Federal Mortgage Related Laws Flashcards
1
Q
What does RESPA stand for? When was it enacted?
A
Real Estate Settlement Procedures Act. 1974.
2
Q
What is the purpose of RESPA?
A
1) To allow customers to obtain info on costs of closing so that they can shop for settlement services.
2) To protect consumers from excessive settlement costs and unearned fees.
3
Q
RESPA’s regulations are known as which Regulation?
A
Regulation X
4
Q
What loans are covered by RESPA?
A
Transactions involving a federally-related mortgage loan and secured by a lien on residential properties. Home purchase loans, refinances, lender-approved assumptions, property improvement loans, HELOC and reverse mortgages.
5
Q
What loans are exempt from RESPA?
A
1) Loans for business, commercial or agricultural purposes.
2) Temp financing loans such as construction.
3) Loans secured by vacant land.
4) Loan assumptions which are permissible without lender approval.
5) Transactions between lenders and investors for the sale of a closed loan to a purchaser in the secondary market.
6) Loan conversations when a new not is not required.
6
Q
What is a Bona fide discount point?
A
Discount points paid by the borrower to reduce the interest rate
7
Q
What is a mortgage broker?
A
A person, other than an employee of a lender, that renders origination services and serves as an intermediary between a borrower and a lender in a transaction that involves a federally-related mortgage loan.
8
Q
What are some examples of settlement services?
A
Third party services such as appraisers, inspectors, credit reporting agencies, title insurers and loan processors.
9
Q
When is the special information booklet known as the “Your Home Loan Toolkit: A Step-by-Step Guide” due to the borrower?
A
3 business days after a loan application is received
10
Q
For the purposes of the Good Faith Estimate, what key information defines an application under Regulation X?
A
1) Name
2) Monthly income
3) SSN
4) Property address of home securing the loan
5) Estimated value of home securing the loan
6) Loan Amount
7) Any other info deemed necessary by LO
11
Q
In regards to costs, changes between estimated and actual charges are prohibited for what types of charges?
A
1) Origination charges
2) Charges for locking an interest rate
3) Transfer taxes
12
Q
In regards to costs, there is a 10% tolerance for differences between total amount of actual and estimated charges for what types of charges?
A
1) Lender-required settlement services performed by a provider chosen by the lender
2) Lender-required services and title and insurance services if the loan application uses a provider recommended by the lender
3) Recording fees
13
Q
What are some examples of changed circumstances that cause the amounts stated on the GFE to exceed permitted tolerances?
A
1) Acts of God, war and other emergencies
2) Changes to or inaccuracies in information the lender relied on when preparing the GFE
3) New info about the borrower or transaction
14
Q
RESPA prohibits anyone from giving or accepting unearned fees. Provide some examples of these types of fees.
A
1) Referrals fees
2) Fee-Splitting
3) Exchange of “things of value” for business referrals
15
Q
What is a judicial foreclosure?
A
It requires the involvement of a court. The mortgage includes a power of sale clause.
16
Q
What is a non-judicial foreclosure?
A
If the mortgagee does not have a power of sale clause, no legal action is required. Lender provides borrower with a notice of default and records a notice of default with the county (at least 120 days prior to foreclosure date sale.
17
Q
What does ECOA stand for? When was it enacted?
A
Equal Credit Opportunity Act. 1974
18
Q
What is the purpose of ECOA?
A
To eliminate discriminatory treatment of credit applicants. It’s regulations are intended to promote the availability of credit to all creditworthy applicants regardless of race, color, religion, national origin, sex, marital status, age or if an applicant has income from a public assistance program.
19
Q
ECOA’s regulations are known as what Regulation?
A
Regulation B
20
Q
What loans are covered by ECOA?
A
All extensions of credit, including business, commercial and agricultural use are covered by ECOA.
21
Q
What is adverse action?
A
A creditor’s refusal to offer credit in the amount or according to the terms requested by a loan application.
22
Q
What is the definition of elderly?
A
Age 62 or older
23
Q
When should a notice of action taken be delivered?
A
Within 30 days of receipt of a loan or credit application.
24
Q
What is to be included on an adverse action notice?
A
A statement of the reasons for the unfavorable decision. It must include a statement that ECOA prohibits discrimination against credit applicants. Must also include the name and address of the creditor and the name of the agency that enforces the lenders compliance with the law. Also includes a description of the credit.
