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Nmls Federal Test Training > Federal Mortgage-related Laws > Flashcards

Federal Mortgage-related Laws Flashcards

1
Q

Dodd - Frank Act

A

Established 2010 due to the market crash in 2007. Amended federal lending laws and established the cfpb

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2
Q

Consumer financial protection bureau

A

Cfpb

Established by the Dodd Frank act. Responsible for protecting consumers in the financial marketplace. In charge of implementing and enforcing most federal laws relating to mortgages.

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3
Q

Respa

A

Reg X

In 2011 cfpb replaced HUD as the federal agency responsible for enforcing respa

  • protects consumers from excessive fees
  • limits funds required for escrows
  • established disclosure policies to ensure timely communication
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4
Q

Name two disclosures that replaces respa’s good faith estimate and truth in lending documents.

(Effective oct 3rd 2015)

A

Loan estimate

Closing disclosure

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5
Q

Loans covered by respa

A

Federally-related mortgage loans

  • insured by federal government
  • made with collateral insured by the fed government
  • lender insured by fdic or ncua
  • intended for sale to Fannie or Freddie
  • if creditor is regulated under the truth in lending act
  • if the broker or creditor is federally related
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6
Q

Respa does not apply to

A

Loans for business, commercial, agricultural purposes

Temp financing

Loans secured by vacant land

Loan assumptions which are permissible without lender approval

Secondary market loan purchases

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7
Q

What does section 8 or respa prohibit

A

Giving or receiving a fee, kickback, or anything of value, pursuant to an agreement or understanding for referral of settlement business

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8
Q

A cost of the title examination is $100. The lender charges $150 and retains the $50 up charge. Has a respa violation occurred?

A

No. It would have only occurred if the upcharge was split with the title company. Unilateral mark ups without splitting a fee do not violate respa

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9
Q

When is the special information booklet due and what does it do

A

Three business days after completion of a loan application.

  • explains settlement process
  • tells borrower that they have the right to negotiate
  • reviews protections respa creates for borrowers
  • warns against falsifying info on application
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10
Q

What is the purpose of the business arrangement disclosure.

A

Describe the arrangement between the referring party and service provided (% of ownership)

Indicate that referral may result in a financial benefit for referring party

Show an estimation of costs.

Advise that the borrower is not required to use the referred service provider.

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11
Q

How long does the loan serviced have to notify a consumer of the transfer or sale of servicing of their loan?

A

Must be notified by transferor 15 days before transfer.

Must also be notified 15 days after transfer is complete by the transferee (or new loan servicer)

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12
Q

Name 3 things that must be on the notice of transfer of servicing.

A
  • effective date or transfer
  • name, address, number for the transferee
  • date on which the current servicer will no longer accept payments
  • indication of the transfer will impact the continued availability of optional insurance products
  • statement that the x-fer does not change the terms and conditions of their mortgage
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13
Q

Each violation of section 8 of respa (reg x) may lead to criminal penalties up to ______________

A

$10,000 and/or 1 year in prison.

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14
Q

A bone fide provider of real estate settlement services has to have the following. Name 3.

A

Capital to operate
It’s own employees
Control of its own business
Separate office
Assumption of risk/reward of an enterprise
Ability to do work itself (not contract work out)
Evidence it competes in market for business
Interactions with industry. Not just affiliates

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15
Q

How long must a loan servicer retain documentation related to actions taken on a borrowers mortgage after it has been discharged (paid in full)

A

1 year

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16
Q

After loan is paid on full how long does a servicer have to refund the balance of the escrow account?

A

20 calendar days

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17
Q

When MUST a servicer reach out to a customer who is delinquent on their payments.

A

Live contact must be made on the 36th day of delinquency. Written notice must be provided by the 45th day.

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18
Q

What was the primary intention of ECOA (reg b)

A

To eliminate discriminatory treatment of credit applicants.

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19
Q

ECOA and it’s regulations are intended to promote the availability of credit to all credit worthy applicants regardless of their ____________

(Provide 8)

A

Race, color, religion, national origin, sex, marital status, age

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20
Q

What is redlining

A

Lenders refused to make loans in certain neighborhoods due to personal characteristics of the residents.

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21
Q

What is reverse redlining

A

Predatory lenders target neighborhoods with elderly, immigrant and minority populations to make risky loans that included oppressive lending terms.

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22
Q

Which agency has authority to enforce laws and regulations regarding ECOA/REG B

A

CFPB as of July 2011

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23
Q

What is a “notice of action taken” and when must it be sent to the customer

A

Within 30 days of receipt of a loan/ credit application.

