Intro Flashcards
What does TRID stand for & what is it designed to do?
TILA-RESPA Integrated Disclosure Rule
Designed to:
-help consumers understand their options
-avoid surprises @ closing
-help consumers become more informed shoppers
Why do we have TRID? What Act created this?
Prior to October 3, 2015, borrower rcvd 2 cost-related disc forms at the time of app AND 2 more similar forms at closing. It contained overlapping info and quite confusing for consumers to understand. Dodd-Frank Act & CFPB combined these disclosures to make them easier to understand & cut back on excessive paperwork. Hence now TRID.
The TRID rule does NOT apply to what type of mortgages?
-home equity lines of credit (HELOC)
-Reverse
-Mortgages for mobile homes not secured by real estate
-Loans from anyone who funds no more than 5 loans in a calendar year
*Loans exempted will continue to use the GFE, HUD, & TILA disclosure forms
How many years does it require for the creditor to retain records for an LE?
3 years
How many years does it require for the creditor to retain records that show compliance with a CD and related documents?
5 years
What is the delivery of the LE to the consumer?
Required to give or mail the LE no later than 3 business days after taking borrower’s app & no later than 7 business days prior to consummation. If LE is mailed, it is considered to be rcvd by the borrower 3 bus. days after mailing. It includes creditor’s office are open to the public for business.
7 day business includes all calendar days except Sundays & legal holiday
How many days needs to be provided for a revised LE?
W/in 3 business days of receiving info
What other document needs to be indicated other than the LE?
Intent to Proceed
How many days are the charges on the LE @ least good for?
@ least 10 business days
What allows consumers to waive the 7 day period?
A “bona fide financial emergency”. It’s a written statement that includes all of the following:
-A description of the financial emergency (usually regarding a foreclosure issue)
-An express statement that the waiting period is waived/modified
-Signatures of all consumers that are obligated to repay the loan
What is provided on the LE?
-Rate lock & all info (expires)
-Total Interest Percentage (TIP): how much INTEREST is paying in the loan and w/ a certain amount of years
-Provides comparison of payments made and the principal reduction of the loan in the first 5 years
-Estimated Cash to Close
-Servicing & delivery of appraisal
-Likelihood of future refinance, we don’t know what the market will be, we cannot guarantee you your right to refinance
-Designated place for borrower to sign
What are Valid Changed Circumstances?
-Change in eligibility
-Consumer-requested revisions
-Delays caused by the consumer
-Extraordinary event beyond the control of any interest ex. natural disaster
-Unexpected event specific to consumer
-Change or inaccuracy
-New info specific to the consumer
What is Zero Tolerance & what are the items?
NO tolerance for error
-Fees paid to the creditor, mortgage broker, undewriter, processing
-Origination Fees
-Cost of 3rd party services - appraisal, CR, tax service, flood cert
What are the Cumulative tolerance of 10%?
Cannot exceed by more than 10%
-Recording Fees
-Fees to 3rd party service providers that the borrwer is allowed to shop for (title services, termite inspect)
-Govt recording fees
What is the no tolerance requirement?
Meaning: WITHOUT LIMIT
> If borrower chooses their own 3rd party service provider. Example, HOI, title insurance
Fees that are paid per diem (pre-paid mortgage interest),
Homeowner’s/Flood/Property Taxes due at closing
For a fixed-rate loan, what will NOT change?
Principal & interest
What is the origination charge?
Itemizes each amount and a subtotal of all amts that the consumer will pay for the loan ex) points, app fee, underwriting fee
What is disclosed on the “Other Considerations” on the LE?
-Appraisal: creditor will provide a copy even if the consummation does not occur
-Assumption: whether or not a subsequent purchaser of the property will be permitted to assume the loan on its original terms
-HOI: whether HOI is required and that the borrower may choose the provider
-Late Payment: more than 15 days late
-Loan Acceptance: consumer doesn’t have to accept the loan, not bound to it
-Refinance
-Servicing
How many years does the creditor need to keep the copy of the CD? Who is responsible to send to the borrower & seller?
5 years; Creditor is responsible to send to borrower. Settlement agent is responsible to the seller.
What are the valid change in circumstances for the CD?
1) Changes to the loan’s APR
2) Changes to the loan product
3) Addition of a prepayment penalty
What is on page 4 of the CD?
-Negative Amoritization
-Demand features
-consumer to set up an escrow account, risk of failing
What is on Page 5 of the CD?
