Federal Law Flashcards
Highlights of the Secure and Fair Enforcement for mortgage Licensing Act of 2008 (SAFE ACT, Title V, and economic recovery act)
- Established tests, background check, credit scores.
- The requirements for obtaining a MLO license
Highlights and Disclosure/Notices of Truth in Lending Act (TILA) 1968
- Reg Z
Highlights - disclosure of APR, informed use of credit
-provides right of recission (3 days after refinance)
-Advertising = requires disclosure of certain terms or trigger terms
3/7/3 Rule - earliest close 7 days after initial disclosure; 3 business-day waiting period before consummation if disclosure required.
Penalties
-Violate rescission rights = borrower can rescind the loan for 3 years.
-hoepa = liable to borrower for all finance; cant sell on secondary market
-Civil liability, class action suits, FINES!
Disclosure/Notices
-Within 3 business days of completed application
At closing:
Notice of right to rescind (2 copies)
(Records must be kept for 2 years )
Highlights and Disclosure/Notices of Real Estate Settlement Procedures Act (RESPA) 1974
Reg X
Highlights
-Settlement Services
-Helps consumer shop
-Prohibits kickbacks, fee-splitting and unearned fees
-Sets limits on escrow
-Requires the HUD-1 and GFE = replaced by CD and Loan Estimate (LE)
-Penalties = 10,000/ 1 year in jail or both per violation
Disclosure/Notices
-Within 3 buss days of app:
- requires certain documents books to be made available including
- LE, mortgage disclosure, HUD booklet
-Affiliated Business Arrangements rules
-At Settlement:
- CD
-Initial Escrow Statement
-After Settlement:
- Annual Escrow statement
- 2 months in reserves = refund
- Servicing Transfer Statement
- 15 days before and after transfer (Hello/Goodbye Letter)
Highlights and Disclosure/Notices of Homeowner’s Protection Act (HPA) 1998
Highlights
- PMI cancellation when LTV reaches 80%
-Auto Terminates when LTV reaches 78%
Disclosure/Notices
-Initial dis of HPA provisions with annual statement
-disclosure of cancellation and automatic termination dates of fixed rate loans
Highlights and Notices/Disclosure of Home Ownership and Equity Protecton Act (HOEPA) 1994
Highlights -High-cost home loans -Doesn’t apply to : purchases, reverses, helocs, or business loans. -APR tests -Points and fees test -Prepayment penalty test -Requires homeownership counseling Notices/Disclosure - Must disclose to the borrower within 3 buss days before closing if the loan is a high cost loan or disclosure
Highlights of Higher-Priced Loans - Truth in Lending Act as amended by Housing and Economic Recovery Act of 2008
- Called Section 35 Loans
- These are loans where the APR exceed APR by:
- 5% or more first lien loans
3. 5% or more for subordinate lien loans
- 5% or more first lien loans
- Must have escrow accounts
Highlights and Disclosure/Notices of Fair Credit Reporting Act (FCRA) 1968
Reg V
Highlights
- Rstricts use of credit reports
-requires accuracy on credit reports
-remove 7 years on most negative credit, 10 years on bankruptcies
-Fraud alerts (90 days)
-CRA must block info resulting from identity theft
Notice/Disclosure
Adverse action notice requirements
-Disclose credit reporting agency used
-disclose the CRA is not responsible for the denial
-disclose the CRA provides a free copy of the exact report
-must be given within 30 days off app
-reason for the denial
Highlights and Notices/Disclosure of Fair and accurate credit transaction act of 2003 (FACTA)
Highlights
-Improves consumer access to credit information
-Resolution of consumer disputes
-Prevention and detection of identity theft
Notices/Disclosure
Notice to home loan applicant disclosure
-disclosure of credit score to the borrower
-score factors, ranges of scores, date score computed
-provided by the credit reporting agency with the credit report
Highlights of National do not call registry
- 31 days to put someone on their list to not call
- numbers placed on the list will remain permanently
- 8am-9pm
- penalties =16,000
Highlights of Gramm-Leach-Bliley Act or Financial modernization Act of 1999 ( Privacy Act)
- Protect confidentiality of non-public personal information (NPI or NPPI)
- Safegourd Rule - Keeping borrower’s information safe
- Pretexting Rule - prohibits sharing of information with pretenders
- opt out rule - allows borrowers to opt-out of sharing information with non-affiliates.
