Federal Mortgage Related Laws 1 Flashcards
1
Q
Disclosures due within three business days of loan application
A
- Good Faith Estimate (RESPA)
- Settlement Cost Booklet (RESPA)
- Mortgage Servicing Disclosure Statement (RESPA)
- Truth in Lending Disclosure Statement (TILA)
- Charm Booklet (TILA
- Variable-rate program disclosures (TILA)
- Home Equity plan disclosures (TILA)
- Notice of Right to Receive an Appraisal Report (ECOA)
2
Q
HOEPA high-cost home loan thresholds…
A
- APR threshold
- Points and fees threshold
- Prepayment penalty threshold
3
Q
To get cards that are on the computer onto the ipad go into the edit cards setting and hit the refresh/sync button then go back to library and the next card should appear in the deck
A
done
4
Q
What are the penalties for violation of RESPA/Section 8?
A
- Section 8 of RESPA prohibits referral fees and other forms of kickbacks/fee splitting.
- Penalties include fines of up to &10,000 and up to one year in prison
5
Q
What can result in a $1,000,000 fine and 30 years in prison?
A
Acts of mortgage Fraud.
-The FBI Mortgage Fraud Warning Notice reminds all parties to a loan transaction of this fact.
6
Q
Definition of the term “creditor”?
A
A creditor is any person who regularly extends, renews, or continues credit. Loan originators, lenders and other mortgage professionals are included in this definition.
7
Q
Transactions reported under the HMDA
A
- Purchases
- Refinances
- Home improvement loans
- Pre-qualifications must also be reported, along with their disposition.
8
Q
When a borrower’s LTV reaches 80%
A
- He/She is permitted to request discontinuation of PMI.
- The Homeowners Protection Act Sets the requirements for discontinuation of PMI.
9
Q
An initial privacy notice is due….
A
- At the time that a customer relationship is established.
- The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an initial privacy notice.
“…Not later than when you establish a customer reltionship…” The initial privacy notice should also be accompanied by the opt-out notice.
10
Q
HMDA requires loan originators to
A
- Request information on an applicant’s race, ethnicity and sex. The applicant may decline to answer, in which case the loan originator must make a best guess based on visual observation. This information is necessary to meet the reporting of the HMDA.
11
Q
A permissible purpose is required…
A
- When obtaining a credit report
- Under FCRA lenders and mortgage professionals must provide the consumer reporting agency with a certification of permissible purpose in order to pull credit. loan qualification is considered a permissible pupose
12
Q
The Gramm-Leach-Bliley Act does not protect…
A
- Publicly-available information.
This includes information that can be found in government real estate records, information available from the phone book, and information included on a public unrestricted website.
13
Q
What is the statue of limitation for bank fraud?
A
The statue of limitations for bank fraud is 10 years. Penalties can include fines up to $1,000,000 and prison for up to 30 yrs.
14
Q
Information on the cost of credit results in…
A
The informed use of credit by consumers. The Consumer Credit protection Act (CCPA) states, “Congress finds that economic stabilization would be enhanced by the informed used of credit. The informed use of credit results from an awareness of the costs thereof by consumers”.
15
Q
Exceptions under the ECOA…
A
Although the ECOA prohibits inquires about protected personal characteristics, mortgage professionals are permitted to ask about race, ethnicity and sex for the purposes of compliance with government monitoring programs ( such as HMDA). Inquires about protected characteristics may also be used to determine eligibilty for special-purpose credit, such as assistance programs through non-profits.
16
Q
The purpose of the Homeowners Protection Act is…
A
The Homeowners Protection Act was enacted to facilitate the cancellation of private mortgage insurance (PMI) . Borrowers can request cancellation when their loan reaches 80% loan-to-value (20% equity), but the law requires automatic discontinuation of PMI at 78% LTV (22% equity.)
17
Q
Advertising trigger terms under TILA include…
A
- Amount or % of any down payment
- Number of payments or period of repayment
- Amount of any payment
- Amount of any finance charge
18
Q
What is the Mortgage Servicing Disclosure Statement?
A
The Mortgage Servicing Disclosure Statement discloses to a loan applicant if servicing may be sold during the term of their loan. It applies to first lien mortgages only and must be provided within three business days of application.
19
Q
Fee Splitting is illegal when….
