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MLO Study Guide > Federal Legislation > Flashcards

Federal Legislation Flashcards

1
Q

CFPB

A

Consumer financial protection bureau - purpose is to promote financial stability through accountability and transparency

-created by Dodd-Frank Act and the consumer finance protection act together, have combined rules, making authority for the following
-Office of controller of the currency (OCC)
-Office of thrift supervision (OTS)
-federal deposit insurance corporation (FDIC)
-Federal reserve
-national credit Union administration (NCUA)
-The department of housing in urban development (HUD)
-Federal Trade Commission (FTC)

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2
Q

Which Law does not deal with the CFPB?

A

Fair Housing Act

This law does not deal with money or banking it’s about discrimination

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3
Q

RESPA - Regulation X

A

The purpose of RESPA is to help consumers become better shoppers for settlement services

-covers one to four unit residential properties that are owner occupied

RESPA - does not cover all cash sales, rental property of more than four units, commercial property, and property of 25 acres or more (also called agricultural property)

The penalty for violating RESPA is a fine up to $10,000 and/or imprisonment up to one year

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4
Q

RESPA Section 6

A

Deals with mortgage servicers. Designed to address Servicer’s obligation to correct errors and work with homebuyers if payments are not being made

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5
Q

RESPA Section 8

A

Prohibits kickbacks, fee splitting, and unearned fees. Prohibits giving or excepting a fee, kickback, or thing of value in exchange for referrals of settlement service business. Does allow minimal value promotional items such as pens mugs, T-shirts with company logos. Also prohibited fee splitting and receiving unearned fees.

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6
Q

Purpose of Respa

A

To help consumers become better shoppers for settlement sevices

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7
Q

RESPA Covers…

A

Respa covers 1 to 4 units residential properties (they have to be owner occupied)

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8
Q

RESPA does not cover…

A

All cash sales, rental property of more than 4 units, commercial property, and property of 25 acres or more (agricultural property)

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9
Q

Punishment for violating RESPA

A

Fine up to $10,000 and/or imprisonment up to one year

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10
Q

RESPA section 6

A

This with mortgage services. Designed to address services obligation to correct errors and work with homebuyers if payments are not being made.
(Deals with mortgage servicing and mortgage servicing abuses)

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11
Q

Mortgage servicer

A

The company that has been hired to make the payments for the mortgage and to collect the taxes and insurance

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12
Q

RESPA section 8

A

Prohibits kickbacks, fee splitting, and unearned fees. Prohibits, giving or excepting a fee, kickback, or thing of value in exchange for referrals of settlement service business. (Allows minimal value promotional items.) also prohibits be splitting and receiving unearned fees.

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13
Q

RESPA Section 9

A

Title Insurance — Prohibits 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 (treble damage) all charges made for the title insurance

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14
Q

RESPA Section 10

A

Deals with Escrow accounts. Section 10 Limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance, and other related charges

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15
Q

RESPA Section 10 Title Insurance Monthly Rules

A

Each month lenders may require borrowers to pay into the escrow account no more than than 1/12th of the annual disbursement. At closing — allows for servicers to take a cushion of up to 2 months or 1/6th of the annual taxes at closing…if taxes are due they can take 6 months of taxes (only if it’s due)

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16
Q

RESPA Section 10 Annual Escrow Analysis

A

Requires an annual escrow analysis if there is any shortage - then servicers must return any excess over $50 to consumer if borrower is not delinquent

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17
Q

Defining a Complete Application

A

6 items necessary for a complete application 1. Name of Borrower 2. SSN number for each borrower 3. Gross Monthly income of each borrower 4. Loan amount sought 5. Address of subject Property 6. Estimate of property value

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18
Q

what is never allowed to be put in the place of necessary information on a credit application

A

N/A

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19
Q

Initial Disclosures must be provided once a complete application is received and borrower has indicated their intent to proceed unless…

A

The applicant withdraws the application or the lender denies the application before the 3rd day after the application

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20
Q

What disclosures must be issued at or within 3 business days of the application

A

Home loan tool kit (RESPA), loan estimate (TILA document RESPA decides when it’s given), Mortgage Servicing Disclosure Statement (RESPA), List of HUD approved home loan counselors (RESPA)

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21
Q

What disclosures are required before settlement?

A

Affiliated Business Arrangement (AfBA) Disclosure (1% not 10%) (RESPA)
Closing Disclosure 3 days prior to consummation of loan (TILA)

22
Q

Which disclosures are required at settlement?

A

Finalized Closing Disclosure (TILA)
Initial Escrow Statement (within 45 days of closing) RESPA

23
Q

What disclosures are required after closure?