1) Total of payments
2) Finance Charge: the total dollar amount the loan costs the client
3) Amount Financed: the loan amt avilable for the consumer’s use
4) APR
5) TIP: life of the loan
6) Other Disclosures: offer additional warnings about the risks. Appraisal, contract details, liability after foreclosure, refinance, tax deductions
7) Contact Info
What does ECOA stand for & when was it enacted? What Regulation is it under? What does it do?
The Equal Credit Opportunities Act. Congress enacted in 1974 to eliminate discriminatory treatment of credit applicants. Gives equal chance to obtain credit. Requires separate credit files for married spouses IF requested. It addresses fairness in the app process, the extension of credit & appraisal disc requirements
Regulation B. - “BE EQUAL” **helps memorize
*primary reason was women were not being treated equally when applying for credit
-If an application for credit is DENIED based on the appraisal, under ECOA (Reg B) says borrower has 90 days to request a copy/lender has 30 days to deliver
=ECOA(RegB) allows the borrower to CHALLENGE the VALUE
Deals with credit APP
What documents are disclosed to consumers under ECOA?
It needs to include a notice to the applicant of their right to receive a copy of any appraisal report that was used in the credit decision making process
What is the Fair Housing Act?
It addresses fairness in the extension of credit relating to housing and other housing related discrimination practices
Under ECOA, it prohibits discrimination in all types of credit based on what?
Sex, Race, Color, National Origin, Religion, AGE, MARITAL STATUS, Receipt of INCOME from public assistance (welfare, SSA, child support), exercised rights under the Consumer Credit Protection Act
How do you ask an applicant their marital status?
Are you married, unmarried, or separated?
When an applicant applies for a mortgage, what are the age requirements?
Age shouldn’t be a factor but at least 18 and for reverse, at least 62
ECOA requires the creditor to notify the borrower of their status of the application within how many days?
w/in 30 days following receipt of a COMPLETED APPLICATION
Credit Decisions will generally take what kind of written form?
1) Approved - a commitment letter is provided to the applicant
2) Incomplete - a notice of incomplete application is provided to the applicant
3) Denied - a statement of Adverse Action is provided to the applicant
What is Adverse Action Notice?
It’s a notification given to an applicant when adverse action is taken shall be in writing and shall contain a statement of the action being taken:
-a stmt of SPECIFIC REASONS for the action taken OR disclose that the applicant has the right to request the reason(s) for denial w/in 60 DAYS
-Disclosure needs to include name, address, and telephone # of the person/office from which stmt of reasons can be obtained
-If chosen to disclose orally, the creditor shall also disclose the applicants right to have them confirmed in writing w/in 30 days of rcving the applicant’s written request for confirmation
How many days does a borrower need to receive a notice of his/her “Right to Receive” a copy of the appraisal?
w/in 3 days of the application
If an application is denied based on the appraisal report, how many days does the consumer have the right to request the appraisal report? how many days does the lender need to provide?
Consumer - 90 days; Lender 30 days
If application was approved, borrower should rcv the appraisal within how many days?
no later than 3 business days prior to the close of a 1st lien loan
How many months does ECOA disclosure must be retained? Why?
25 months; Civil action may be filed within 2 years (24 months) to sue for ECOA violation
What is the penalty for violations of ECOA?
$10K per violation
What is the Civil Rights Act & When?
1866; prohibits public and private racial discrimination in any property transaction in the US. Even though created then, it was basically ignored until 1968. **REMEMBER THIS IS ABOUT RACE
What Supreme Court Case really regulated the Civil Rights Act?
Jones v. Mayer
What are the remedies under the Civil Rights Act?
-injunction: required defendant to do/refrain
-compensatory damages: reimbursement for expenses
-punitive damages: punish
You can get 1 of these, or you can get ALL of them or any combos
What is the Fair Housing Act?
Part of what Act & When?
Title VIII of the Civil Rights Act of 1968. It makes it illegal to discriminate in the SALE OR LEASE of residential property and prohibits discrimination based on:
Sex, Race, Color, National Origin, Religion, PHYSICAL OR MENTAL DISABILITY, FAMILIAL STATUS (families w/ children under the age of 18, pregnant women, anything that has to do w/ children)
Congress further expanded the Fair Housing Act with expanded protection. What Act is this & when?
Americans with Disabilities Act (ADA), signed into law in 1990
What are the exemptions for the Fair Housing Act?
