MLO Flash Cards
MLO Study Guide
What is the CFPB and who was it created by?
Consumer Financial Protection Bureau / Created by the Dodd Frank Act and the Consumer Finance Protection Act.
What is the purpose of the CFPB?
To promote financial stability through accountability and transparency
What is Regulation B?
Equal Credit Opportunity Act (ECOA), this ensures that all consumers are given an equal chance to obtain credit.
What is Regulation C?
Home Mortgage Disclosure Act (HMDA), To identify possible discriminatory lending patterns through the collection and disclosure of data about applicants and borrower characteristics.
What is Regulation F?
Fair Debt Collection Practices Act (FDCPA),
What is Regulation G/H?
SAFE (Secure and Fair Enforcement) Mortgage Licensing Act (SAFE) - State Compliance and Bureau Registration System
What is Regulation N?
Mortgage Acts and Practices (Advertising) - (MAP), To prohibit false or misleading commercial advertising of mortgage products.
What is Regulation O?
Mortgage Assistance Relief Services Act (MARS), To help protect distressed home owners from foreclosure prevention scams.
What is Regulation P?
Gramm-Leach Bliley Act - Protects your non-public information
What is Regulation V?
Fair Credit Reporting Act (FCRA), To ensure the accuracy fairness and privacy of consumers personal information that is assembled and used by consumer reporting agencies.
What is Regulation X?
Real Estate Settlement and Procedures Act (RESPA), To help consumers become better shoppers for settlement services, eliminate unnecessary increases in costs due to kickbacks, and place limitation of the use of reserve accounts.
What is Regulation Z?
Truth in Lending Act (TILA), To promote the informed use of consumer credit by requiring disclosure about its terms and costs.
What are the laws regulated by CFPB?
Regulation B - Equal Credit Opportunity Act / ECOA
Regulation C - Home Mortgage Disclosure Act / HMDA
Regulation F - Fair Debt Collection Practices Act
Regulation G/H -SAFE Mortgage Licensing Act / SAFE
Regulation N - Mortgage Acts and Practices / MAP
Regulation O - Mortgage Assistance Relief Services / MARS
Regulation P - Gramm-Leach Bliley Act / GLBA
Regulation V - Fair Credit Reporting Act / FCRA
Regulation X - Real Estate Settlement and Procedures Act / RESPA
Regulation Z - Truth in Lending Act / TILA
What is a mortgage?
A written instrument using real property to secure repayment of a debt
What makes up the Primary Market?
Mortgage Banker (closes a loan in their own name using their own funds)
Mortgage Broker (Facilitates loan origination for financial institutions for a fee)
Commercial Banks (Examples. Chase, Bank of America, Citibank…)
Savings and Loan associations (S&L / Thrifs)
Credit Unions
Finance Companies (High risk loans at high rates)
Mutual Savings Banks
What makes up the Secondary Market?
Fannie Mae (FNMA)
Freddie Mac (FHLMC)
Ginnie Mae (GNMA)
The Federal Home Loan Bank System
Private Investors
What is Fannie Mae?
The Federal National Mortgage Association (FNMA) - Est. 1938
- It is a government-sponsored enterprise (GSE)
- Largest mortgage investor
What is Freddie Mac?
Federal Home Loan Mortgage Corporation (FHLMC)- Est. 1970
- 2nd Largest GSE created to provide a secondary market for mortgages from S&L associations
What is Ginnie Mae?
Government National Mortgage Association (GNMA) - Est. 1968
- Part of Department of Housing and Urban Development (HUD)
- Does not purchase or sell loans
- Issues guarantees on bond pools of government backed (FHA/VA/USDA) loans
What does RESPA apply to?
Applies to any federally related mortgage loan for 1-4 unit owner occupied property
It applies to all listed - conventional loans, government sponsored loans, purchase loans, reverse mortgages, assumptions, refinances, property improvement loans, equity lines of credit)
What does RESPA NOT apply to?