A
One or both settlement service provide fail to perform enough work to earn the fee
20
Q
“Low monthly payments” is an example of…
A
An advertising trigger term under Regulation Z ( TILA)
- TILA/Reg Z requires additional information to be provided in an advertisement that contains trigger terms. Most commonly, APR must be provided if the advertisement includes the note rate.
21
Q
Regulation B….
A
Is the regulation that issues the rules for the Equal Credit Opportunity Act.
22
Q
Credit not covered by TILA…
A
- Business or agricultural credit
- Credit in excess of 25,000, unless it is secured by a dwelling/ real property
- Public utility credit
- Student loans
- Home fuel budget plans
23
Q
When a borrower reaches a 20% equity position…
A
He/She is permitted to request discontinuation of PMI
( private mortgage insurance).
The Homeowners Protection Act sets the requirements for discontinuation of PMI. It is at the lenders discretion to permit discontinuation at 80% LTV
- the borrower must be current on payments
24
Q
The Patriot Act requires…
A
Financial institutions to verify the identity of a person applying for a loan, maintain a record of the information used for verification, and determine whether a potential borrower appears on known terrorist lists.
25
Nonpublic personal information is...
Information derived from a credit report or provided with respect to loan application.
- examples might include:
loan balances, account numbers, unlisted phone numbers, etc. Nonpublic personal information is protected by the provisions of the Gramm-Leach-Bliley Act.
26
Where is borrower credit disclosed?
Borrow credit - an amount paid to a third party originator by a lender for locking a loan in at an interest rate above the par rate
-must be disclosed on the GFE and HUD-1.
Updated versions of the forms are intended to make disclosure of borrower credit clearer to borrowers.
27
What purpose does escrow analysis serve?
An aggregate escrow analysis ( ANNUAL ESCROW STATEMENT) is provided to borrowers annually, pursuant to Section 10 of RESPA. It's purpose is to prevent escrow overages.
According to Section 10, the cushion of funds maintained in the escrow account cannot exceed one sixth (TWO months) of the annual cost of taxes and insurance.
28
Regulation X....
Is the regulation that issues the rules for the Real Estate Settlement Procedures Act - RESPA
29
Who issues and enforces regulations for TILA
The CFPB- Consumer Federal Protection Bureau
30
When must APR be initially disclosed?
APR must be initially disclosed within three business days of application
31
Following initial disclosure of APR, when can the transaction process?
The transaction can proceed to closing after seven business days have elapsed from disclosures.
32
A three-year right of rescission may occur when...
A loan originator/lender fails to correctly provide a Notice of the Right to Cancel or fails to provide the borrower with proper material notices required under TILA.
- This includes the APR, finance charge, amount financed, number of payments and payment schedule.
33
Protected characteristics under ECOA include....
- Marital status
- Sex
- Bearing/rearing of children
- Race
- Color
- Religion
- National origin
- Age
34
Purpose of HMDA...
The Home Mortgage Disclosure Act is a reporting law that helps the federal government identify discriminatory lending practices. It also ensures that depository institutions are meeting the needs of their communities. HMDA requires mortgage professionals to report information about loan transactions and demographics(race, sex, etc.) of applicants.
35
When multiple parties have rescission rights....
Any one of them may exercise the right to terminate the transaction. Under the TILA/Regulation Z, an individual has rescission rights when he/she has an ownership interest in the property. The individual does not necessarily have to be a party to the loan transaction.
36
If an ad states the rate of finance, it must...
Use the term "annual percentage rate". APR is required in advertisements that use trigger terms. The goal is to ensure that consumers are advised of all terms of a loan and not just the most attractive ones.
37
Under TILA, business days are...
Everyday except for Sundays and federal holidays. Saturdays are included as business days. This is very important when calculating the time period alloted for rescission.
38
What is the Servicing Transfer statement?
Required under Section 6 of RESPA, the Servicing Transfer Statement advises a borrower when their loan has been transferred to another servicer. It must be provided 15 days prior to the servicing transfer. The new servicer must also provide notice within 15 days after the transfer and may not assess late fees for a period of 60 days following the transfer.
39
When is the GFE provided?
Within three business days following application. If the loan application is completed in a face-to-face interview , the disclosure is due at the time of the application.
40
Title charges ( on the GFE ) include...
- Cost of the title search
- Title insurance premiums
- Notary fees
41
TILA covers loans when...
- The borrower's dwelling secures the mortgage debt
| - The homeowners uses the proceeds of the loan for personal, family, or household purposes
42
Prohibitions under the ECOA include....
