NMLS Flashcards
URAR
Uniform Residential Appraisal Report
What is form 1004
Fannie Mae Form 1004 - exterior inspection
What is a form 2055
Fannie Mae Form 2055 - drive-by appraisal
Geographic and Market Analysis
Addresses the economic setting of the property and the market forces that might impact the value
Internal Obsolescence
Internal factors that could impair the ability to sell the property
Economic Obsolescence
External factors that could impact the ability to sell the property
VA Appraisal
Certificate of Reasonable Value
AVM
Automated Valuation Model - Computer programs that can provide a probable value range for properties by performing a statistical analysis of available data
HVCC
Home Value Code of Conduct - result of Fannie’s settlement with NYC AG to improve appraisal independence and integrity rules. (Replaced by provisions of Dodd Frank Act)
3 types of appraisals
1) Sales comp or Market data approach
2) Cost Approach
3) Income Approach
Income Approach
Used with loans relating to an investment property. Appraiser determines fair market rental value of the subject property.
Cost Approach
Determining the cost to rebuild (insurance claim)
Sales Comp. or Market Data Approach
Uses comps to determine subject property value
Federal laws that require specific disclosure requirements relating to loan applications are:
ECOA, FCRA, HMDA, RESPA, and TILA.
Also, the SAFE Act requires that a person receiving an application must be registered and/or licensed under the requirements of the ACT.
Fannie Mae Forms
1004, 1007, 1073, and 2055
Form 1004
URAR - Single unit property interior and exterior inspection
Form 1007
Single family properties intended for investment purposes
Form 1073
Interior and exterior inspection of a single unity property in a condominium.
How long is an appraisal good for?
4 months / 120 days
ECOA Appraisal Rules (4 rules)
1) Notice of right to receive a copy (w/ in 3 days of receiving loan app.)
2) Copy of appraisal no later than 3 days before closing
3) If loan does not close - 30 days
4) Lender not allowed to charge for a copy
Dodd Frank Rules (Appraisal)
1) receive copy of appraisal promptly, but not less than 3 days before closing
2) Borrowers not allowed to pay appraiser at the door 3) Any person involved in loan production is prohibited from selecting the appraiser
Fannie Mae Appraiser Requirements
1) State-licensed or state certified
2) have a resume of knowledge and experience
3) Have errors and omissions insurance policy, generally.
12 CFR 1026.42
Dodd Frank Act transferred appraisal independence and integrity rules and required behaviors to the CFPB for enforcement. Rules are covered under TILA 1026.42. Rules apply to valuation of consumer’s primary dwelling.
Covered Person 42(a)
A creditor with respect to a covered transaction or a person that provides settlement services. Examples: title searches, tile examinations, attorney, prep. of documents, agent, broker, under writing, etc.
Covered transaction 42(b)(1)
An extension of consumer credit that is or will be secured by the consumer’s principal dwelling.
Valuation 42(b)(2)
An estimate of the consumer’s principal dwelling in written, or electronic form., other than one produced solely an automated model or system.
Coercion
no covered person shall or shall attempt to directly or indirectly cause the value assigned to the consumer’s principal dwelling to be based on any factor other than the independent judgement of a person that prepares valuations.
Examples of actions that violate coercion standards include:
1) seeking influence
2) withholding or threatening
3) current or future retention
4) excluding from future engagement
5) conditioning compensation
Misrepresentation (42(c)(1))
Prepare valuations that materially misrepresent the value of the consumer’s principal dwelling in a valuation; likely to significantly affect the value assigned to the consumer’s principal dwelling.
Falsification or Alteration (42(c)(2)(i))
Falsify and alter a valuation - an alteration is material if when changed it will likely affect the value assigned to the consumer’s principal dwelling.
Inducement of Mischaracterization
Induce a person to violate the rules associated w/ independent valuations.
Permitted Actions (5 key items)
1) ask to consider additional, appropriate property information
2) provide further detail, substantiation, or explanation 3) correct errors in the valuation
4) obtain multiple valuations - select most reliable valuation
5) Withholding compensation due to breach
Prohibition on Conflicts of Interest
Any person preparing a valuation or performing valuation management fictions that may have a direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is or will be performed.
Mandatory Reporting
Any covered person that reasonably believes an appraiser has not complied with the Uniform Standards of Professional Appraisal Practice of ethical or professional requirements. (should refer the matter to appropriate state agency)
Timing of Reporting 42(g)(1)
A covered person must notify the appropriate state agency within a reasonable period time after the person determines that there is a reasonable basis.
Loan-to-Value (LTV)
Amount as a percentage of the purchase price of a property or the appraised value whichever is less. LTV is always based on 1st mortgage.