Does not apply to all cash sales, rental properties, a property of 25 acres or more (agricultural), vacant land (unless a dwelling will be constructed or moved onto the property within 2 years), commercial property, home seller takebacks, temporary construction loans
If the rental property has 2-4 units and the owner of the rental property is in one of the units, then RESPA does apply
What are the 4 sections of RESPA
S.K.T.E
Section 6 - Servicing
Section 8 - Kickbacks
Section 9 - Title
Section 10 - Escrow
What does Section 6 do?
Force Place Insurance - Loan servicer force places insurance on the property due to borrower canceling or has not renewed insurance policy for the property (Must notify 45 days before / again at 30 days before)
Qualified Written Request (QWR) - Loan servicer has 5 days to notify of receipt / 45 days to resolve the issue in the request (Ex. Borrower has some kind of issue with the loan servicing and sends a request to servicer)
Missed Payments/Delinquent Accounts - Loan Servicer must attempt to contact the borrower within 36 days of the missed payment. Loan Servicer must mail Loss Mitigation info within 45 days to borrower. Loan Servicer is prohibited from filing a pre-foreclosure Notice of Default (NOD) until payment is 120 days late.
What does Section 8 do?
Prohibits Kickbacks, Fee-splitting, unearned (upfront) fees
Prohibits the acceptance or giving of anything of value for referrals of settlement services
What does Section 9 do?
Seller cannot require the buyer to use a particular title insurance company as a condition of the sale, unless the seller pays for title insurance and all other title related fees.
If violated, the buyer may sure for treble damages (3x) for all title insurance charges
What does Section 10 do?
Lender cannot require the borrow to deposit more than 1/12 of the annual amount into an escrow account.
However at closing the lender can require a 2 month cushion
Analysis of escrow is required every year / any excess of $50 returned to borrower within 30 days
What penalties can you incur for violating RESPA?
May face criminal and civil penalties
- A fine up to 10,000$
- Imprisonment up to 1 year
- Liability up to 3x the amount of the service
What disclosures are given at or within 3 business days of a completed application
Home Loan Toolkit (For a normal purchase)
HUD Special Information Booklet AKA. “Know before you owe” Booklet (Required for HELOCs, Reverse mortgages, and loans secured by mobile homes)
Loan Estimate or Good Faith Estimate (GFE)
Mortgage Servicing Disclosure Statement
List of 10 HUD approved Home counselors
If the borrower is turned down by lender or withdraws, these are not required any longer.
What disclosures are given BEFORE settlement?
Affiliated Business Arrangement Disclosure (if the lender owns more than 1% of the business the lender refers the borrower to)
Closing Disclosure (3 Days before closing)
What disclosures are given AT settlement?
Finalized Closing Disclosure
Initial Escrow Statement (Can be given within 45 of the settlement as well)
What disclosures are given AFTER settlement?
Annual Escrow Statement (Given annually)
Servicing Transfer Statement - If the servicer for the loan is being transferred (Notify 15 days before the transfer, and a 60 day grace period)
How long are the terms of the RESPA disclosures at the state of an application?
Terms must be available for 10 business days
What 6 items make up a completed application?
A.L.I.E.N.S
A - Address of the property
L - Loan Amount
I - Income
E - Estimate value of the subject propety
N - Name
S - SSN
What is a HUD - 1 Settlement Statement?
A document that lists all charges and credits to the buyer and to the seller in a real estate settlement, or all the charges in a mortgage refinance.
What is an FHA loan?
FHA loans are mortgage loans that are insured by the Federal Housing Administration (FHA) and issued by FHA-approved lenders.
The FHA is part of what?
The FHA is part of the US Department of Housing and Urban Development (HUD)
What are the general guidelines for an FHA loan?
- For purchases, the property must be an owner-occupied, one-to-four-unit residence
- Regarding credit scores, the minimum down payment for a credit score of 580+ is 3.5%, 500-579 is 10%, and below 500 are not eligible
- It is okay for a down payment to come from gift funds
- Seller concessions are limited to 6% of the sales price or appraisal value, whichever is lower
- Mortgage payments are due at the 1st of each month and they are considered late on the 15th of the month. The maximum late charge is 4% of the monthly principal and interest.
- Maximum allowable term is 30 years.