-It is NOT a violation to refuse rental of a room/unit in a dwelling with no more than 4 independent units, provided that the owner occupies one unit as a residence. If you own the house, you can discriminate of who you want to rent other people
-Single-family home is sold or rented by a private owner w/o the use of a broker, sell by owner
-Housing operated by organizations and/or private clubs (example: sorority, senior)
What are some of the discriminatory practices that violate the Fair Housing Act?
-Refusing to rent/sell property after good faith offer
-Refusing to negotiate sale/rental of residential property
(example: listing agent discriminates to show the house)
-Making any representation that property is not available for inspection/sale/or rent when it is available
-Using discriminatory advertising that indicates limitation/preference (example: no children on a listing)
-Coercing, intimidating, threatening/interfering w/ anyone for exercising rights
-Discriminating in the terms/conditions of any sale/rental of residential property or providing any services/facilities
What includes the Fair Housing Act Discriminatory Practices?
-Blockbusting (panic selling): trying to induce owners to SELL their homes by suggesting that the ethnic/racial composition of the neighborhood is changing w/ the implication that property values will decline due to this change, COMMITTED BY REAL ESTATE AGENTS
-Steering: channeling prospective real estate buyers/tenants to particular neighborhoods based on their race, religion, or ethnic background, COMMITTED BY REAL ESTATE AGENTS
-Redlining: refusal to make loans on property located in a particular neighborhood for discriminatory reasons. This promoted the passage of the HMDA law - THESE ARE COMMITTED BY LENDERS
What is the advertising for the Fair Housing Act?
Lenders are required to include the “equal housing lender” slogan in any broadcast advertisement
Display the Equal Housing Opportunity LOGO on all printed promo material
Within how many years can a written complaint may be filed with HUD office?
w/in 1 year of violation
What is the Community Reinvestment Act?
Congress enacted this to encourage financial institutions to help meet the CREDIT needs of the communities in which they operate, including low & moderate-income neighborhoods, consistent w/ safe & sound lending practices
What is the Home Mortgage Disclosure Act? What Regulation?
HMDA; Congress enacted this to encourage financial institutions to help meet the HOUSING needs of the communities in which they operate, including low & moderate-income neighborhoods, consistent w/ safe & sound lending practices
-it was written in response to “redlining”
-Regulation C
-if refused, and the app is taken face to face, interviewer is required to make a visual observation (ECOA) or otherwise, HDMA requires the lender to complete the report based on surname
Where is the HDMA information collected in?
Section 8 of the 1003
What does HMDA require lender to do?
File Loan Application Register (LAR) Reports due March 1st of each year. LAR reports contain info regarding the ethnicity, race and sex of individuals that apply for loans
What’s the purpose in filling out the demographic info of the 1003?
Identifying possible discriminatory lending patterns through the collection & disclosure of data about applicant
What is the Homeowners Protection Act? When does it apply?
HPA; requires lenders or servicers to provide disclosures concerning private mortgage insurance (PMI) on residential mortgage transactions
Only applies if the loan is current & the payment history is acceptable. This means no payment was 30 days or more past due in the past 12 months and no payment was 60 days or more past due in the previous 24 months
When can a borrower request cancellation of PMI?
When loan balances reached 80% LTV of the OG purchase price/appraised value of the home *THiIS IS WHEN BORROWER MAY REQUEST AT 80%)
When is PMI automatically cancelled?
When the LTV reaches 78% or less of the OG purchase price or appraised value of the home at the time the loan was obtained, whichever is less (THIS IS WHEN IT AUTOMATICALY GETS CANCELLED - KNOW THE DIFFERENCE)
Lender/servicer must disclose this info annually to the homeowner
If the PMI has not been cancelled, it will end when loan reaches the midpoint. Example: 30 year loan midpoint is after 180 payments
What is FCRA & under what Regulation?
Fair Credit Reporting Act; Regulation V
Was enacted to ensure the accuracy, fairness, and privacy of consumers’ personal info used by consumer reporting agencies (CRA)
-dealing with the granting of credit, access to credit info, rights of debtors, and the responsibilities of creditors
-It requires credit reporting agencies to VERIFY **REMEMBER* V AS IN VERIFY or VERY GOOD CREDIT that is under dispute and limits how long neg info can remain on a credit report
What are the 3 CRAs?
Equifax, Trasunion, & Experian
What is a creditor?
Defined as “a person who regularly extends consumer credit that is subject to a finance charge or is paid by written agreement in more than 4 installments, and to whom the obligation is originally payable”
FCRA provides what rights?