Combined Loan-to-Value (CLTV)
Combined LTV involves more than one loan. Combined as a percentage of the value. When combined with 1st mortgage and 2nd mortgage, the LTV would be based on the first mortgage and the CLTV is a combination of both mortgages.
Total Loan-to-Value (TLTV)
Total LTV describes the total loans in relation to the value. Generally used when there is a refinance transaction. CLTV would include the amount of the 1st mortgage plus the amount drawn from the HELOC at closing, and the TLTV would be the total amount of all loans including max amount available w/ the HELOC.
NFIP
National Flood Insurance Program (FEMA)
SFHA
Special Food Hazard Area SHFA are defined as the area that will be inundated by the flood event having a 1-percent chance of being equaled or exceeded in any given year.
Special Flood Hazard Area (SFHA)
A high risk area that has special flood, mudflow, or flood-related erosion hazards.
Zonve VE or V
Most hazardous areas, usually first row beach front properties. Zone A relates to areas near lakes, streams or other bodies of water.
Zone V and A
1) Considered high flood risk
2) Require mandatory flood insurance
3) Have a 1 percent annual chance of flooding and a 26% chance of flooding during a 30 year mortgage
Zones require mandatory flood insurance
A, V, VE
A - 100 year 1% annual chance - near water
V - 100 year 1% annual chance of flood - coastal region (storm induced wave)
VE - 100 year 1% annual chance of flood - coastal region (storm induced velocity wave action)
Zones that don’t require mandatory flood insurance
B&X - shaded on map - 500 yearss between .2% and 1%
C &X - no shaded on the map
D - areas no yet studied by FEMA
BFE
Base Flood Elevation - computed elevation to which floodwater is anticipated to rise during the base flood. Relationship between BFE & elevation determines the flood insurance premium.
Mortgage Lender Responsibilities (related to flood insurance)
Lender must:
- determine if a structure is located in a SFHA
- ensure borrow has flood insurance if in a SFHA
- require a borrower to escrow for flood insurance
- implement force placed insurance coverage after a 45 - day notice period if the borrower lets their flood insurance laps
Settlement Documents (2 categories)
1 - Documents related to the sale
2 - Documents related to the loan
Seller
Grantor
Buyer
Grantee
Deed or Warranty Deed
- Instrument that transfers real property from a a seller to a buyer
- Seller signs the Deed and is the Grantor
- Buyer is the Grantee
Instrument
- Mortgage
- Recorded
- Used mostly in a Lien theory state
- Deed of Trust
- Recorded
- Used in a Title Theory state
Loan
Participants and Details
- Instrument that shows the real estate as security for the loan
- Borrower signs the mortgagor
- Lender is the mortgagee
- Instrument that shows the real estate as security for the loan
- Instrument that shows the real estate as security for the loan
- Borrower signs and is the Trustor
- Third party is the trustee
- Lender is the Beneficiary
Deed
Deed transfers ownership of real property. Sellers will be liable if clear title is not available.
Deed in Lieu
Voluntary transfer of ownership to the lender.
Deed of Trust
A three-party security instrument for transfer of real estate, which includes a beneficiary. Deed of trust is associated with a title theory state.
Deficiency Judgement
Judgement against a borrower after the sale of a foreclosed property if the lender did not receive enough from the sale to cover the outstanding balance.
Deed Restrictions
Restricted use of the land that has been recorded in the county register. (elements like: sq footage limitations, color schemes, use of fencing, etc.)
Foreclosure
Lender exercise the right to force the sale of property that secures the loan when the borrower has reached the level of delinquency allowed by law to allow such right to be exercised.
Insurance
Homeowner’s insurance is a requirement of a loan. (Includes fire, hazard and flood insurance)
Mortgage
Purpose of a mortgage in the creation of a voluntary lien that real estate collateralize for the repayment of debt.
Note
Borrowers sign a separate promissory note giving personal guarantee to repay the outstanding loan.
Satisfaction of Mortgage
debt has been paid, and the lien has been extinguished.
Survey
plan that outlines the boundaries and measurements of the property.
Title Insurance (lender)
Policy that protects the lender against any liens or encumbrances that may affect the title.
Title Insurance (Owner - Optional)
Protects the owner against existing defects against the title that may have been missed in the title examination. Not transferable. One time payment at settlement.
Transfer tax
Tax charged by a city or county when a title to real property is transferred to a new party.
Settlement process
includes the executing of the legal documents associated with the real estate transaction.
- Collection and transfer of money from buyer to seller
- Payoff and transfer of funds between lends and borrowers
- Includes executing documents and the collection of fees for the title insurance , property insurance, government fees, wire fees, and other related fees
Closing Agents (5 examples)
- Attorney
- Settlement agent
- Notary
- Escrow agent
- etc.