- The borrower must occupy the property within 60 days after closing and plan to stay for at least a year
- The loan is assumable, subject to approval of loan servicer and HUD credit guidelines
- There is an Anti-Flip Policy - A borrower cannot purchase a home from a seller that recently bought the property within the past 90 days because any sales during that timeframe is considered to be a “flip”
- No prepayment penalties
- Two types of mortgage insurance that are required, upfront MIP and Monthly MIP (upfront can either be payed lump sum at closing or financed into the loan)
What are seller concessions?
Seller concessions are closing costs that the seller pays to help the buyer reducing the amount of cash they need to close.
What is Novation?
The process of releasing the original borrower and substituting the new mortgager
What are front-end and back-end ratios for a FHA loan?
31% maximum front-end and 43% maximum back-end
What are the front-end and back-end ratios for a conventional loan?
28% maximum front-end and 36% maximum back-end
What are the front-end and back-end ratios for a VA loan?
No front-end for a VA loan and a maximum 41% for the back-end
What are the front-end and back-end ratios for a USDA loan?
28% Maximum front-end and 41% maximum back-end
Who created the SAFE Act?
The Housing and Economic Recovery Act (HERA)
Conference of state bank supervisors
What is the CSBS?
American association of residential mortgage regulator
What is the AARMR
Who took control of Fannie Mae and Freddie Mac in 2008?
The Federal Housing Agency, and this was allowed by the Housing and Economic Recovery Act (HERA).
What is a color of title?
A document or other instrument that appears to be a legitimate claim of title to a piece of land, but due to a title defect, cannot transfer for convey ownership
What are the 3 ways to estimating property value?
Sales-Comparison Approach
Cost Approach
Income Capitalization Approach
What are the minimum amount of comparisons an appraiser will get for a sales-comparison approach?
3 comparisons, and they must be 1 to 3 miles away from the subject property and closed within the past 6 months.
What approach will an appraiser take if you buy vacant land and plan to build a home on it within the first 2 years? After 2 years?
Cost approach if the home is built within the first 2 years. Sales-comparison approach after 2 years.
What is the penalty for violating the SAFE Act?
$34,401 per violation
What is the penalty for violating TILA?
$13,627 for the first and $27,252 for any subsequent violations
Who created the DNC?
The Federal Communication Commission(FCC) and the Federal Trade Commission(FTC).
What is a VA loan?
Mortgage loans that are guaranteed by the US Department of Veteran Affairs.
What is the Maximum Guarantee for a VA loan?
The maximum guarantee is 25%.
Who can get a VA loan?
Veterans, military members currently serving, reservists, and select surviving spouses. (assuming a VA is possible for non-military, as long as they meet the requirements to assume the loan)
What is available for VA loans?
Purchase of owner-occupied single-family homes or multifamily dwellings up to four units.
What are the main benefits of a VA loan?
To be able to purchase a home with no down payment and have prepayment penalties.
What are the 2 documents required for eligibility for a VA loan?
Certificate of Eligibility (COE) and the DD214 / NGB22/23 or statement of service.
DD214 is discharge paperwork
NGB22/23 are general orders
What are the VA qualifications?
- Maximum back-end ratio is 41%
- Sufficient Residual Income
- Must occupy the property within 60 days after closing and plan to stay for at least 1 year
What is the Variable Funding Free for a VA loan?
It is a one-time non-refundable fee of 2.15% of the purchase price of the home. It can be financed into the loan if needed, and may be waived all together for veterans with disabilities or surviving spouses.
What is the maximum a vendor may charge for a VA loan?
1% of the loan amount to cover cost.
What is obtained through a VA appraisel?
a Certificate of Reasonable Value (CRV) or a Notice of Reasonable Value (NOV).
What is the maximum seller concessions allowed for a VA loan?
They must not exceed 4%of the loan.
What is the maximum loan term for a VA loan?
30 years
What is the late fee for a VA loan?
4% of the monthly Principal and Interest.
What is a conventional loan?
Mortgage loans that are not insured or guaranteed by the government. They are not part of any specific government program
What are the 2 types of conventional loans?
- Conventional conforming - Loan conforms to loan limits, down payment requirements, borrower income requirements, debt-to-income ratios, and other underwriting guidelines established by both the FNMC (Fannie Mae) and FHMLC (Freddie Mac).