-Right to request a copy of credit file/report
-Right to request his/her credit score - indivd. may also request their credit score from the credit bureaus, but it’s not free
-Right to Dispute Negative or inaccurate info. The consumer reporting agency must correct or delete inaccurate, incomplete, or unverifiable info. w/in 30 days of receipt of the dispute
-Right to limit prescreened offers
1) Adverse Action Notice
2) Copy of Credit File/REport
3) Right to Request his/her credit score
4) Right to Dispute Negative or Inacc Info
5) Right to limit prescreened offers
List situations in which it DOES & DOES NOT need to be retained on credit.
-Negative credit info of more than 7 years must be deleted (late payments, foreclosures, collections, tax lien)
-Bankruptcies, judgements or other public records no more than 10 years must be deleted. Chapter 7 provides for complete liquidation of the debtor’s debts while Chapter 13 provides for the debtor to pay back their creditors through a payment plan decided by the court
-UNPAID federal tax liens may be retained on credit reports forever
-CRIMINAL CONVICTIONS remain forever
What are some of the limits with FCRA?
-Must limit access to a credit file to ONLY those with legit business need
-May not give out consumer credit info to an employer w/o written consent
-If MLO is running a credit report and sees a fraud alert, he must contact person whos name is on the account at the # provided to the credit bureau
-Min time frame that a consumer reporting agency must include a fraud alert in a consumer’s file is 1 year
Can an MLO provide credit report?
No; only credit reporting agency
FCRA requires each of the consumer reporting agencies to provide an individual with his/her credit report IF in which circumstances?
1) Info resulted in adverse action (denial)
2) Victim of identity theft (fraud)
3) Inaccurate info as a result of fraud
4) On public assistance or unemployed
What other disclosures need to be provided for FCRA?
-Summary of Consumer Rights: revised sept 2018, right to obtain and dispute info
-Summary of Consumer Identity Theft Rights: revised sept 2018, rights when a victim of identity theft
-Notice of National Security Freeze Right: *new, must be provided when consumer receives either of the above summaries
What is FACTA & what does it allow?
Fair & Accurate Credit Transaction Act. It is an amendment to FCRA (Fair Credit Reporting Act) to PREVENT identity theft, improve resolution of consumer disputes, improve accuracy of consumer records.
It requires when a consumer applies for a home loan, he/she must rcv the Home Loan Application Credit Score Info Disclosure
-Gives consumer their right to one free CR each year from each CR agency, allows consumers to purchase a CR SCORE **you have to pay to get info about CR score
-Range of CR is 300-850
Under what section of the FACT Acts directs the Federal Trade Commission to create rules regarding ways to detect, prevent, and mitigate identity theft?
Section 114
What is the Section 114 Rules under the FACTA Act?
Red Flag Rules; it requires many businesses & org. to implement a written Identity Theft Prevention Program designed to detect the warning signs/red flags of identity theft in their day-to-day operations. Card issuers to assess the validity of change of address requests. Users of consumer reports to reasonably verify the identity of the subject of a consumer report in the event of discrepancy
What is the Red Flag Rule & what are its requirements?
Measured to address identity theft.
-Financial institutions & creditors must implement a written identity theft prevention program
-Credit card issuers must address the validity of change of address request
-Requires creditors & financial institutions to establish an Identity Theft Prevention Program
**Under the FCRA (Reg V)
What are the 5 categories that red flags fall into?
1) alerts, notifications, or warnings from a consumer reporting agency
2) suspicious documents
3) suspicious identifying info such as suspicious address
4) unusual use of a covered account (suspicious activity)
5) notices from customers, victims of identity theft, law enforcement authorities, or other businesses about possible identity theft in connection w/ covered accounts (irregular payment)
In what situations can a new CD must be sent and within how many calendar days?
Non-numeric clerical errors & tolerance violations. Must be delivered w/in 60 calendar days following loan closing. Lenders have 60 days to refund any excessive various between the LE & the CD
What does SAFE Act stand for?
Secure and Fair Enforcement for Mortgage Licensing Act
If an application for credit is DENIED based on the appraisal, ECOA says borrower has how many days to request a copy/Lender has how many days to deliver?
90 days (borrower); lender (30 days)
What does HMDA stand for? What Regulation?
Home Mortgage Disclosure Act, Reg C
What does RESPA stand for? What Regulation?
Real Estate Settlement Procedures Act, Reg X
What does TILA stand for? What regulation?
Truth in Lending Act, Reg Z
What does HPA stand for?
Homeowners Protection Act = private mortgage insurance
What does HERA stand for?
Housing & Economic Recovery Act