- Inquires about protected characteristics
- Discouraging applicants from applying for a loan (also called steering)
- Refusing to consider public assistance, alimony/child support, or pension retirement benefits as income
- Assuming that a woman will stop work to raise children
43
What is PMI?
Private mortgage insurance is required by conventional lenders when a borrower makes a down payment of less then 20%. ( or has less then 20% equity)
It is governed by the Homeowners Protection Act and must be discontinued when the loan reaches 78% loan-to-value (22% equity)
- Assuming the borrower has met the terms of the agreement to that point.
44
Borrower identity verification is required under...
The USA PATRIOT ACT. The Act requires financial institutions to verify the identity of persons involved in financial transactions, as a counter-terrorism measure
45
Regulation Z...
Is the regulation that issues the rules for the Truth-In-Lending Act.
46
What is the notice of the right to cancel?
It is a disclosure providing the notice of the right to rescing certain lending transactions.
It is due at closing for refinances and other HELOCs.
Two copies must be provided to each person with ownership interest in the property.
47
When is the Mortgage Servicing Disclosure provided?
- Within three business days following the application
- If the loan application is completed in a face-to-face interview, the disclosure is due at the time of the application.
48
Requirements for the Settlement Cost Booklet include...
- Only one copy is required for multiple borrowers
- The booklet can be reproduced in any form
- The booklet can be translated into other languages
- The booklet can be stamped with a business/mortgage professionals' name
* The booklet CANNOT be made part of other larger documents
49
What is APR?
The annual percentage rate is the cost of credit expressed as a percentage. It includes the interest on the loan as well as any finance charges.
It MUST be disclosed to a consumer WITHIN 3 BUSINESS DAYS of LOAN APPLICATION.
- Along with the finance charge and must be accurate within one eighth of 1% ( 1/8%)
50
Loans not covered by RESPA include...
Loans for:
- 25 acres or more
- business, commercial or agricultural purposes
- temporary financing (bridge loans)
- vacant land
- loan conversions
51
Prepaid items ( on the GFE ) include....
- Costs due at closing, which are payable at some point in the future ( funds are placed in escrow)
- Pro-rated real estate taxes
- Homeowners insurance premiums
- Flood insurance premiums
- Private mortgage insurance premiums
- Interim interest ( per diem interest )
52
What are the penalties for violations of ECOA?
- Violators of ECOA can face
- civil penalities of $5,000 per day. A pattern of misconduct can result in civil penalties of $25,000.
- Punitive damages can result in fines of up to $10,000 in individual actions or the lesser of $500,000 or 1% of the violator's net worth.
53
The purpose of the FCRA is...
The Fair Credit Reporting Act ( FCRA ) is aimed at ensuring the accuracy, fairness, and privacy of consumers' personal information that is assemble and used by consumer reporting agencies.
54
An Opt -Out Notice is due...
At the same time as the Initial Privacy Notice:
- when a customer relationship is established.
The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide Opt-Out Notice with a method for customers to opt-out of the sharing of their personal information.
55
When a borrower reaches a 22% equity positon...
PMI must be automatically discontinued. The Homeowners protection Act sets the requirements for discontinuation of PMI.
56
Phone numbers remain on the Do-Not-Call Registry...
Indefinetly.
57
Prepayment penalties appear on what documents?
The GFE, The HUD-1, the Truth-In-Lending Disclosure Statement, and the promissory note.
58
What is the TIL disclosure?
The Truth-in-Lending Disclosure Statement provides lona applicants with the cost of credit expressed as a percentage ( the APR ) and has a dollar amount (finance charge).
- It MUST be provided WITHIN THREE DAYS OF THE LOAN APPLICATION.
59
After loan servicing is transferred...
The new servicer cannot asses late fees for a period of 60 days
60
What is the finance charge?
The finance charge is the cost of credit expressed as a dollar amount. Finance charges include interest and other fees paid in conjunction with the loan transaction, such as broker fees and points.
It MUST be DISCLOSED to a consumer WITHIN THREE BUSINESS DAYS OF A LOAN APPLICATION,
- along with the APR and MUST not be understated by more than $100
61
Who has the right to rescind a loan transaction?
Anyone with an ownership interest in the property
62
Civil action under the ECOA
Must be taken by consumers within FIVE YEARS OF A VIOLATION.
An exception exists in that if the attorney general initiaties action, the aggrieved consumer may take action within one year of the initiation of proceedings.