- Conventional non-conforming - Loan does not meet the standards of both the FNMC and the FHMLC.
What are examples of non-conforming loans?
- Jumbo Loans - Loans that exceed the loan limits est. by the FNMC and the FHMLC
- Alt-A Loans - Loans made to borrowers who do not represent the high credit risk of subprime borrowers, but do not quite meet the underwriting requirements to qualify to be a conforming loan
- Subprime loans - Loans made to borrowers who have a credit history that reflects significant derogatory issues or borrowers have a combination of credit issues and documentation issues
What is the down payment would a borrower need for a conventional loan?
5% or in some cases 3% for 1st time home buyers.
What is the late fee for a conventional loan?
5% of the monthly principal and interest.
What is TRID?
The TILA-RESPA Integrated Disclosure Rule
What is the purpose of TRID?
To protect the borrowers by dictating what information mortgage lenders need to provide to borrowers, when they must provide it, and by regulating what fees lenders can charge and how these fees can change. TRID helps borrowers understand their options, to become more informed shoppers, and avoid surprises.
What organization was established upon the creation of the Dodd-Frank Act to monitor the finances of major banks and credit unions?
The Consumer Financial Protection Bureau (CFPB)
What are the 2 major forms of TRID?
- Loan Estimate (LE) - An estimation of the principal, interest rates, closing costs, and mortgage features of the loan. The lender is required to either give or mail the LE to the borrower no later than 3 business days after taking the borrower’s application, and no later than 7 business day prior to closing of the loan.
- Closing Disclosure (CD) -The actual Cost information at the time of closing the loan.
What are the 3 Tolerances?
- Zero Tolerance
- 10% Tolerance
- No Tolerance
What is Zero Tolerance?
T.R.A.I.L
T - Transfer Taxes
R - Credit Report
A - Appraisal
I - Interest Rate
L - Loan Origination Fees
What is 10% Tolerance?
- Recording Fees
- Fees to third-party service providers that the borrower is
allowed to shop for if the borrower elects to use a provider listed on the lenders recommended provider list. - Government Recording Fees
Although any one of the these charges can exceed charges listed on the LE by any amount, the final amount (aggregate/acummulative) for these third-party charges cannot exceed the amount disclosed in the LE by more than 10%.
What is the NO Tolerance?
- Fees for services that the owners choose for themselves if they don’t choose from the lenders list.
- Fees that are paid per diem (pre-paid mortgage interest)
- Homeowners insurance, floor insurance, property taxes due at closing
What are the exceptions to TRID?
- Home Equity Lines of Credit (HELOCs)
- Reverse Mortgages
- Mortgages for mobile homes not secured by real estate
- Loans from anyone who funds no more than 5 loan in a calendar year
How long must a lender retain these documents?
3 years for the LE and 5 years for the CD.
What is FCRA?
The Fair Credit Reporting Act (Regulation V)
What is the purpose of the FCRA?
To ensure the accuracy, fairness, and privacy or consumers personal information that is assembled and used for by consumer reporting agencies.
What are the consumers rights under the FCRA?
- Adverse Action Notice - An entity that uses a credit report to deny an application for credit, insurance, or employment, must provide the consumer with the name, address, and toll-free phone number of the reporting credit bureau.
- Copy of a consumer credit file (credit report) - consumers are entitled to a free copy of their credit file under FCRA if: information given resulted in adverse action, the consumer is a victim of identity theft (with fraud alert), there is inaccurate information as a result of fraud on the credit report, or the consumer is receiving public assistance or unemployment benefits.
3.Annual Credit Report - consumers are also entitles to one free credit report every 12 months from each of the three national credit bureaus (Equifax, Experian and TransUnion).
- Dispute incomplete or inaccurate information - a consumer reporting agency must correct or delete inaccurate, incomplete, or unverifiable information within 30 days of receipt of the dispute.
- Limit Prescreened Offers - Consumers have the right to limit prescreened offers of credit and insurance based on information in their credit report.
- Inform Consumers - credit reporting agencies must inform consumers about negative information that is in the process of being placed, or has already been placed, on a consumer’s credit report within one month
What are the Credit Reporting Agencies’ Obligations Under FCRA?