Decision of the underwriter. (Ex- adverse action which is an unfavorable decision)

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24
Q

Notice of incomplete application must be sent how many days after the original application is received.

A

30 calendar days.

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25
Q

Creditors must provide the following to the federal government even if the applicant refuses. True or false?

Ethnicity
Race
Sex
Age

A

True as long as the property is for a principal dwelling.

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26
Q

Describe overt discrimination

A

Blatant refusal to offer credit to an individual due to his/her ethnicity or religion.

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27
Q

Describe disparate treatment.

A

When a creditor treats two people differently who are similarly situated financially because they do not belong to a protected class

Ex: a women ‘given a slightly higher rate than a man who is financially identical.

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28
Q

Describe disparate impact.

A

When a neutral policy without discriminatory intent has a discriminatory impact.

Ex. If a lender has a policy of limiting credit transactions to $250k or more the policy may limit the access that members of a protected class have to credit.

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29
Q

If a customer is out of guidelines when applying are you able to discourage they from moving forward?

A

No you are not able to make any statements that would discourage an applicant.

30
Q

What are the penalties for ECOA?

A 
$10,000 for individual actions 
The lesser of $500,000 or 1% of a creditors net worth in class actions.
31
Q

What are the primary goals of TILA reg Z

A

Promote consumers by disclosing costs and terms of credit

Create uniform standards for stating the cost of credit encouraging customers to compare lenders.

Ensure that advertising for credit is truthful

Provide borrowed with the right to rescind

32
Q

Which credit transactions does tila apply to?

There are 4

A
  • Credit offered to consumers
  • The offer of credit is make regularly.
  • the credit includes a finance charge
  • the credit is for personal, family or household purposes
33
Q

Describe the difference between open ended loan and close ended loan

A

Open ended is a line of credit

Close ended has a fixed payment period and you cannot take additional funds from the account.

34
Q

Fees that are included in the calculation of the APR

A 
PMI
discount fees
origination fees
Processing fees
Underwriting fees
35
Q

Fees excluded from the APR calculation

A 
Title fees
Escrow fees
Notary fees
Appraisal and credit report fees
Documentation prep fees
36
Q

Name the 3 disclosures that must be sent out on ARM products.

A

Summaries of loan costs and lending terms

Warnings related to the inherent risks of arms and their rates.

Advance notice of rate changes that will impact future loan payments.

37
Q

What is the CHARM booklet and when is it due

A

Due no later than 3 business days after a consumer submits an application for a loan that will be secured by his/her principal dwelling.

Disclosures regarding the risks of arm products.

38
Q

When must a rate change disclosure be sent to the borrower on an ARM product.

A

At least 60 days but no more than 120 days before the first payment is due at the adjusted interest rate.

39
Q

If a customer closes on their mortgage (that the 3day ror applies to) on Wednesday she will their loan fund.

A

Monday.

40
Q

What situation is the 3 year right of rescission for?

A

For a borrower who did not receive a 3 day ROR.

41
Q

How long does the creditor have to refund any moneys paid by the consumer in the event of a right of rescission

A

20 calendar days.

42
Q

Can the 3 day right of revision be waived?

A

Only in the evens of a bona-fide financial emergency.

Must be in writing and include

Description of the emergency
Signature of all parties that have a right to rescind.

43
Q

What are some trigger terms for open ended mortgages.

A

References to any of the following

Finance charge
Other charges
Taxes imposed on credit transactions
Payment terms of a one equity

44
Q

Trigger terms for close ended mortgages.

A
  • Amount or % down payment
  • Number of payments or the period of repayments
  • payment amounts
  • the finance charge
45
Q

Fees included in the finance charge

A 
PMI
Discount points 
Origination fees
Processing fees
Underwriting fees
46
Q

Remember the acronym for what is required on an application.

A 
L
I
E
N
S
A 
Address of subject prop
Loan amount 
Income
Estimate of value 
Name of applicant 
Social security
47
Q

Remember the acronym for the areas covered by respa (reg X)

R
E
S
S

A

Referrals
Escrows
Special info booklets
Servicing

48
Q

Remember this acronym for truth in lending TILA (reg z)

TILA drives a C.A.R

A

Cost of credit
Advertising must be truthful
Right to rescind

49
Q

Remember which costs are included in the finance charges using this acronym

C
O
I
M

A

Closing agent fees
Origination fees
Interest points, PMI, MIP
Mortgage broker fee

50
Q

There are two main differences between the protected classes under ECOA and fair housing. What are they?