Highlights of Fair Housing Act 1968
Specifically prohibits for race, color, religion, sex, or national origin but adds DISABILITY
Highlights and Notices/Disclosure of Equal Credit Opportunity Act (ECOA) 1974
Reg B
Highlights
-Prohibits discrimination on everything but disability, that’s FHA
Cannot
-discourage applying
-ask about spouse or child rearing
-ask about child support or alimony as income
Can
-Inquire about race, ethnicity or sex for HMDA
Notices/Disclosure
-Approval, Counteroffer, Adverse action
-Within 30 days of application
Appraisal Notice
-Copy of appraisal after paid upon request within a reasonable period of time
ECOA Notice
Highlights and Notice/Disclosure of Home Mortgage Disclosure Act (Federal Reserve Board, HMDA) 1975
Reg C
Highlights
-Used to track info to prevent discrimination
-prevent redlining and blockbusting
-report info to the regulator
-must keep files for 3 years
Can be taken:
- face to face (guess)
- Mail
- telephone
- Internet
Notice/Disclosure
-1003 monitoring section x of the loan appHighlights of FTC Red Flags
-protect sensitive personal data
-implementation of a written plan to detect and prevent identity theft
-penalty = 3,500 per incidence of non-compliance
-Identifying red flags:
- Account activity
Inconsistent information
Highlights of Dodd-Frank
- Created the CFPB
- Prohibits Unfair Lending Practices
- Penalties for irresponsible lending
- Expands consumer protection on high-cost mortgages
- Additional disclosures
- Housing counseling expansion
Highlights of Bank secrecy act/anti-money laundering (BSA/AML)
- FinCEN
- Suspicious activity reports (SAR)
- Within 30 days
- Transactions with more than 5,000 in cash or other assets is reported
- Must be kept for 5 years- Requires companies to have policies for employees to identify suspicious activities
Highlights of Mortgage Acts and Practices - Advertising
Reg N
- Prohibits certain material representations
- Must be accurate communication of APR, interest, amount of fees or costs, fees or cost for any additional product that might be sold, terms, amounts, payments, relating to taxes or insurance, any prepayment penalty, any teaser rates etc.
Highlights of Electronic Signatures in Global and National Commerce Act (E-Sign Act)
-Allows for e-sig as long as the borrower gives permission
Highlights of US Patriot Act
- Requires ID to be provided for mortgage loans
- Meant to identify if an individual is a terrorist or not
- Lender must verify the borrowers identity
Highlights and Notices/Disclosure of Homeowner’s protection act
Highlights
-Allows the borrower to request PMI be removed at 80% LTV
-REquires PMI to be taken off by the servicer at 78%
Notices/Disclosure
-Initial Disclosure
-Requires a notice about the cancellation of PMI and their rights under the homeowner’s protection act
Notice upon cancellation requires a notice be provided at time of cancellation of PMI
Highlights of Mortgage Assistance Relief Services (MARS)
Reg O
Highlights
-Foreclosure rescue/loans modifications
-Prevents these individuals from obtaining a fee before they have actually obtained a loan modification or foreclosure help from the borrower’s servicer and the borrower accepts the loan mod/foreclosure help
Highlights of Loan Originator Compensation (Under TILA)
- No comp based on “terms” or a proxy for a term
- No dual compensation
- No steering
- Individual LO can receive income in the following forms:
- Permissible bonuses
- Can’t bebased off the terms of the LO’s transactions
- May not exceed 10% of the LO’s total compensation UNLESS the LO originated less than 10 loans during the preceding 12 mo.
- Permissible bonuses
- Contribution is allowed to tax advantage plan as long as its not based on terms of loan
Highlights of Ability to Repay (ATR) (Under TILA)
- Requires creditor to make a good estimate on or before consummation that consumer will be able to repay
- Consummation = when the loan funds or borrower receives money
- Closing is the same day on purchase but on refinance its 3 days after closing for consumption for right to rescind
- Considerations of repayment
- Income and Assets
- Employment status
- The creditor must VERIFY info is accurate through 3rd party (W2, 1099, verifications of employment)
Highlights of Qualified Mortgage (QM) (Under TILA)
-Provides liability protection for creditors
-Creates a presumption that the creditor complied with the ATR rule
-4 types of QM loans:
1. General
2. Temporary
3. Small Creditor
4 . Balloon -payment QMs
- QM Loan Requirements
- no neg am
- No interest only
- No balloon payments
- cannot exceed 30 year term
- may not have points and fees that exceed
- 3% of total loan amount for 100,000 or greater loan
- 5% less than 100,000
- 8% less than 12,500
- underwrite based on full amortizing on max rate first 5 years
- determine ATR
- Consumers DTI cannot exceed 43%
Safe harbor and rebuttable presumption:
-QMs that are not higher-priced have safe harbor
- QMs that are higher priced have rebuttable presumption that they comply with ATR but consumer can rebut that.
Points and fees included;
- finance charges
- loan originator compensation
- Real estate related fees
- Insurance Premiums
- Max prepayment penalties, prepay penalties paid in a finance