- Negative credit info more than 7 years must be deleted from the credit report
- Bankruptcies, judgements, or other public records more than 10 years old must be deleted from the credit report
- Unpaid federal tax liens may retained on credit reports forever
- Criminal convictions also remain forever (if state reports it)
- Must limit access to a credit file to only those with a legitimate business need
- May not give out consumer credit info to an employer or potential employer without written consent.
What are the penalties under the FCRA?
Credit reporting agencies, users of consumer reports, and furnishers of information may be held civilly liable for violations under FCRA. The statute of limitations to bring a lawsuit is 2 years after the violation is discovered or 5 years after it occurs, whichever is sooner. The penalty is up to $1,000.
What are the protected classes under the Fair Housing Act?
Sex, Race, Religion, Color, National Origin, Disability, Familial Status
What is Blockbusting?
Trying to induce owners to sell their homes by suggesting that the ethnic or racial composition of the neighborhood is changing, with the implication that property value will decline due to this change
What is steering?
Channeling prosprective real estate buyers or tenants towards (or away from) particular neighborhoods, based on their race
What is Redlining?
The refusal to make loans on property located in a particular neighborhood for discriminatory reasons
What is the Home Mortgage Disclose Act (HMDA)?
Requires lenders to file reports and maintain a log of race, sex, ethnicity of every applicant that applies for a home loan.
What is the Community Reinvestment Act (CRA)?
Reduce discriminatory credit practices against low income neighborhoods. Designed to help meet the credit needs of the community.
Where do you file a Fair Housing Complaint?
A written complaint may be filed with the HUD office within one year of violation.
What is the Equal Credit opportunity Act (ECOA)?
Regulation B / To ensure that all consumers are given an equal chance to obtain credit
What are the protected classes of the ECOA?
Sex, Race, Religion, Color, National Origin, Age, Marital Status, Public Assistance
How old do you need to be to qualify for a reverse mortgage?
62 years old.
When must you notify the borrower under the ECOA?
Notify within 30 days of completed application
- If approved (commitment Letter)
- If incomplete (notice of incomplete application)
- If denied (Statement of Adverse Action)
- Specific reasons for the denial or inform applicant of the
right to request specific reasons within 60 days
- If the adverse action was based on data from a consumer
credit report, information on the credit reporting agency
must also be included
What must the applicant receive notice of the right to receive a copy of the appraisal report?
Within 3 business days
How long does the applicant have to request an appraisal report if they are denied?
90 days of credit decision, and the lender must provide it within 30 days
If application is approved, when should the applicant receive the appraisal?
No later than 3 business days prior to the close of a first-lien loan
How long must ECOA disclosures be retained for?
25 months due to civil action being required to be filed within 24 months.
What is the penalty for violating the ECOA?
$10,000 per violation
Qualified Mortgage
The QM rules are for covered transactions, which are defined as closed-end consumer credit transactions secured by a dwelling. These include mortgages secured by a principal dwelling, but also second homes or investment properties.
What is a Section 35 loan?
A Higher-Priced Mortgage Loan (HPML)
What requirements are placed on Higher-Priced Mortgage Loans?
A.P.E
A - ABILITY to repay
P - No PREPAYMENT penalty, unless it’s in the first 2 years
E - Requires ESCROW for taxes and insurance from the monthly mortgage payment for the first 5 years
What is a Section 32 loan?
A High-Cost Mortgage Loan (HCML)
APR exceeds the APOR by 6.5% on first lien of $50,000 or higher loans
8.5% of first liens less than $50,000 or subordinate liens
What requirements are placed on High Cost Mortgage Loans?
B.A.P.S
B - No BALLOONS
A - ABILITY-TO-REPAY (ATR)
P - No PREPAYMENT penalties
S - Must SPEAK to a HUD counsoler
What are the 8 Factors of the Ability-to-Repay (ATR)?
M.I.C.E D.O.E.S
M - Monthly Mortgage
I - Income + Assets
C - Credit History
E - Employment
D - Debt to Income (DTI)
O - Other Debt
E - Expenses
S - Simultaneous Mortgage
What are the main 5 key forms?