A

ECOA does not cover the protected class of handicapped whereas fair housing act does

ECOA does not cover rental transactions whereas the fair housing act does.

51
Q

Give a HOEPA overview

A

Crests protections under the TILA for loans with high interest rates and high fees. Also refers to as high cost mortgages.

After the collapse in 2008 it also expanded to scope if the law. Including the “ability to repay rule”

52
Q

Name a type of loan that is regulated by HOEPA

A
  • high cost mortgages
  • secured by a principal dwelling
  • meets one of the following thresholds
    1. An apr threshold
    2. Points or fees threshold.
    3. A pre payment penalty threshold.
53
Q

Under HOEPA, what are the first and subordinate lien thresholds.

A

First lien = APR higher than 6.5 percentage points above the average prime offer rate for a comp transaction

Subordinate lien = APR higher than 8.5 percentage points above the average prime offer rate for a comp transaction

54
Q

Under HOEPA what are the point and fees thresholds based on loans greater and less than $20,350.

A

Loans $20,579 or more = threshold is triggered if the points and fees exceed 5% of the total loan amount.

Loans less than $20,579 = threshold is triggered if the points and fees exceed the lesser of 8% of the total loan amount or $1,029

55
Q

Under HOEPA, a home loan may also be high cost if it includes either of these two pre payment penalty regulations.

A
  1. A prepayment penalty provision that is in force for more than 36 months after closing
  2. A prepayment penalty that can exceed more than 2% of the amount prepaid.
56
Q

The only types of transactions that are excerpt from provisions of HOEPA are?

A

Reverse mortgages

Bridge loans used to finances initial construction of a dwelling

Loans originated by a housing finance agency and doe which the agency is the creditor

Loans originator by the USDA

57
Q

Who is the right to rescind on a transaction.

A

Each person with an ownership interest in the property used to secure the loan.

58
Q

When are the HOEPA disclosures due?

A

At least 3 business days prior to the closing of a mortgage.

59
Q

Does the ability to repay rule (ATR) apply to close end and open ended transactions?

A

No the ATR rule does not apply to transactions involving open ended mortgage loans.

60
Q

A creditor can offer a high cost mortgage to a borrower if they do the following.

A

Make certain the borrower has completed counseling with a hud approved counselor.

61
Q

HOEPA prohibits the use of the following terms in high cost mortgages

A 
Balloon payments 
Negative amortization
Advanced payments 
Increased interest rates after default
Improper calculated rebates
Prepayment penalties
Acceleration of debt
62
Q

High priced mortgages are closed end loans that are secured by a principal dwelling that exceed average prime offer rate by the following percentages.

A
  1. 5 percentage points for first liens loans with a principal balance within the confirming loan limits
  2. 5 percentage points for jumbo loans
  3. 5 percentage points for subordinate liens.
63
Q

On high priced mortgage loans how long must an escrow account be set up for at a minimum?

A

5 years.

After 5 years the consumer can request to have the escrow account cancelled only if the ltv is below 80%

64
Q

What is steering

A

Lona originator tries to direct a consumer to a transaction based that he/she will be paid higher on.

65
Q

HOA, Homeowners protection act was passed to facilitate what?

A

The cancelation of PMI

66
Q

Which loans does the HPA not cover? Name two.

A

Government insured fha or va loans

Loans protected by PMI paid for by the lender

67
Q

What 3 online classes does the SAFE ACT require mortgage professionals to take.

A

3 hours of mortgage laws and Regs

3 hours of ethos, fraud, consumer protection and fair lending

2 hours of non traditional mortgage marketplace

68
Q

Safe act requires the following to be completed annually

A

3 hours of mortgage laws and Regs

2 hours of ethos, fraud, consumer protection and fair lending

2 hours of non traditional mortgage marketplace

69
Q

Under Hmda what are some of the different types of information collected about each mortgage application?

Name 4

A 
Date app was receive?
Type of loan?
Was it for a pre approval?
Did it result it a denial or an origination?
What was the action taken on the loan?
Property location?
Occupancy status of home?
Ethnicity, race, sex, income
First or second lien?
70
Q

As of Jan 2018 the. Uber of hmda categories will increase from 12 to what?

A

48 categories

71
Q

What transactions does the FCRA apply to?

A

Any transaction that involves the use of credit reports.

Consumer investigatory reports.

Employee background checks.

72
Q

Under the FCRA How long does a furnisher of credit have from the receipt of a dispute to investigate the dispute and rectify any inaccuracies.

A

30 days

Nmls Federal Test Training (1 decks)

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