63
The purpose of FACTA is....
The Fair and Accurate Credit Transactions Act ( FACTA )
- It was passed as an amendment to FCRA.
- It includes provisions to address identity theft, to facilitate consumers' access to the information retained by CRAs, and to improve the accuracy of consumer reports.
64
The disclosure due at least seven business days prior to closing is the....
Final Truth-In-Lending Disclosure Statement
65
When a borrower's LTV reaches 78%
PMI must be automatically discontinued.
| The Homeowners Protection Act Sets the requirements for discontinuation of PMI.
66
What is the HUD-1A?
The HUD-1A is most commonly used for refinance transactions. Just like the HUD-1 Settlement Statement, it provides the final disclosure of actual closing costs, expressed in DOLLAR AMOUNTS.
- It is provided at settlement, although it must be made available one day prior if the borrower requests it.
67
ECOA's purpose?
The Equal Credit Opportunity Act is aimed at promoting the availability of credit to all creditworthy applicants regardless of their race, color, religion, national origin, sex, marital status or age.
It also prohibits discrimination against credit applicant based on receipt of public assistance or participation in credit counseling programs (exercise of rights under the Consumer Credit protection Act.)
68
Government Charges on the GFE include...
- Charges to record the mortgage
- transfer tax
- other charges established by the state of municipality.
69
What are "things of value"?
Under RESPA, "things of value" are any payment, advance, loan, or service including:
money, discounts, commissions, salaries, stock, opportunities to participate in money-making program, special banking terms, tickets to theatre or sporting events
trips, etc. Things of value are illegal when they are provided in exchange for referrals.
70
Payment of referral fees is....
A violation of RESPA/Regulation X.
Referral fees are considered unearned fees under RESPA.
Any "thing of value" (money, gifts, discounts, etc. ) given in exchange for a business referral is illegal under Section 8 of RESPA
71
The notice of Right to Rescind is required...
For refinances and other home equity loans such as HELOCs.
The loan must be secured by the borrower's principal residence. The right to rescind the loan MUST be EXERCISED WITHING THREE BUSINESS DAYS OF CLOSING.
72
Penalties for violation of the Telemarketing Sales Rule...
Violation of the Telemarketing Sales Rule (including the Do-Not-Call provisions) is a violation of the Federal Trade Commission Act. Penalties are $16,000 for each violation for continued violations, each day is considered a seperate violation.
73
The APR and finance charge must appear on...
The truth-in lending disclosure statement. It is due within three business days following application and no less than Seven business days prior to closing.
- TILA or Regulation Z requires these two terms to be displayed prominently and suggests that they are presented with a box around them.
74
What is the notice of Adverse action?
Under ECOA, loan applicants must be advised of the status of their application within 30 days of application.
If their application is turned down, they must receive a Notice of Adverse Action advising them of the reason for denial as well as a Number of other rights
75
The purpose of RESPA is.....
To protect consumers from excessive settlement costs and unearned fees.
And to provide consumers with information on closing costs so they can shop for settlement services.
76
Historically, what was YSP?
yield spread premium was a fee paid by a lender to a third party loan originator for originating a loan at a rate higher then the par rate.
It was intended to provide a resource for originators to subsidize borrower closing costs.
77
What must occur within 20 days of rescission?
The lender must return any money or property paid by the borrowe in connection with the loan.
This might include broker fees, application fees, and third party settlement fees.
78
A good faith estimate is not due until...
The loan application has been completed and, in the case of a purchase money mortgage, the subject property has been identified.
79
Accepting a referral fee can lead to...
Fines of up to $10,000 and one year in prison.
Accepting a fee in exchange for a referral is a violation of RESPA / Regulation X.
80
The purpose of the TILA...
The truth in lending act is a consumer protection law aimed at providing consumers with disclosure of the cost and terms of credit.
It also ensures that advertisements are truthful and allows borrowed to rescind ( cancel ) certain types of transactions.
81
The purpose of Do-Not-Call Provisions
The do not call implementation act was passed under the Telemarketing Consumer Fraud and abuse Prevention Act / Telemarketing Sales Rule.
It is a consumer protection law that permits consumers to restrict unwanted sales calls to their homes.
82
What is the settlement cost booklet?
The settlement cost booklet, or information booklet, provides information on the settlement process, explains consumer rights under RESPA, and warns against the use of false against the use of false information on the loan application.