25
What are acceptable reasons for denial on a credit application?
1) not of legal age to enter a contract
2) fails to demonstrate sufficient credit worthiness based on permittable factors such as income and credit history
3) fails to submit info needed to complete application
26
When is an appraisal due to an applicant?
Promptly after they are completed or least 3 business days prior to consummation, whichever is earlier. Borrowers can waive the timing requirement as long as they receipt a copy at or prior to consummation.
27
What is not considered to be valuations under ECOA?
1) Internal docs that merely restate a dwelling's estimated value as listed in the appraisal or written valuation.
2) Publicly available government agency statements of appraised value.
3) Publicly available lists of valuations
4) Manufactures' invoices for manufactured homes.
5) Reports reflected property inspections that do not provide, and are not used to develop, an estimate of the property's value.
6) Appraisal reviews that don't include the appraiser's estimate of the property value or opinion of value
7) An appraisal review that does not itself state an estimate that is different from the appraisal.
28
What is redlining?
The refusal to offer credit in particular neighborhoods due to the race or ethnicity of the residents (also considered Overt Discrimination).
29
What is disparate treatment?
When a creditor treats a loan applicant who is a member of a protected class differently from other loan applicants who are similarly situated but not members of a protected class.
30
What are the ECOA rules surrounding requiring a co-signer?
It's prohibited to require a signature from an applicant's spouse or of another person who is not a joint applicant, if the individual qualifies on his or her own for credit.
31
What are considered prohibited factors/practices when it comes to lending?
1) refusing to consider public assistance as income
2) assume a woman of childbearing age will stop working to raise children
3) refuse to consider income from a pension, annuity or retirement benefit
4) refuse to consider regular alimony or child support
32
What does TILA stand for? When was it enacted?
Truth In Lending Act. 1968.
33
What are the primary goals of TILA?
1) Protect consumers by disclosing the costs and terms of credit
2) Create uniform standards for stating the cost of credit, therefor encouraging consumers to compare the costs of loans offered by different creditors.
3) Ensure that advertising for credit is truthful and not misleading
4) Provide borrowers with the right to rescind certain types of mortgage transactions.
34
TILA regulations are known as what Regulation?
Regulation Z
35
TILA applies to all credit transactions that meet which following four conditions?
1) credit is offered to consumers
2) Offer or extension of credit is made regularly
3) Credit includes a finance charge or a written agreement stating that the loan may be repaid in more than four installments.
4) Credit is primarily for personal, family or household purposes
36
What is the definition of business day?
any day on which the creditor's offices are open to the public for carrying out substantially all business functions. It means all calendar days except Sundays and legal public holidays.
37
What is the definition of dwelling?
a residential structure that contains 1 to 4 unites whether or not the structure is attached to real property. It includes an individual condo unit, cooperative unit, mobile home or trailer, if used as a residence.
38
What is the definition of a residential mortgage transaction?
A transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer's principal dwelling to finance the acquisition or initial construction of that dwelling.
39
Define finance charge.
the cost of credit as a dollar amount
40
Define APR
a measure of the cost of credit, expressed as a yearly rate.
41
What is included in a finance charge?
Fees paid to 3rd parties if the creditor requires the use of a particular third party or retains a portion of the third-party charge.
42
What is NOT included in a finance charge?
Any fees of the type that are payable in a comparable cash transaction, such as taxes.
43
What fees are included in the APR?
1) PMI
2) Discount points and mortgage broker fees
3) Origination fees
4) processing fees
5) underwriting fees
44
Which fees are NOT included in the APR as they are in the calculation of the finance charge?
1) title fees
2) escrow fees
3) notary fees
4) appraisal and credit report fees
5) document preparation fees
45
What is a three-year rescission period?
It's available to a borrower who did not receive a notice of the right to rescind or accurate Truth In Lending disclosures at the time that he/she entered an agreement for a mortgage loan.
46
What must the Notice of the Right to Rescind include?
1) creditor's retention or acquisition of a security interest in the consumer's principal dwelling
2) consumer's right to rescind
3) instructions on how to exercise the right to rescind, including a form to use, stating the lender's business address
4) date that the right of rescission expires
5) a description of the effects of rescission for the consumer
47
What does HOEPA stand for? What was it enacted?