1003 - Uniform Residential Loan Application (URLA)
1004 - Uniform Residential Appraisal Report (URAR)
1005 - Request for Verification of Employment (VOE / Payroll)
1006 - Verification of Deposit (VOD / Bank Balance)
1008 - Transmittal Summary - Summarizes the data of the mortgage loan
What is HOEPA?
The Home Ownership and Equity Protection Act (HOEPA) which was an amendment made to the Truth in Lending Act in 1994, that protects consumers from predatory mortgage lending.
What are the qualities of a Qualified Mortgage?
Rules of 3!
- Points + Fees must not exceed 3%
- Back-end ratio of 43%
- Prepayment penalty for the first 3 years
- No terms over 30 years
- No Toxic features (3 features)
- no balloon
- no interest only
- no negative amortization
- Must have ATR
How long do you have to keep all types of documents?
5 Years - Suspicious Activity Report (SAR) and CD
3 Years - Loan Application Register (LAR), LE, and LOC
25 Month - ECOA
2 Years - Everything Else
What documents will the NMLS # appear on?
1003 Uniform Residential Loan Application
Promissory Note
Mortgages
Advertisements
Trust Deeds
What are the Flood zones?
High Risk - A and V
Moderate Risk - B and X
Low Risk - C and X
What are the RESPA disclosures?
K.A.M.I.L.A.S
K - Know before you own handbook
A - Affiliated Business Arrangement (AfBA)
M - Mortgage Servicing Disclosure Statement
I - Initial Escrow
L - List of HUD approved counselors
A - Annual Escrow
S - Servicing Transferring Disclosure
Also, GFE and HUD are also disclosures, but are only used for NON-purchases.
What are the penalties for violating FACTA?
$5,000 a/o 1 year jail
What is Fair and Accurate Credit Transactions Act (FACTA)?
A 2003 law aimed at enhancing consumer protections against identity theft.
What are the penalties for violating DNC?
$50,120 per call
What is the penalty for an unauthorized Fax?
$500 per fax
What is the Gramm-Leach-Bliley Act (GLB)?
Requires financial institutions – companies that offer consumers financial products or services like loans, financial or investment advice, or insurance – to explain their information-sharing practices to their customers and to safeguard sensitive data.
What are the penalties for violating the GLB?
$10,000 Per violation a/o 5 year in prison
What are the TILA disclosures?
B.R.A.W.L on C.C.T (Brawl on closed caption TV)
B - Balloon Notice
R - Right to Recission
A - Adjustable Rate Mortgage (ARM) disclose
W - When your home is on the line
L - Loan Estimate (LE)
C - Consumer Handbook on ARMs (CHARM) Booklet
C - Closing Disclosure (CD) which includes partial payment policy
T - Transfer of Mortgage
What is the seller concessions or a conventional loan, if it is an investment property?
2%
Who created the Nationwide Multistate Licensing system and registry (NMLSR)?
The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR)
Who is responsible for the enforcement of the Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act)?
The Consumer Financial Protection Bureau (CFPB)
Who issues the approval or denial of a mortgage license?
The state regulators
Who can revoke a mortgage license and what happens to the MLO once it is revoked?
The state regulator, and the MLO is immediately unable to conduct mortgage business in any of that state’s jurisdictions.
What additional expanded authority do state regulators have under the Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act)?
They have the authority to examine company books, records, issue cease and desist orders, and also interview the lenders’ employees anytime deemed warranted.
The maximum amount for a civil penalty imposed by the state is $25,000.
What is the difference between the Dodd Frank Act and the SAFE Act?
SAFE Act create the NMLS while the Dodd Frank Act focused on lending rules and regulatory enforcement.
Under the Dodd Frank Act, what are the 7 permissible compensation methods for MLOs according to the CFPB Loan Originator Compensation Rule?
- Overall dollar volume
- The long-term performance of their loans
- An hourly rate based on the actual number of hours worked
- Loans that are made to new customers versus loans to existing customers
- Fixed payment in advance for each loan that the originator arranges for the creditor
- The percentage of the loan originator’s application that close
- The quality of loan files that are submitted
When must an MLO update their employment information?
An MLO must do so within the NMLS database system no later than 30 days after any changes.