It applies to purchase transactions only and is due within THREE BUSINESS DAYS OF THE APPLICATION.
83
The purpose of the Red Flaggs Rule is...
The Red Flaggs Rule was created by the the Federal Trade Commission under. FACTA.
The purpose is to address identity theft by focusing on methods of detecting a security breach.
84
What is the HUD-1?
The HUD-1 Settlement is the final disclosure of actual closing costs, expressed in DOLLAR AMOUNTS.
85
When is the HUD-1 provided.
At closing ( also known as settlement ).
However, under RESPA, borrowers have the right to review the HUD-1 one business day prior to closing. They must make a request to do this.
86
What are the penalties for violation of the GLB Act?
The Gramm-Leach-Bliley Act does not include any specific penalties, but authorizes regulating agencies to bring enforcement actions and impose penalties.
The FTC can bring action against mortgage brokers under the Federal Trade Commission Act. This Act provides for penalties of up to $10,000
87
What is the GFE?
The Good Faith Estimate ( GFE ) is the an estimate of closing cost expressed in dollar amounts.
It must be provided withing 3 BUSINESS DAYS OF LOAN APPLICATION. - or at loan application if the interview takes place in person.
88
Who regulates RESPA?
The CFPB
89
What is an established customer relationship?
An established customer relationship means a transaction has occurred within the past 18 MONTHS.
Under provisions of the Telemarketing Sales Rule, mortgage professionals are permitted to contact consumers listed on the Do-Not-Call Registry if they have an established customer relationship.
90
What DISCLOSURE is due at the time of MAKING A REFERRAL?
The Affiliated Business Disclosure. Required by RESPA, it advises loan applicant that an affiliated business arrangement exists and lets them know that they are not required to use the referred entity.
91
The Red Flags Rule requires...
Creditors to create a policy to identify and mitigate the risks of identity theft. The Red Flags Rule was created by the FTC pursuant to FACTA.
92
What are the penalties for violation of TILA?
TILA does not address penalty amounts for open-end mortgage loans.
For closed-end loans secured by a dwelling, the penalty is at least $400 and up to $4,000.
93
RESPA applies to....
Federally-regulated mortgage loans.
This includes first and second liens and is such as a broad definition that RESPA applies to virtually all residential mortgages secured by real property.
94
What fees are never included in finance charges?
- Title insurance and title examination fees
- Doc prep fees
- Notary fees
- Sellers points
- appraisal/credit report fees ( if they are charged to all applicants as part of loan application).
95
What is the Appraisal Report Notice?
Under ECOA, loan applicants who have been turned down (Adverse Action) have the right to receive a copy of their appraisal report. They must be provided with disclosure of this right using the:
Notice of Right to Receive an Appraisal Report.
The notice is due no later than THREE BUSINESS DAYS after a creditor receives an application for a loan secured by a first lien on a dwelling.
96
When is the TIL Disclosure provided?
Within THREE business days following application and at least SEVEN BUSINESS days prior to settlement.
If the loan application is completed face to face the disclosure is due at the time of the application.
97
When is the Affiliated Business Arrangement Disclosure provided?
At the time of the REFERRAL.
The Affiliated Business Arrangement Disclosure is required only if customers are referred to a settlement service provider that is an affliated business.
98
What fees are included in finance charges?
Finance charges include:
- interest
- loan origination fees and points
- mortgage broker fees
- credit life insurance fees (when insurance is required)
- premiums for property and liability insurance.
Appraisal and credit report fees are NOT included if they are part of application fees which are charged to all applicants.
99
What happens when a loan is rescinded?
Each party to the transaction is restored to their previous position. The transaction is canceled and funds and property must be returned.
100
The three-year right to rescind exists for....
Borrowers who did not receive a notice of the right to rescind or accurate TIL disclosures as required by law.
101
What is HERA....
Housing and Economic Recovery Act 2008
The goals of Hera:
- strengthen regulation of the gov't sponsored entities
- providing additional Federal Housing Administration programs to assist homeowners
- establishing a nationwide database and education standards for the mortgage industry
102
Section 10 of RESPA deals with
how to manage Escrow accounts
103
Section 8 of RESPA...
Deals with kickbacks
104
Section 6 of RESPA deals with...
A borrowers notice if/when the loan serving is to change hands
105
What is an HPML?
| These regulations are found in section 35 of Regulation Z
Higher priced mortgage loans