The Homeownership and Equity Protection Act. 1994
48
Why was HOEPA put in place?
It creates protections under TILA for loans with high interest rates and high fees and refers to these loans as "high cost mortgages." It discourages transactions and abuses in the subprime lending market.
49
What defines a high cost mortgage?
1) secured by a borrower's principal
| 2) meets at least one of the following thresholds - an APR threshold, a points/fees threshold or a prepayment threshold
50
What is the APR threshold for 1st lien mortgages?
6.5 percentage points above the average prime offer rate for a comparable transaction
51
What is the APR threshold for subordinate lien mortgage?
8.5 percentage points above the average prime offer rate for a comparable transaction.
52
What are the entities that enforces HOEPA?
The CFPB, The Dodd-Frank Act
53
What are the types of loans not subject to HOEPA?
1) Reverse mortgage loans
2) bridge loans used to finance the initial construction of a dwelling
3) loans originated by a housing finance agency and for which the agency is the creditor
4) Loans originated by USDA
54
Define a higher-priced mortgage loan
A closed end loan that is secured by a borrower's principal dwelling and that exceeds the average prime offer rate for a comparable transaction by the following:
1) 1.5 percentage points for 1st lien loans with a principal amount that doesn't exceed the conforming loan limit
2) 2.5 percentage points for 1st lien loans with a principal amount that exceeds the conforming loan limit
3) 3.5 percentage points or more for loans secured by a subordinate lien
55
Who issued the LO Compensation Rule?
The CFPB
56
What is the LO Compensation Rule designed to discourage?
1) Basing loan originator compensation on the terms of a mortgage loan
2) Allowing loan originators to collection dual compensation
3) Creating incentives for steering consumers towards specific (more expensive) mortgage loan products
57
Who does the LO Compensation Rule not apply to?
Creditors that fund loans from their own resources such as banks or credit unions (depository lenders)
58
What are the permissible compensation methods in regards to the LO Compensation rule?
1) LO's overall dollar volume
2) long-term performance of the LO's loans
3) hourly rate based on actual number of hours worked
4) loans that are made to new customers VS existing customers
5) payment fixed in advance for each loan that the LO arranges for the creditor
6) percentage of the LO's applications that close
7) quality of the LO's loan files that are submitted to the creditor
59
What does TRID stand for?
TILA-RESPA Integrated Disclosure
60
The TIL and GFE are now known as what?
The Loan Estimate
61
The Final TIL and HUD-1 Settlement Statement are now known as what?
The Closing Disclosure
62
What types of products does the TRID rule NOT apply to?
1) HELOCs
2) Reverse mortgages
3) mortgage secured by a mobile home or dwelling that is not attached to real property
63
When most the Loan Estimate be delivered to the consumer?
No more than 3 business days after the loan application is received and no later than 7 business days prior to consummation.
64
Costs disclosed on the Loan Estimate are deemed in good faith if they meet which conditions?
1) the aggregate amount of closing costs are recording fees does not exceed amounts disclosed on the Loan Estimate by more than 10%
2) The fees for 3rd part services are not paid to the creditor or an affiliate of the creditor
3) The creditor permits the consumer to shop for settlement services.
65
What types of fees on the LE have zero tolerance?
1) Fees paid to the creditor or an affiliate of the creditor
2) fees paid to creditor, mortgage brokers, affiliates of the creditor or mortgage broker, unaffiliated 3rd parties if the creditor did not allow the consumer to shop for settlement services and transfer taxes
66
What types of fees on the LE can vary?
1) prepaid interest
2) property insurance premiums
3) amounts placed in escrow
4) charges paid to 3rd party service provides chosen by the consumer
5) charges paid for 3rd party services not required by the creditor
67
What is the timeframe in which a revised LE must be provided to the consumer?
Within 3 business days of receiving the information that prompted the change. The revised disclosure must be received by the consumer no later than 4 business days prior to consummation.
68
In regards to a revised Closing Disclosure, the three business day waiting period applies when the following occurs.
1) change in the APR
2) change in the loan product
3) Addition of a prepayment penalty
69
What does HPA stand for and when was it enacted?
Homeowners Protection Act. 1998.
70
What's the purpose of the Homeowners Protection Act?
To facilitate the cancellation of PMI. It provides for the automatic termination of PMI at 78% LTV (22% equity position) as borrower builds equity and the risk of loss from default decreases.