A

Annual Escrow Settlement (RESPA Section 10)
Servicing Transfer statement (RESPA)
- Goodbye Letter (15 days prior to transfer - no penalty for 1st 60 days) (servicers)

24
Q

The closing disclosure

A

Formally called the hud one and is given at or within three days prior consummation of loan and then again at doc signing and all rates should be the same (TILA document — TILA states by law this must be given to the borrower, however RESPA determines when it is given)

25
The closing disclosure estimate
Formally called the hud one and is given at or within three days prior consummation of loan and then again at doc signing and all rates should be the same
26
Loan Estimate
Combines the Good Faith Estimate (GFE) and the initial Truth in Lending Statement -No fee except the credit report fee can be obtained prior to delivering the Loan Estimate -Must be delivered or mailed within 3 business days of receipt of complete application -Availability of terms - must be available 10 business days -TIP = Total Interest Percentage (only the interest) (APR = total interest + fees percentage) Lock or Rate Lock - is shown on the loan estimate only
27
Closing disclosure (no longer an estimate)
Review the form - places the existing HUD form and the final truth in Lending Statement Closing disclosure must contain the actual terms and costs of the transaction -The Creditor (Bank or Lender) is responsible for providing the statement to the borrower and the settlement agent (title agent) is responsible for providing the statement to the seller
28
Initial Closing Disclosure timeframe
the initial CD must be delivered within 3 business days prior to loan consummation. A final CD is delivered at loan consummation. If there is no valid change in circumstance. If there is the borrower must receive a new 3 day waiting period which includes -Changes in APR -Change in loan product -The addition of a prepayment penalty
29
TILA (Truth in Lending Act) Regulation Z
This act deals with Credit, APR, and Advertising of consumer loans Requires lenders to disclose the complete cost of credit
30
3 Day Right of Recission in Certain Transactions (only in HELOC/REFI’s) (TILA) REG Z
-It only takes one borrower to rescind for the loan to be cancelled -The rescission starts the day after the documents are signed -Creditor must return any money collected related to the loan within 20 calendar days -Consumers may rescind the credit transaction until midnight of the third business day -Borrower must receive two copies of a Notice of Right to Rescind -Time is up midnight of the third day
31
TILA Transactions related to installments
TILA applies to transactions that are payable by written agreement with more than 4 installments
32
How long must TILA disclosures be kept?
Loan Estimate (3 years) Closing Disclosure (5 years)
33
TILA Disclosures
-Loan Estimate and Closing Disclosure -Consumer Handbook on Adjustable Rate Mortgages (CHARM Booklet) -When your home is on the line disclosure (for HELOCs and Refis)
34
TILA Disclosures
-Loan Estimate and Closing Disclosure -Consumer Handbook on Adjustable Rate Mortgages (CHARM Booklet) -When your home is on the line disclosure (for HELOCs and Refis)
35
When would a buyer get the CHARM Booklet?
When they’re getting an adjustable rate mortgage
36
TILA requires the disclosure of what type of rate?
Annual Percentage Rate (ARM)
37
Another word used for Annual Percentage Rate (ARM)?
Effective Rate
38
What is another word used for Interest Rate?
Note Rate or Nominal Rate
39
Penalty for Violating TILA
$5,000 per day for single violation, $25,000 for reckless violation, $1,000,000 per day for knowingly violating TRID
40
TRID
Is when an escrow company closes before the 3 day waiting period
41
Mortgage Disclosure Improvement Act (MDIA) — 3/7/3 Rule (TILA)
-Initial disclosure must be mailed within 3 business days of receipt of completed application -Earliest consummation on 7th business day after disclosures delivered/mailed -Redisclosure - Consumer must receive corrected disclosure at least 3 business days before loan can be consummated if there was a significant variance in the APR
42
TILA Accuracy / Redisclosure
APR is accurate if no variance above or below initial disclosure by more than -1/8th (.125) for regular transaction for a 30 year fixed -1/4th (.25) for irregular transaction not a 30 year fixed)
43
Business day
All working calendar days except Sundays and legal public holidays (According to TILA) -except to the rule is for the initial loan estimate and a business day is any day the creditor’s office is open for business
44
Business or calendar day (TILA)
0-9 days is a business day 10+ days is a calendar day
45
TILA Advertising (Triggering Terms)
If an ad contains triggering terms like 20% down, pay only $700 a month, only 360 payments, 30 year financing available, 1% finance charge then that advertisement must include -Amount or percentage of down payment -term of repayment -Annual percentage rate, using that term spelled out in full or APR (Non-triggering terms include 5% Loan APR Available, easy monthly payments, FHA financing available, 100% VA financing available, terms to fit your budget
46
Triggering Term
If they use a number to describe credit terms and that number is not the APR then it’s triggering, but if they used the APR they don’t have to say anything else
47
Qualified Mortgage
When a lender receives “safe harbor” (legal protection) if the borrower later goes into foreclosure if the lender ensures that the borrower has the “ability-to-repay
48
Qualifications for the ability-to-repay (Qualified Mortgage) (TILA)
-No doc loans/NINA (no income no assets)loans are not allowed -Sets a maximum debt-to-income ratio of 43 percent -Caps points fees at 3 percent/3 points -Loan terms over 30 years prohibited -Interest only loans not allowed/negative amortization loans not allowed -prohibits use of teaser rate in affordability calculations -requires that adjustable rate mortgages (ARMs) be underwritten to the maximum interest rate that can be charged during the first five years of the loan term -prepayment penalties are prohibited except for certain fixed-rate, qualified loan
49
Ability to Repay (8 types of information needed)
1. Current Income and Assists 2. Current Employment Status 3. Borrower’s Credit History 4. Monthly Payment for Mortgage 5. Borrowers monthly payments on other simultaneous mortgage loans 6. Monthly payments for other mortgage related expenses 7. Other debts of the borrowers 8. Monthly debt payments compared to the borrowers monthly income (DTI cannot exceed 43%)
50
HOEPA Home Ownership & Equity Protection Act (TILA) Reg Z
Part of TILA

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