When an MLO is transferring from a Depository institution to a state-licensed mortgage company, and they receive temporary authority, how long do they have to complete all necessary requirements during this transition period?
120 days and they must complete the NMLS Exam and the 20 hour course prerequisite.
In order to transfer from a depository institution to a state-licensed mortgage company, how long must an MLO work uninterrupted?
The previous 12 months and have a good standing with the NMLS.
When can an MLO start working under temporary authority?
From the date the MLO submits a state license application and all required background check information.
When does the temporary authority end for an MLO?
Temp. Authority ends at the earliest of one of the following
- The MLO withdraws the application
- The state denies or issues a notice of intent to deny the application
- The state grants the license
- 120 day after the application submission and the application is listed on the NMLS as incomplete
What happens to loans originated while an MLO is acting under Temporary Authority and their license is ultimately denied.
The lender would need to transfer the loans that are still in the origination process to a properly licensed MLO employed by their company.
What is a surety bond?
A written agreement, often required by law, to guarantee performance or payment of another company’s obligation under a separate contract or compliance with a law or regulation.
When is a Mortgage Call Report (MCR) due and how often are they required?
They are required every quarter and they are due 45 after the end of each quarter.
When is the annual financial state due?
Within 90 days of their fiscal year-end
When are outside documents sent by an MLO or Lender to a state regulator, via the NMLS portal, expected to be received by the state regulator?
Within 5 days
What are the continuing education requirements for a licensed MLO?
3 hours of Federal Law
2 Hours of Ethics and Non-Traditional Mortgage Products
1 Hour of Elective
What is a master and sub-servicer and their relationship?
A master servicer is the owner of the right to perform servicing, and the sub-servicer is the on that does not own the servicing rights for a mortgage, but performs servicing duties for the master servicer (aka outsourcing)
What is subrogation?
Is is a fancy way to say transfer. Generally happens when a mortgage loan is sold on the secondary market from one lender to another. They can either retain servicing right, the loan itself, or retain neither completely subrogating the loan to the new lender.
What is the US Department of Agriculture (USDA) also referred to as?
The Agriculture Rural Housing Service (RHS)
What is the Mortgage process?
- Origination - Checking the applicant’s credit, quoting and locking rates, gathering required documentation for the processor, and underwriting review.
- Loan Processing - Executes any verifications as needed in the file and coordinates the loan process with all parties involved.
- Underwriting - Underwriters evaluate all aspects of the loan and decide whether to approve the loan and on what terms and conditions.
- Consummation and Settlement
- The loan is approved and all “Prior To Doc” conditions are met.
- The lender issues an “Clear to Close” and loan documents are prepared for consummation (aka. the signing)
- Borrower signs loan documents (aka: consummation) and funds are disbursed at settlement
- Legal documents are publicly recorded, and the loan is then completed. - Servicing - Mortgage servicers collect and process the monthly mortgage payments, send billing statements, escrow statements, and impose late fees.
What are the 2 types of settlement?
Wet settlement - All parties execute documents at consummation then immediately afterwards settlement happens and funds are disbursed. Everything is signed and funded in the same day.
Dry Settlement - A settlement is when the parties meet to sign documents, but funds are not disbursed. The loan does not fund until more conditions are satisfied. These are known to all parties.
What is a par rate?
A par rate is an interest rate that does not have any discount points or credit to the borrower. It is also the rate closest to zero discount poutns if there is not a zero-discount point option.
What is a basis point
Also known as “bips”, they are equal to 1/100th of a percentage point.
Ex. “It cost 65 (.65%) basis points to buy down the interest rate”.
Under the Ability-to-Repay Rule, can a consumer be qualified for a loan under the introductory rate (teaser rate) for a loan?
No, the applicant must be qualified for the FULL NOTE rate.
What is the 1,2,3 rule?
The 1,2,3 rules is the marker for when a mortgage loan is considered to be a higher-priced mortgage loan.
- The APR on a first lien is 1.5% or greater than the APOR
- 2.5% or greater for jumbo first liens
- The APR on a 2nd mortgage is 3.5% or greater than the APOR
What is the Two Appraisal Requirement?