71
What agency is responsible for managing the HPA?
The CFPB
72
What types of products are exempt from HPA?
Government insured FHA or VA loans. Loans protected by PMI paid for by the lender.
73
Define good mortgage history.
He/she did not make a mortgage payment that was 60 days or more past due during the 12 month period beginning 24 months before the date on which the mortgage reached the cancellation date and did not make a mortgage payment that was 30 days or longer past due during the 12 month period preceding the date on which the mortgage reaches the cancellation date.
74
How can a borrower request cancellation for PMI?
It must be submitted via written request.
75
If a borrower doesn't request cancellation of PMI and if PMI doesn't automatically terminate, when will final termination occur?
When the borrower reached the midpoint of the amortization period for the loan.
76
What does HMDA stand for?
Home Mortgage Disclosure Act
77
What is the primary goal of HMDA?
To identify urban areas where the availability of home financing at reasonable terms is limited. They determine the following:
1) if depository institutions are meeting the housing needs of their communities (in urban areas)
2) identify discriminatory lending practices and patterns
3) determine how to distribute public sector investments where they are needed
78
HMDA regulations are known as what Regulation?
Regulation C
79
What does HMDA define as a dwelling?
A residential structure whether or not attached to a real property located in a state of the USA, District of Columbia or Puerto Rico. Condos, cooperative units, mobile or manufactured homes.
80
What information is required for HMDA?
1) date app received, including loan number
2) type of loan
3) purpose/amount of loan
4) if they app was a request for pre-approval and if it resulted in denial
5) action taken on loan
6) location of the property
7) owner/occupant status
8) ethnicity/race/sex/income of applicant
9) type of entity purchasing a loan that the institution originates or purchases and then sells within the same calendar year
10) difference between the loan's APR and the average prime offer rate for a comparable transaction if the difference is 1.5% points more for 1st lien or 3.5% points for loans secured by subordinate lien
81
What does FCRA stand for and when was it enacted?
Fair Credit Reporting Act. 1970.
82
What's the purpose of FCRA?
to ensure accuracy, fairness and privacy of consumers' personal information that is assembled and used by consumer reporting agencies
83
FCRA regulations are known as what Regulation?
Regulation V
84
What information is included in a consumer report?
information that relates to a consumer's credit worthiness, credit standing, credit capacity, character, personal characteristics, or mode of living which is used or expected to be used in order to determine the consumer's eligibility for credit or insurance to be used for personal, family or household purposes or to evaluate a consumer for employment.
85
What information may not be included in a consumer report?
- bankruptcy cases (older than 10 years)
- civil lawsuits (older than 7 years)
- arrest records (older than 7 years)
- accounts placed for collection/charge offs (older than 7 years)
- adverse info (older than 7 years)
86
What does FACTA stand for and when was it enacted?
Fair and Accurate Credit Transactions Act. 2003.
87
What's the purpose of FACTA?
to address the problem of ID theft, to facilitate consumers' access to the information retained by CRAs and to improve the accuracy of consumer reports.
88
Who is responsible for enforcing the Red Flags Rule?
Primarily CFPB, but also federal banking regulatory agencies, the NCUA and the FTC.
89
What is the purpose of the USA Patriot Act?
To investigate, identify and report information on money laundering and other financial crimes
90
Who monitors the USA Patriot Act?
FinCEN - Financial Crimes Enforcement Network
91
How does a RMLO comply with the USA Patriot Act?
- establish a consumer identification program (CIP)
- create an anti-money laundering (AML) program
- make suspicious activity reports (SARs)
- report receipt of currency in excess of $5,000
92
What does BSA/AML stand for?
Bank Secrecy Act/Anti-Money Laundering
93
What's the purpose of BSA?
- prevent and detect money laundering and criminal activity financing
- document large currency transactions
- improve reporting and aiding investigations of financial crimes
94
What is the purpose of the Gramm-Leach-Bliley (GLB) Act?
To ensure that financial institutions protect nonpublic personal information of consumers by
1) advising consumers of the financial institutions policies with regard to use and exchange of personal info
2) offering consumers the opportunity to limit the use and exchange of their personal info
3) creating a security program to protect personal info from unauthorized release and disclosure
95
The Gramm-Leach-Bliley regulations are known as what Regulation?
