you an email or letter asking if you requested the changes. Unless you respond, they will make the changes.
How many days does a company have to send a letter to everyone in the data base telling them there was a breach and what your company is doing to protect them?
30 days.
Companies have to inform the consumer what they do with their NPI (Non-Public Personal Information). What are the 3 options?
Share it, sell it or give it away.
How many days from the NPI notice must a borrower choose to opt out, stopping the company from sharing their data.
30 days.
What is Phishing or Pretexting?
Obtaining personal information by illegal process.
Ex. Receiving a text, claiming to be from the IRS, asking for your SSN.
Who regulates the Safeguard Rule?
FTC.
Whenever you are not using your files, they are to be locked up in a desk drawer or filing cabinet.
Who enforces the DNC? (Do Not Call)
Federal Trade Commission (FTC)
What are the fines for violating the DNC?
Up to $42,530 per call (each call, not each day, is considered a separate incident)
If you pull data from the Do Not Call (DNC) data base, it cannot be over ___ days old.
30 days.
Who is exempt from Do Not Call (DNC)?
Established Business Relationship (EBR) - You can call for 18 months, even though the consumer is on the DNC.
How many days can you call on a Pre-Qual? (DNC)
90 days.
All solicitation calls to a person on the DNC must be documented and kept for 2 years.
Internal Do-Not-Call List
If a consumer requests this via letter or email, they don’t want marketing solicitations. The company must maintain an internal DNC list, so all employees know that person is not to be called.
What is MDIA?
3/7/3 - 3 business days from application, the borrowers are to receive the disclosures.
Closing has to wait 7 business days from the signed intent to proceed.
3 business day delay from the changes to the CD, a new CD is issued if the loan program changes, prepayment penalty is added, or the APR tolerances are exceeded.
What is the Home Ownership Equity Protection Act (HOEPA) under and what section?
TILA/Reg Z (Section 32)
Covers predatory lending, abusing lending practices, negative amortization, prepayment penalties, balloon lending, subprime lending, equity stripping, and Ability to Repay (ATR).
HOEPA Restrictions on Balloons - minimum of ___ years.
5 years.
Who does not allow prepayment penalties and when is it considered one?
Fannie Mae, Freddie Mac, FHA, VA or USDA.
Prepayment penalty applies if you pay the loan off within the first 2-3 years.
Average Prime Offer Rate (APOR)
Issued how often, by who and for what length terms?
Weekly by the FFIEC for 30, 25, 20 and 15 year terms.
The index is added to the High-Cost and Higher-Priced Lending Triggers.
What are the HOEPA trigger rates/fees for first and second mortgages?
First mortgages - 6.5%
2nd Mortgages - 8.5% and 5% fees
Ex. If the APOR index for a 30 year fixed, first mortgage loan is 4%, you would add the index to the first mortgage trigger of 6.5% = 10.5%.
Your APR cannot exceed 10.5%. The loan could not be locked; thus not closed.
How many days from a signed application must a loan estimate be delivered? What must be included on the LE?
3 business days (if mailed, it must be documented that it was mailed within 3 days).
Must include all costs, fees, and terms of the loan.
What is an Annual Percentage Rate (APR)?
The cost of the loan including all costs for the loan, interest paid, and MI insurance over the life of the loan.
What are the 2 options to meet QM requirements and give Safe Harbor to the mortgage company and MLO, showing they proved the Ability to Repay.
Option one - 43% max DTI and no more than 3% in fees
Option two - Approve Eligible from Fannie or Freddie and must meet High-Priced Lending Limits.
What limits a MLOs commission? What can NOT be used for the commission?
Basis points of the loan amount.
Ex. $200,000 loan times 100 basis points = $2,000 commission
None of the TERMS of the loan can be used for the commission.
What are bonuses based on? What are they limited to?
Based on number of loans originated or the dollar amount originated for a specific period.
Bonuses are limited to 10% of your last 12 months of compensation.
When to deliver a CHARMS booklet?
Must be delivered to all borrowers on any ARM Loan within 3 business days from the signed application.
MAP Rule (Reg N)
If you don’t have what you are advertising, don’t advertise as if you do.
Do not use any words, sentences, or terms that would give borrowers the impression that you offer certain incentives that you don’t actually have, just to get them to apply for a loan with you.
What is Bait & Switch?
Enticing the borrower to call you for low advertised rates and then try to switch them to another loan program because you don’t have the rate.
Digital Delivery
You must have a signed approval from the borrower with their consent for digital delivery.
Does not include faxing or email. DocuSign or eSign are okay.