HPMLs require two appraisals if the subject property is being resold within 90-180 days of its acquisition by the seller. The requirement for a second appraisal is intended to help stop the practice of overvalued property flipping.
What are the amounts that would require a second appraisal?
- More than a 10% price increase if the seller acquired the property within the past 90 calendar days.
- More than a 20% price increase if the seller acquired the property in the past 91 to 180 calendar days.
What is Rebuttable Presumption?
The borrower can raise a legal challenge, but must overcome the legal presumption that the lender complied with this obligation.
Aka. The lender can be sued by the borrower based on whether the lender met its ATR obligations, but only if they have a HPML.
What is a gift letter?
It is writing and signed confirmation by the donor of an amount of money to the borrower, and it must state that they DO NOT need to be repaid this amount given.
The “Margin” on a ARM product is determined by whom?
The creditor
What are the sections of a 1003 (URLA) Form?
Section 1 - Borrower Information
Section 2 - Financial Information (Assets/Liabilities)
Section 3 - Borrower Information (Real Estate)
Section 4 - Loan and Property Information
Section 5 - Declarations
Section 6 - Acknowledgments and Agreements
Section 7 - Military Service
Section 8 - Demographic Information
Section 9 - Loan Originator Information
What are the 4 C’s of Qualifying a Borrower?
Credit - Credit Score
Capacity - Debt-to-Income Values
Collateral - Large ITEMS of value (home, car, inventory, RE, stocks, etc.)
Capital - Liquid Assets ($ in savings, checking, stocks, 401k, etc.)
What is Capital Gains Income, and how do you qualify a borrower using it?
The profit that results from a sale of a capital asset and the Borrower must document a two-year history of capital gains income.
Can Unemployment or Welfare be used as qualifying income?
Yes, as long as it is continuous and ongoing.
How much can you Gross Up income on a conventional and non-conventional loan?
25% for conventional / 15% for non-conventional. Both can only apply to NON-TAXABLE income.
What are the Automated Underwriting Systems used to evaluate the 4C’s?
Desktop Originator (DO) - Fannie Mae’s AUS for Mortgage Brokers
Desktop Underwriter (DU) - Fannie Mae’s AUS for Lenders
Loan Product Advisor (LPA) - Freddie Mac’s AUS for Lenders and Brokers
What is needed when there is an employment gap on a borrower’s work history?
- Borrower Must have a 2-year work history prior to the employment gap
- Document reason for gap with a letter of explanation (LOE) from borrower
- New Income Must be considered a stable income
-FHA ONLY - In unemloyed for 6 months of more, borrower
needs to be re-employed for at least 6 months
What is FEMA?
Federal Emergency Management Agency
What is the required flood chance for FEMA to designate it a flood zone?
1% chase of flooding in a year.W
When is a property required to have flood insurance?
If the flood certificate has it marked as A or V.
What is a Hard Money Loan?
A specific type of asset-based financing through which a borrower receives funds secured by real property.
Under the Gramm-Leach BLiley Act, the opt-out notice is accompanied with what document?
Initial Privacy Notice. This disclosure provides the customer an opportunity to opt-out of having their NPI shared by the lender.
If an MLO learns the Appraiser is affiliated personally with the listing agent who also happens to be the subject property owner, what should the MLO do?
Inform underwriting about a conflict of interest. If not disclosed this would be seen as Fraud for Profit.
What is Reverse Redlining?
A lender purposely targeting a certain area and pushing less favorable loan programs and terms for reasons other than credit worthiness.
What is the standard FCC penalty cost for violating the Telephone Consumer Protection Act (TCPA)?
$16,000 per violation, plus an additional $10,000 if a robocall
What is Acceleration Clause?
Alows a lender to foreclose when the borrower defaults on the “Note”; lender moves the maturity date up to now
When would a lender be allowed to exceed any fee tolerance limit, set forth by TRID?
When there is a valid changed circumstance.
If settlement charges exceed the tolerances allowed, the Closing Disclosure will still be seen as made in good faith if the lender provides a corrected Closing Disclosure and refunds the excess amount within what time frame?
60 calendar day after CONSUMMATION
When must a “revised” Loan Estimate be received by the applicant?
At least 4 business days prior to consummation.