Closing Disclosure
documents that provided to the applicant (generally by the lender) at least 3 business days before closing. Documents reflects the actual final totals relating to items disclosed on the Loan Estimate. Lender may chose to use settlement agent to review Closing Disclosure at the time of consummation when the legal documents are executed.
Time of Consummation (documents that are executed)
- Promissory note - applicant’s promise to pay note
- Deed - instrument transferring ownership of the property
- Mortgage or Deed of trust - security instruments associated with the loan. (recorded)
Closing Agent
Title Company
Escrow Agent
Attorney
Notary
Known as a settlement agent, is an impartial 3rd party that oversees the finalization of a real estate transaction.
Execute the documents related to finalizing the transaction including the collection and dist. of funds, and recording of the documents.
Closing Disclosure (for borrower/seller)
5 page form that provides final details about the mortgage loan selected
borrower - responsibility of lender
seller - responsibility of the closing agent
Third Party Vendor
Closing agent, title related, gov’t related (transfer taxes, intangible taxes, and recording)
Origination Fee
Underwriting, processing, wire, etc
Prepaid items
Home owner’s policy paid at closing, and per diem interest
Escrow account fee
a charge to setup an escrow account
Wet Settlement Act
Requires lenders to provide funds to settle all loans at the time of closing.
Wet funding or non-escrow states, funds to settle loan are set to the settlement agent prior to the borrower signing all closing docs. All conditions must be satisfied before the lender gives permission of the settlement agent to release funds.
Dry Settlement
Escrow states - borrower must first sign closing documentation, and bring any required funds to settle the loan at closing.
Settlement agent then sends several signed documents for review to the lender.
Lender determines that loan is in order, funds are wired to the escrow account of the settlement agent for disbursement. (borrower can still have outstanding conditions prior to funding in dry funding states)
Table Funding
Mortgage brokers can close loans in the broker’s name. The funds are provided by the lender at closing.
This is not a secondary market transaction and no service release premium is earned.
Acceptable Funds at Settlement (5 items)
Good funds that a settlement agent may accept from a buy or seller at closing:
- Certified bank check
- Bank cashier’s check
- Certified credit union check
- Check from an attorney’s escrow or trust account
- Wired funds credited to the closing attorney’s escrow account
Examples of bad funds (not accepted at closing)
- Personal check
- Mutual fund or money market check
- Out-of-state attorney’s check
- Credit union check
What names should be on the check?
Borrowers - checks payable to themselves, which they can endorse over to the settlement agent at closing
Borrower Checklist for Closing
- Certified funds
- Check book in the event additional funds are needed
- Photo ID
- Proof of insurance or original homewoner’s insurance policy
- Power of Attorney, or Attorney-in-fact
- Closing conditions required by the lender (pay stubs or gift letter)
- Other documents - original termite letter, applicable septic, well water inspections
Seller Checklist for Closing
- Photo ID
- Power of Attorney (seller does not require lender approval)
- House keys and garage door openers
- Other documents - original termite letter (if applicable, septic and well water inspections (if applicable)
- Certificate of Occupancy (CO) - This document is issued by the county for newly constructed or renovated homes.
AMTPA
Alternative Mortgage Transaction Parity Act
Regulation D
Consumer Financial Protection Bureau
Key factors
- Pre-empted states’ right to limit loans to fixed rate mortage and allowed ARMS
- Pre-empted states’ rights to limit pre-payment penalties and late fees
- Pre-emption over prepayment penalties lifted in 2002
BSA/AML
Bank Security Act / Anti Money Laundering
Us Department of the Treasury
Key factors
- requires reporting of cash in excess of 10k
- Requires a reporting program under FINCEN
DIDMCA
Depository Institutions Deregulation Monetary Control Act
Key factors
- Deregulated interest rates
Do Not Call
Do Not Call Improvement Act
Federal Trade Commission
Key factors
Limits mortgage companies from contracting a client who is on the national Do-not-call registry:
- Up to 18 months after the last transaction with the mortgage company for clients
- up Up to 3 months after a client makes an inquiry
Prohibited from contacting a person
- Who contacts company not to call. The company must put person on the Do Not Call List.
- $42,530 fine per violation
ECOA
Equal Credit Opportunity Acct
Reg B
Consumer Financial Protection Bureau
Key Factors
- Prohibits discrimination based on Age, Sex, Marital Status, Race, Religion, Color, National Origin, Receipt of public assistance.
- Unmarried, an ECOA category, not single, divorced, or widowed
- Requires: Notice of action w/ 30 days
- Requires: Notice of right to receive a copy of the appraisal anytime during application but no later when action taken
- Requires: Lenders to provide copy of appraisal - 3 days prior to closing
- If a loan does not close, a copy of appraisal must be made available to borrower w/ in 30 days.
