Homemade NMLS Qs from Paul Flashcards
GET ABOVE A 70%!
MLO paycheck can never be based on:
Rate
Term
Program
MLO CAN get PAID based on:
Flat fee in advance
Hourly rate for time worked
Overall loan volume (measured in units or dollars)
In advertisements, if you use a trigger term you must disclose the __________.
APR
How long must you keep applications/compliance with disclosures?
2 years
How long must you keep MARS Rule?
2 years
How long must you keep ECOA-B Complaints?
25 months
How long must you keep CDs/complice with compensation records/consummate files/compliance with qualified mortgage rule?
3 years
How long must you keep Final CDs/consummated files?
5 years
How long must you keep SARs Report?
5 years
How long must you keep Patriot Act?
7 years
To what does Higher-Priced Mortgage Loan (HPML) belong?
Section 35 of TILA
To what does Home Ownership and Equity Protection Act (HOEPA) belong?
Section 32 of TILA
What are prohibited terms in HPML / HOEPA?
- Balloon payment within the first 5 years of the loan
- Negative amortization
- Prepayment penalties after first two years
- Demand clauses
How do lenders have to advertise?
“equal housing lender”
How do MLOs have to advertise?
“equal housing opportunity”
If you live somewhere from 0-14 days a year it is considered a ____________.
investment property
If you live somewhere from 15 days - less than 6 months is considered a ___________.
2nd home
If you live somewhere for 6 or more months is considered a __________.
primary residence
What is the MAX penalty per day from the CFPB?
$25,000
initial disclosures (LE, HUD, SIB) must be sent at or within ___________ of application.
3 business days
fastest a loan may close (consummate) is on the ___________ after sending an LE
7th business day
fastest a loan may close is on the 3rd business day after receipt of a CD. Resets if:
- Add prepayment penalty
- Change program
- APR increases by .125% or more
How many days do you have to make a decision on application?
30 days
How many days do you have to communicate exact reasoning for application decision?
60 days
How many days does borrower have from receipt of ADVERSE ACTION NOTICE (AAN) to get credit file?
60 days
Actual Fraud
you know better
Constructive Fraud
you don’t know &/or don’t look into it
What’s an example of a GSE?
Fannie Mae, Ginnie Mae, and Freddie Mac
What gives an MLO “safe harbor”?
- Providing lowest interest rate
- Lowest interest rate without risky features
- Lowest total dollar amount for origination fees and discount points
A MLO may have ________ communication with an appraiser.
limited
USPAP is the
appraiser code of conduct… (Uniform Standards of Professional Appraisal Practice)
Blockbusting
Encouraging a person to move/sell based on race, ethnicity, religion, etc.
Who is most likely to falsify tax documents?
The Accountant (the only person who COULD forge them).
Who is most likely to falsify a sales contract or a purchase agreement?
The Real Estate Agent (the only ones that do it).
Blockbusting
encouraging people to sell
Who is most likely to falsify a deed or a title?
The government worker, county clerk, county reporter.
Redlining
Not giving money in a certain area (mortgages)
Steering
Channeling customer to an area/home/etc based on race, religion, ethnic background, etc.
Community Reinvestment Act of 1977
- Has a program where banks can get money for not redlining
- It’s like a HMDA audit
HMDA - C evaluates ________ __________ and monitors ______
lending practices ; compliance
Section 114 of FACTA is _______.
RED FLAGS
HMDA - C ensures that people are following ______ and ___________.
ECOA & Fair Housing Act
What is the purpose of HMDA-C?
To identify discriminatory patterns
What does the Fair Housing Act say?
Don’t discriminate when buying, selling, or renting out a house
Can you ask someone where his/her downpayment comes from?
YES! for a downpayment
What does ECOA - B say?
Don’t discriminate when giving people money or credit
List the 12 protected classes
- Age
- Color
- Disability
- Familial status
- Income from public assistance
- Marital status
- LGBTQ/sexual orientation
- National origin/ethnicity
- Race
- Religion
- Separate credit reports
- Sex
Higher-Priced Mortgage Loan (HPML) “Higher-Priced” is Section ____ of _________.
Section 35 of TILA
Home Ownership and Equity Protection Act (HOEPA) “High Cost” is Section ____ of ________.
Section 32 of TILA
When is HPML triggered on your first lien?
When you have an APR +1.5% greater than APOR.
When is HPML triggered on your second lien?
When APR is +3.5% greater than APOR.
When is HPML triggered on a JUMBO loan?
When APR is +2.5% greater than APOR.
What does APOR stand for?
Average Prime Offer Rate (The average APR)
HPML / HOEPA are two separate laws. (True or False)
TRUE!
HPML / HOEPA
- Gov DOES NOT “cap” interest rates
- But IF you charge interest rates past a certain point, the gov is gonna make sure there are rules in place to protect to borrower
What is the Mailbox Rule?
a document is considered received on the 3rd business day after mailing
What is Recession?