Who is the CFPB?
The agency that has the right to draft, implement, investigate, and enforce laws and regulations.
What is the HPA (Homeowners Protection Act)?
Mortgage Insurance (MI) requirement on all conventional conforming loans above 80% LTV.
BSA (Bank Secrecy Act) & AML (Anti Money Laundering Act).
How often must employees go through annual training?
What do you do it detected?
Annually. Training to identify fraud or money laundering and what to do if it is detected.
If detected, the file is to be turned over to the compliance officer or senior officer for determination if it should be filed as a Suspicious Activity Report (SAR).
If a SAR is reported, how long must a file be kept for?
Who can information be released to?
5 years in a secure place.
Law enforcement or FINCEN.
US Patriot Act. What are we checking through OFAC?
All borrowers and donators of gift funds must be checked through OFAC to see if any of those involved are on the Federal Watch List.
What do you have to do if someone is on the Federal Watch List?
Contact OFAC for approval to proceed with the loan.
What are the penalties for red flags?
$3,500 per violation, which may include an additional $2,500 for FTC Fines.
The Dodd-Frank Act mandates that any person who violates, through any act or omission, any provision of Federal consumer financial law, penalties may be set out in 3 separate tiers:
First tier - civil penalty may not exceed $5,639 for each day during which such violation or failure to pay continues.
Second tier - any person that recklessly engages in a violation of a Federal consumer financial law, a civil penalty may not exceed $28,139 for each day during which such violation continues.
Third tier - civil penalty may not exceed $1,127,779 for each day during which such violation continues.
What law deals with a credit application?
ECOA (Regulation B)
Where is HMDA information found?
Section 10 (X) of the 1003 loan application
What 4 things do you need to know about HPA?
- Deals with PMI only, not MIP
- PMI is on conventional loans, not government
- PMI is required when the borrower puts less than 20% down
- PMI Protects the Lender
What is HERA?
It’s the law that created the SAFE act.
What is the purpose of the CFPB?
To promote financial stability through accountability and transparency.
What 2 entities created the CFPB?
Dodd-Frank Act and Consumer Finance Protection Act
*if it has to do with money or banking it falls under the CFPB
ECOA deals with discrimination when granting _____?
Credit
Fair Housing deals with discrimination in the _____________?
Sale/Lease of property
What is ECOA?
A federal law that ensures all consumers are given an EQUAL chance to obtain credit
How many days does a creditor have to notify applicants of their lending decision?
within 30 days of the filing of a complete application
What is an Adverse Action Notice?
Denial Letter
How long must ECOA disclosures be retained for?
25 months
How long do consumers have to file civil action for ECOA violations?
24 months (2 years)
*that’s why you must retain ECOA disclosures for 25 months
Under ECOA what is the creditor NOT allowed to ask about in relation to children?
Childbearing, childrearing or birth control methods
What is the fine for violating ECOA?
$10,000
What is a protected class?
A “class of individuals” that cannot be used as a source of discrimination/denial when approving a credit application.
What are examples of public assistance?
Social Security income, Pension, child support, alimony, etc. (Any type of non-taxed income)
Which law requires the lender to provide the borrower with a copy of the appraisal?
ECOA
A borrower must be notified within ___ days of receipt of an application of their right to receive a copy of the appraisal.
3
If an application is denied based on the appraisal report - the consumer has the right to request appraisal report used within __ days of credit decision - lender must provide within __ days.
90 days, 30 days
If an application was approved - the borrower should receive the appraisal no later than _______ prior to the close of a first lien loan.
3 business days
What are the 7 protected classes of The Fair Housing act?
- Sex
- Race
- Religion
- Color
- National Origin
*1-5 also protected by ECOA
- Disability
- Familial Status (children under 18)
*Last 2 are ONLY protected by Fair Housing
How long does a borrower have to sue under the Fair Housing Act?
1 year
What are the 3 laws that are under the Fair Housing Act?
- Blockbusting
- Steering
- Redlining
What does HPA require lenders or servicers to provide?
Disclosures concerning Private Mortgage Insurance (PMI) on residential mortgage transactions.
When can a borrower request PMI cancellation? When does it automatically cancel?
80% LTV (lender can say yes or no)
78% LTV (if borrower is current)
What is the purpose of HMDA?
To identify possible discriminatory lending patterns.
What is a LAR report? What are on these reports?
HMDA requires lenders to file reports regarding the ethnicity, race and sex of all applications. These reports are called LARs (Loan Application Register).