- Requires consumers to receive a reason for denial
- Averse summary is the same as denial notice
- Record retention is 25 months
FCRA
Fair Credit Reporting Act
Reg V
Consumer Financial Protection Bureau
Key factors
- Controls how Consumer Reporting Agencies (CRA) collect and share info
- Limits reporting derogatory info - 7 years (bk’s 10 years)
- Allows consumers to challenge inaccuracies on the credit report
- Allows consumers to receive a free copy of a credit report annually from each bureau
HOEPA
Home Ownership Equity Protection Act
Consumer Financial Protection Bureau
Key factors
- Establishes the thresholds for high cost loans subject to section 32 of regulation Z
- APR threshold 6.5% above
- APOR for 1st mortgage >50k & 8.5% for second
- Points and fees threshold 5% of loan amount
HPML
Higher Priced Mortgage Loans
Consumer Financial Protection Bureau
Key factors:
- HPML loans exceed the “average prime offer rate” (APOR) by:
- 1.5% APR for the 1st mortgage
- 3.5 % APR for 2nd mortgage
- 2.5 % APR for a jumbo loan
HPA
Homeowners Protection Act
Consumer Financial Protection Bureau
Key factors:
- Requires PMI to be automatically terminated when:
- LTV reaches 78% of original value
- Borrower can request cancellation of the PMI
when the loan has been paid down to 80% of the
original value.
- Cancellation requires a good payment history:
- No 60 day lates in in 24 months
- No 30 day lates in 12 months
- Loan current at time of termination
MAP
Mortgage Acts and Practices
Reg N
Key factors
- Applies only to non-depository institutions
- Prohibits deceptive advertising in mortgage products
- Prohibits deceptive advertising in any form of media communications
HMDA
Home Mortgage Disclosure Act
Reg C
Consumer Financial Protection Bureau
- Designed to identify discrimination in lending
- Requires depository institutions and non-depository institutions to report
- Have a home or branch office in an MSA;
- on the preceding December 31 or
- receive applications related to property located in
the same MSA in the preceding calendar year
- Does not inlcude pre-qualifications
- Must report on Home Purchases, Home Improvement loan, and Refi.
- Requires report on:
- Applicant date
- Loan information
- Location and type of property
- Disposition of application (approved or denied)
- Name, ethnicity, race, sex, and income borrower
- Upload via Loan Application Register (LAR) by Mar 31 of the following year.
LAR
Loan Application Register
FACTA
Fair and Accurate Transaction ACT
Reg V
Consumer Financial Protection Bureau
Key factors
- Made provisions of FCRA permanent in 2003
- Relates to identify theft
- Requires 4 years for a credit score
- Requires credit reporting agencies to put a 1 year alert on a consumer’s credit file if they get a call indicating the possibility of identity theft
- Fraud alert extended to 7 years when a police report is filed
- FTC created the RED Flags program to implement FACTA includes 26 red flag items and requires all lenders and mortgage brokers to implement a red flag program.
FH ACT
Hair Housing Act
HUD
Key factors
- Addresses discrimination in housing, prohibited basis: Race, color, religion, sex, family status, national origin, handicap
- Blockbusting
- Steering
- Redlining
FINCEN
Gram, Leach, Bililey Act
Reg P
Consumer Protection Bureau
- Requires creditors to provide a provacty notice to consumers giving them the right to opt out of having their info shared between creditors
- Requires all mortgage companies to have SAFEGUARD Rules to implementation the provisions of GLBA. The rule requires all mortgage brokers and lenders to have a safeguard policy that protects the privacy rights of its clients relating to access to sensitive information covers pretexting, which relates to getting consumers information through false means.
MARS
Mortgage Assistance Relief Services
Reg O
Consumer Financial Protection Bureau
Key factors
- Advance fee ban on loan modification
Suggestions to consumer not to make schedule payment payment is encouraging default.
NFIP
National Flood Insurance Program
Federal Emergency Management Agency (FEMA)
Key factors
- Structure must be located in Special Flood Hazard Area (SFHA)
RESPA
Real Estate Settlement Procedures Act
Reg X
Consumer Finacial Protection Bureau
Refers to federally related mortgage loans: See RESPA Summary study Guide
RHS
Rural Housing Service
USDA - US Dept. of Agriculture
Rural development loans to encourage growth in non-rural areas:
- 100% financing
- 90% coverage for the lender in the event of a borrower’s default
SAFE
Secure and Fair Enforcement for Mortgage Licensing Act
H(non-depository) - G (depository)
Consumer Finacial Protection Bureau
Key factors
Regulation requiring MLOs working for a depository institution to be registered
Regulation requiring MLO’s working for a non-depository institution to be both registered and licensed.
TILA
Truth-In-Lending Act
Reg Z
Consumer Financial Protection Bureau
See TILA study guide