3 day waiting period from closing to funding on a refinance of a primary residence
Must receive LE at least ___ days prior to close.
4
Must receive CD at least ___ days prior to close
3
Can LE / CD be sent on same day?
NO! MUST be AT LEAST one day apart.
Under FCRA do customers have the right to require removal of poor credit?
NO! Only the right to DISPUTE incomplete or inaccurate information.
What does GFE stand for?
good faith estimate
Who do you need approval from to give someone a CD?
the underwriter
What is considered a “business day”?
Monday - Saturday; no Holidays
What is the purpose of FACTA?
to empower consumers to prevent identity theft
Name another abbreviation for an LE.
GFE
Red Flag Rules are from what?
Section 114 of FACTA
Name another abbreviation for an CD
TIL
The Settlement Statement is also known as what?
The Final CD
HUB 1
Abbreviation for Loan Estimate
LE
Abbreviation for Closing Disclosure
CD
What are you NEVER allowed to write on a form (except when writing about the subject property)
N/A
The Loan Estimate is _______.
summarized
The Closing Disclosure is _________.
itemized
What is main font size?
12
What is subtext font size?
8
What law requires you to Safe Guard customers’ NPPI?
GLB
What law keeps security of credit reports?
FACTA
What is GLB?
Gramm-Leach Bliley Act; safeguard NPPI
What does NPPI stand for?
Non-Public Personal Information
What law requires customer identification programs? (CIPs)
The Patriot Act
To what does RESPA apply?
covered transactions
What is a covered transaction?
Any conventional loan, non-conventional loan, any reverse mortgage
Where is the only place RESPA doesn’t apply?
ALL STAFF SALE
What law covers 3rd party settlement procedure and providers?
The Real Estate Settlement Procedure Act (RESPA)
Why is a Land Contract is considered risky?
Because you “Rent to Own”
TCPA rules what hours for calling?
8am - 9pm borrower local call time, unless they have an established business relationship already.
What does HELOC stand for?
Home Equity Line of Credit
A Home Equity Line of Credit is
a mortgage; a lien; a line (or credit) instead of a loan; a line of credit with a mortgage; open-ended; all the rules still apply
SAFE Act - Reg H is a law within which other law?
Title V of HERA (Housing Economic Recovery Act)
360/120 or 360/180
balloon loan/balloon payment
If you’re a Processor, can you be a W-2?
Yes!
If you’re a Processor, can you be a 1099?
Yes; IF you pass an MLO test.
If you’re an MLO, can you be a W-2?
Yes!
What type of appraisal is a construction loan?
“subject to” appraisal
What is the Successive Year Rule?
You cannot take the same course in back to back years for continuing education
What is a Compensating Factor?
- A strength that offsets a weakness
- ex: Maybe i have poor credit BUT i have been working a job 3 years with a new DOPE income
List the 3 Non-Conventional Loan Types.
FHA, VA, USDA
Can Non-Conventional Loans have a prepayment penalty?
NO!
How often can the state technically audit you?
As often as they deem necessary
For a Non-Conventional Loan that is a primary residence only within how many days must customer occupy the home?
60 days
Non-Conventional Loans require you to stay in that home for how long?
At least 1 year
Do Non-Conventional Loans require escrows?
Yes!
A banker or a lender is a ______.
creditor
A creditor is responsible for the final ________.
“clear to close”
What is a creditor responsible for?
Gathering all papers (Act of Settlement Agent responsible for signing)
What is an encumbrance?
- Anything that encumbers a property/title from being transferred
- Like a mortgage
What is an easement?
- Public right to be on private land
- Ex: Gas meter reader can walk on your property
- Ex: Sidewalks
What is encroachment?
- Structural trespassing
- Ex: our tree branches fall on Mark’s house; Anne’s fence is on our yard
What is a setback?
The distance SET BACK from the road your house needs to be
What is eminent domain?
- The public government’s right to FORCE the sale of private land (at fair market value)
- Poconos house
What is an example of a “cloud on the title”?
I change my name. Who owns the house? Summer Seipel or Summer Andrews?
Property taxes use _______ when customer move in in the middle of the month.
proration
List the two different title insurance policies.
Lender’s Title Insurance Policy
Borrower’s Title Insurance Policy
What type of insurance do Conventional Loans use?
PMI (private mortgage insurance)
What type of insurance do Non-Conventional Loans use?
MIP (mortgage insurance premium)
If you get ____% LTV (loan value), borrower HAS to take out insurance.
