License Law and Regulation Flashcards
What must an individual first obtain before they can engage in the business of a loan originator?
-License and registration as a state-licensed loan originator (a licensed mortgage loan originator must register with, and maintain a valid unique identifier issued by, the NMLS), or -Registration through the NMLS as a registered loan originator
What does it mean for an individual to engage in the business of a loan originator?
If he or she, in a commercial context and habitually or repeatedly: -Takes a residential mortgage loan application -Offers or negotiates terms of a residential mortgage loan for compensation or gain, and/or -Represents to the public, through advertising or other means of communicating or providing information (e.g., through the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that he/she can or will perform these activities
What does it mean for an individual to take a residential mortgage application?
If he or she receives the application for the purpose of: -Facilitating a decision on whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower, or -Accepting the terms offered by a borrower or prospective borrower in response to a solicitation
What does it mean for an individual to offer or negotiates terms of a residential mortgage loan for compensation or gain?
The individual: -Presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms -Communicates directly or indirectly with a borrower or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms -Recommends, refers, or steers a borrower or prospective borrower to a particular lender or set of residential mortgage loan terms in accordance with a duty to, or incentive from, any person other than the borrower or prospective borrower, and -Receives or expects to receive payment of money or anything of value in connection with these activities or as a result of any residential mortgage loan terms entered into as a result of such activities
What is an independent contractor when it comes to loan origination?
An independent contractor is an individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed and registered as required under the S.A.F.E. Act or is exempt from licensing. An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless he/she is a state-licensed loan originator
What individuals is the state not required to license as loan originators?
-A loan processor or underwriter -A registered loan originator who is an employee of: 1. A national bank 2. Member banks of the Federal Reserve System and their respective subsidiaries 3. Insured state nonmember banks 4. Savings associations and their operating subsidiaries 5. Lending institutions regulated by the Farm Credit System, or 6. Any federally-insured credit union -Any individual who performs only real estate brokerage activities -Any individual who is only involved in extensions of credit related to timeshare plans -Any individual who offers or negotiates terms of a residential mortgage with or on behalf of an immediate family member (i.e., a spouse, child, sibling, parent, grandparent, or grandchild, including step and adoptive relationships) -Any individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence -A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to his or her representation of the client, unless the attorney is compensated by a lender, broker, or other loan originator, or by any agent of the same -An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator in his or her official duties as an employee. A housing finance agency is any authority whose activities make it eligible to be a member of the National Council of -State Housing Agencies and that is: 1. Chartered by a state to help meet the affordable housing needs of the residents of the state 2. Supervised directly or indirectly by the state government, and 3. Subject to audit and review by the state in which it operates -An employee of a bona fide nonprofit organization who acts as a loan originator: 1. In his or her capacity as an employee of the bona fide nonprofit organization, and 2. Makes residential mortgage loans with terms that are favorable to the borrower
What are the qualities of a bona fide non profit organization?
-Has the status of a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code of 1986 -Promotes affordable housing or provides homeownership education or similar services -Conducts its activities in a manner that serves public or charitable purposes rather than commercial purposes -Receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients -Compensates its employees in a manner that does not incentivize employees to act other than in the best interests of its clients -Provides or identifies for the borrower residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs, and -Meets other standards that the state determines appropriate
What must an applicant give to the NMLS concerning his or her identity?
-Fingerprints for submission to the Federal Bureau of Investigation and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check, and -Personal history and experience, including authorization to obtain: 1. An independent credit report obtained from a consumer reporting agency, and 2. Information related to administrative, civil or criminal findings by any governmental agency
An applicant will have to show that he or she is not financially responsible. What is considered to be financially irresponsible according to the state/NMLS?
-Current outstanding judgments, except judgments solely as a result of medical expenses -Current outstanding tax liens or other government liens and filings, and/or -Foreclosures or a pattern of seriously delinquent accounts within the past three years
The S.A.F.E. Act requires the creation of a registration system for those individuals acting as mortgage loan originators while employed by what institutions?\
-A depository institution -A subsidiary that is controlled by a depository institution and regulated by a federal banking agency (e.g., the FDIC or the NCUA), or -An institution regulated by the Farm Credit Administration
What did Regulation G do?
Gave authority to the CFPB, from the federal banking agencies, to regulate the licensing and registration of mortgage loan originators.