If the application was taken _____, ECOA says that the MLO can use visual observation to fill in Section 10 (ethnicity, race, sex)
face to face
If the application was taken __,__ or __, ECOA says you must fill in Section 10 (ethnicity, race, sex) based on surname.
Mail, telephone or internet
What does FCRA deal with?
Credit reports and credit reporting agencies.
According to FCRA, consumers have the following 5 rights:
- The right to an Adverse Action Notice (Denial Letter)
- Free Copy of Consumer Credit File/Credit Report
- Request Credit Score (although score is not free)
- The right to dispute incomplete or inaccurate information
- The right to limit prescreened offers
Any entity that uses a credit report or another type of consumer report to deny an application for credit, insurance, or employment must provide the consumer with?
The name, address and phone number of the agency that provided that information (ex. Equifax)
Consumers are entitled to a free copy of credit file (report) under Regulation V (FCRA) if:
- Information resulted in adverse action (denial)
- Victim of identity theft (with fraud alert)
- Inaccurate information as a result of fraud
- On Public assistance or unemployed
Credit Reporting agencies may not report outdated negative credit information.
How many years for each?
- Negative Credit Information
- Bankruptcies
- Criminal conviction
- 7 years
- 10 years
- Does Not Expire
Unpaid tax liens stay on your credit report for how long?
Paid tax liens?
Forever
7 years
Under FCRA, you must have a _________ to pull someone’s credit.
Legitimate Business Need
What is the purpose of the FACT Act, or FACTA?
Intended to help consumers fight identity theft.
What is FTC Red Flags Rules aka?
Section114 Rules aka identity theft rules
What regulation says you can get a free credit report annually?
FACT Act or FACTA
What is the government backed website where you can get a free credit report?
www.annualcreditreport.com
What 3 things does the FACT Act require?
- Businesses to truncate credit/debit card receipts.
- Consumers can place fraud alerts, password and/or credit freezes.
- Requires measures to secure and dispose of sensitive consumer credit information.
What does it mean to truncate receipts?
X out all but the last 4 digits of the credit card numbers. (part of the FACT Act)
What are the 3 ways to secure clients private information?
Burn, shred or lock up.
What is the Gramm-Leach-Bliley Act also known as and what is it’s purpose?
Financial Services Modernization Act
To protect consumers privacy.
What is the safeguard rule and what regulation is it under?
Requires financial institutions to design & maintain safeguard to protect consumer data
Gramm-Leach-Bliley Act
What are pretexting provisions and what regulation is it under?
Protects consumers from individuals and companies that obtain their personal financial information under false, fictitious, or fraudulent pretenses
Gramm-Leach-Bliley Act
What is the Financial Privacy Rule and what regulation is it under?
Governs collection of nonpublic personal information and how its shared. Consumers have the right to opt in/opt out
Gramm-Leach-Bliley Act
What are the 3 laws that make up the GLBA?
- Safeguards Rule
- Pretexting Provisions
- Financial Privacy Rule
*SPF - just like sunscreen, it protects (privacy)
What is the purpose of the USA Patriot Act?
Anti-Terrorism. (In response to the 911 Terrorist Attacks)
What is required under the USA Patriot Act?
Requires the establishment of anti-money laundering programs.
Lenders are required to verify the date of birth, social security number (or other form) and ethnicity
What does the DNC allow consumers to do?
File complaints with FTC.
Anyone that offers or sells goods (including loan originators) must check the list every 31 days and delete from their call list, those phone numbers on the registry.
How often must you search the Do Not Call List (DNC)?
Every 31 days
How often must the national and internal DNC list be updated?
Every 31 days and records to document this must be maintained for 24 months
What does the MARS Rule address?
FTC rule to address loan modification, short sale & foreclosure relief scams
What does the MARS Rule ban and prohibit?
Bans collecting fees until homeowners have acceptable written offer from lender or servicer.
Prohibits advising consumers to discontinue communication with lenders.
What is the Bank Secrecy Act (BSA) also known as?
Anti-Money Laundering Act or BSA/AML
What does the BSA/AML act require of financial institutions?
1.Requires financial institutions to keep detailed records of cash transactions exceeding $10,000 (withdrawing, depositing or transporting)
Under the BSA/AML, MLOs are required to report any suspicious activity exceeding $_____?
$5,000
Requires that loan originators report suspicious activity that might be a sign of tax evasion, money laundering, or other possible criminal activity.
How is HERA related to the SAFE Act?
HERA is the parent act to the SAFE Act
What is the SAFE Act within HERA referred to as?
Title V (Title 5) of HERA
CSBS and AARMR work with HUD to create the ______ System.
NMLS