100%
USPAP
Code of conduct for appraisers
Appraiser: don’t want to see adjustments:
line
+/- 10%
Appraiser: don’t want to see adjustments:
net
+/- 15%
Appraiser: don’t want to see adjustments:
gross
+/- 25%
Appraiser: don’t want to see adjustments:
land
+/- 30%
Approaches to Appraisals:
Income approach:
- Renting something out
- Ex: i own a house on OSU campus but I rent it out
- Compare rent income id make
Approaches to Appraisals:
Cost approach:
- New construction/weird property
- Ex: dome shaped house
Approaches to Appraisals:
Sales/Market Approach:
- Buy/refinance regular house
- Ex: they draw geographic circle on a map & compare to similar properties
IRS Form 4506-T grants ______ __________.
Electronic permission
Can we directly contact the IRS directly?
Yes!
Can we directly contact Social Security?
Yes!
What type of form is a IRS Form 8892?
a tax extension form
Can we look at the source of income?
NO! (because all sources of income are “equal”)
Can we look at the durability & stability of income?
Yes, please!
Can we look at the source of down-payments and/or assets?
Yes, please!
What are the 4 Cs of underwriting?
- Credit history
- Capacity to repay
- Cash assets
- Collateral
For a disability payment, who will give an award letter?
Social Security
Does short term disability qualify as a disability payment?
NO!
What does the E-Sign Act say/do?
- You can NEVER force a borrower to do online
- Borrower can agree & then change mind
- Wet signatures: sign w/ pen
TILA - Reg Z laws apply to which two categories?
- 1-4 SFD (single family dwelling)
- 5 + payments
RESPA laws apply to which three categories?
- 3rd party settlement
- Covered transaction
- 3rd party: not directly part of the transaction
What is another term for a note rate?
interest rate (NOT APR)
YSP
- You accept a higher interest rate to pay less now in closing cost
- Credit to borrower
Discount Points
- Person gives money upfront for a BON A FIDE interest rate drop/reduction
- Charge to borrower
Discount Points are also known as
permanent buydown
When you are feeling questionable on the exam…
Go with whatever is in the borrower’s best interest and protects & helps them the most.
Prepayment Clause
- Penalty for paying soon
- ONLY a conventional & qualified mortgage can have this
Defeasance
If you pay off the house, they can’t still charge you
What is RESPA - X comprised of?
6: servicing
8: referrals
9: seller title insurance
10: escrows
What is TILA - Z comprised of?
Advertisements MDIA (3/7/3) AIR MLO Comp Rule HOPEA
FHA DTI ratios
31/43
What is Dodd-Frank Act - Reg Z comprised of?
- Title X - Consumer Protection Act → created CFPB
- Title XIV - Mortgage Reform & Anti-Predatory Lending Act → Amended TILA/RESPA
What is TILA/RESPA Integrated Disclosures (TRID) - Reg Z comprised of?
- LE: loan estimate
- CD: closing disclosure
What did Dodd Frank Act AND TRID amended?
RESPA and TILA
What is the minimum downpayment on an FHA Loan
3.5%
What is the minimum downpayment on a Conventional Loan?
5%
What are Ethics and Discrimination Laws comprised of?
- ECOA - B
- Fair Housing Act
- HDMA - C
- CRA
What are the two laws regarding credit?
- FCRA - V
- FACTA -V
What type of loan are public?
Non-Conventional (FHA, VA, USDA)
What type of loan are private?
Conventional Programs (FNMA, private)
What is another name for a loan?
A note (a promise to pay money = financing instrument/negotiable instrument)
What is another name for a mortgage?
A lien (collateral = security instrument)
What is another name for an instrument?
documents
What is the Primary Market?
lenders make mortgage loans directly to borrowers
What is the Secondary Market?
private investors and gov agencies (FNMA, FRDMC, FHL Banks) buy and sell real estate mortgages
Will Ginnie Mae BUY or SELL a loan?
NEITHER!!! They are insurance!
What helped to restore faith in the cycle between the primary market, secondary market, pod/securities, and bond market?
The Dodd-Frank Act
What established a “qualified mortgage”?
The Dodd-Frank Act
Who can ONLY buy qualified mortgages?
FNMA (Fannie Mae)
Loan Process Step 1
Inquiry
What is INQUIRY
- Not a full application
- Borrower inquires about rates and terms of a loan
- Must provide APR which is NOT the interest rate
Loan Process Step 2
Application
What is APPLICATION
Collection of:
- Address
- Loan amount
- Income
- Estimate of property value
- Name
- SSN
ALIENS constitutes the LEGAL EVENT of an application → this triggers a clock that starts ticking.
What is the application form known by?
Uniform Residential Loan Application = 1003 = URLA = 65
What are the Three Steps of Money Laundering?
- Placement
- Layering
- Integration
Who can take applications?
Only an MLO
After accepting an application, what can you do?
- Accept
- Deny
- Withdrawal
Loan Process Step 3
Processing
What is the percentage for total DTI for a qualified mortgage?
43%