Regulation P
96
What does MAP stand for?
Mortgage Acts and Practices Rule
97
Who enforces MAP?
Primarily the CFPB, but also the FTC
98
MAP regulations are known as what Regulation?
Regulation N
99
What is the primary focus of MAP?
Addressing misrepresentations in the advertising of mortgage products.
100
Which entities are excluded from the MAP rule?
Banks, savings and loan institutions, federal credit unions or other entities that are excluded from the FTC's jurisdiction.
101
How long must commercial communications (marketing) be retained?
24 months
102
When was the eSign Act enacted?
2000
103
What's the purpose of the eSign Act?
It states that an electronic record or electronic signature cannot be declared invalid simply because it is given electronically, rather than on paper or in other forms.
104
What is the purpose of the Do-Not-Call Act of 2003?
To protect consumers from unwanted solicitations from mortgage bankers and mortgage brokers.
105
What information must a mortgage pro verbally disclose during a call?
1) ID of caller
2) purpose of call is to sell goods/services
3) nature of goods/services being sold
4) assurance that no purchase or payment is required to participate in any type of promo
106
Per the telemarketing sales rule, when are calls prohibited?
Before 8:00AM or after 9:00PM
107
What does ATR and QM stand for?
Ability to Repay Rule and Qualified Mortgage Rule
108
Which types of loans does the ATR rule apply to?
- first and subordinate liens
- loans secured by a borrower's principal residence
- loans secured by non-owner occupied residences
- refinances
- closed end home equity loans
109
What are the 8 factors to determine repayment ability?
- current or reasonably expected income or assets
- employment status
- monthly payments on the loan
- amount of the consumer's payments on any simultaneous loan known to creditor
- monthly payments for mortgage-related obligations (such as HOI)
- debt obligations (including alimony/child support)
- monthly DTI ratio or residual income
- credit history
110
How is the fully-indexed rate calculated?
By adding together the index and the margin in effect at the time of consummation. Margin is set by the lender.
111
What is considered a qualified mortgage?
Max DTI ratio of 43%
112
What would disqualify a loan from being considered a qualified mortgage?
- term longer than 30 yrs
- points and fees that exceed a certain percentage (cap is generally 3%)
- negative amortization
- balloon payments
- ability to defer repayment of principal (interest-only loans)
113
What are the costs included in the points and fees calculation?
- compensation paid to a creditor or LO
- charges by creditors, such as loan origination fees
- charges by 3rd parties, if the creditor requires use of a particular provider, if the fee is paid to the creditor's affiliate, or if the creditor retains a portion of the provider's fee
- real estate related fees if the creditor receives indirection compensation for the fee, the fee is paid to the creditor's affiliate or the charge is unreasonable
- closing agent fees, if the creditor requires the use of a particular agent or retinas a portion of the fee
- mortgage broker fee
114
What are the costs not included in the points and fees calculation?
- insurance
- upfront and annual mortgage insurance premiums (for FHA loans)
- funding fees (for VA loans)
- premiums for PMI if due after consummation (premiums due at or before consummation are included in the finance charge)
- 3rd party charges not retained by the creditor
- bona fide discount points (pts paid by borrower to reduce the rate)
115
What does the CFPB stand for?
The Consumer Financial Protection Bureau
116
What are the duties of the CFPB?
- conduct financial education
- collect and respond to consumer complaints
- research and monitor the markets for consumer financial products and services
- supervise covered persons for compliance with federal consumer financial laws
- take enforcement actions for violations of federal consumer financial laws.
117
What are the 3 principles that the CFPB uses to guide it's examination process?
- focus on consumers
- data-driven examination
- consistency
- mortgage origination examination procedures
118
How can consumer complaints be submitted to the CFPB?
- online, by phone, fax or mail
119
What does HUD stand for?
Housing and Urban Development
120
What is HUD's mission?
To create strong, sustainable, inclusive communities and qualify affordable homes for all.
121
HUD has authority over which act?
The Fair Housing Act
122
What are the programs offered by HUD?
- Single family insurance
- rehab loan insurance
- FHA Home Equity Conversion Mortgages
- ARMs
- Energy Efficient Loan Program
- Graduated Payment Mortgage
- FHA Condominiums
- Growing Equity Mortgages
- Manufactured Homes
