NMLS Exam Prep Flashcards
1
Q
Where will your unique identifier number appear?
A
1003 Loan Application, Promissory Note, Mortgage Trustees
2
Q
Where will your unique identifier # not appear?
A
Appraisal reports
3
Q
Is the NMLS # and the Unique Identifier the same thing?
A
yes
4
Q
How many hours of the NMLS pre-licensing must you complete?
A
20 hrs
5
Q
How many hours of continuing education must you complete and how often?
A
8 hours every year
6
Q
What is the state MLO test called?
A
National Exam w/ UST
7
Q
What does UST stand for?
A
Uniform State Test
8
Q
What is.a MU4?
A
The individual application you must complete.
9
Q
What is the name of the individual application?
A
MU4
10
Q
What are the NMLs steps?
A
- Get NMLS #/Unique Identified
- Complete 20 hours NMLS Pre-licensing course.
- Schedule Nation Exam w/ UST.
- Complete MU4 Individual Application
- Submit fingerprints.
- Pay for credit report.
11
Q
What is the passing score for the exam?
A
75% or higher
12
Q
What is the waiting period before re-taking a failed test?
A
30-days
13
Q
What is the waiting period if you fail the 3rd test?
A
6 months
14
Q
To keep your license current, how many hours must you take and by when?
A
8 hours no later than Dec. 31st.
15
Q
When does your license expire? Exception?
A
Dec. 31st each year. Unless you renew during the renewal period.
16
Q
When is the renewal period?
A
Nov.1st - Dec. 31st
17
Q
If you received your license during Nov. 1st - Dec. 31st, do you have to renew your license?
A
No
18
Q
How long is your license valid for? Explain.
A
5 years.
If you go more than 5 years without renewing you must start the process all over again. If you go, 1-4 years w/o renewing, you must pay the renewal fee + cont. education for the prior year not ALL. During the time you have not renewed, your license is inactive.
19
Q
How many questions are on the test? How many are scored?
A
125 questions and 115 scored
20
Q
What law says the borrower has 90 days to request a copy of the appraisal?
A
Equal Credit Opportunities Act / ECOA/ Reg B
21
Q
What law says the lender has 30 days to deliver the appraisal to the borrower?
A
Equal Credit Opportunities Act / ECOA / Reg B
22
Q
How many days/months does the borrower have to request a copy of the appraisal?
A
90 days / 3 months
23
Q
How many days/months does the lender have to provide the appraisal to the borrower?
A
30 days / 1 month
24
Q
Appraisal = ________
A
value
25
Challenge the value = ________
ECOA
26
An application for credit can be denied based on ______/_______.
appraisal/value
27
Which regulation/law allows the borrower to challenge the value stated in the appraisal?
ECOA / Reg B / Equal Credit Opportunities Act
28
ECOA (Reg B)
- Allows the borrower to challenge the value of the appraisal.
- A reason why credit may deny the loan.
- Must provide copy of appraisal to the borrower.
29
If an application for ______ is denied based on the appraisal (value) - under _________ says the borrower has ____ days/ ___ months to request a copy / lender has ____ days / ____ months to deliver the appraisal.
credit
ECOA (Reg B)
90 days / 3 months
30 days / 1 month
30
Reg B --- ________ ----- ECOA ---- ________________
Be Equal / Equal Credit Opportunities Act
31
Please explain Reg B (ECOA) in detail.
Deals with credit applications. The law says you must be equal when extending credit and regulators must abide by that. They cannot discriminate by race, sex, age, etc.
32
Reg C --- _______ --- HMDA --- _______________
C your home / Home Mortgage Disclosure Act
33
HMDA = ______
Reg C
34
Explain Reg C - HMDA.
The law that allows regulators to see where possible discrimination takes place
35
Where is HMDA information found/collected?
Section 10 (X) of the 1003 loan application
36
Reg ___--- RESPA --- ________________
X / Real Estate Settlement Procedures Act
37
Reg ___ --- TIL/TILA --- __________________
Z / Truth in Lending Act
38
_____ the godzilla = Reg ___
TILA / Reg Z
39
What does TILA deal with?
credit, APR, & advertising of consumer loans
40
What law deals with credit, APR, and advertising?
Reg Z / TIL/TILA / Truth in Lending Act
41
What does HPA stand for?
Homeowners Protection Act
42
What does HPA deal with?
PMI - Private Mortgage Insurance
43
Does HPA deal with PMI or MIP?
PMI - Private Mortgage Insurance
44
PMI is on what type of loans?
Conventional Loans
45
Does PMI related to government loans?
no
46
When is the borrower required to pay PMI?
when the borrower puts 20% or less down.
47
Who does PMI protect/cover?
the lender
48
What does SAFE stand for?
Secure and Fair Enforcement Act
49
What does HERA stand for?
Housing and Economy Recovery Act
50
Which law created the SAFE act?
HERA - Housing and Economy Recovery Act
51
What does FCRA stand for?
Fair Credit Reporting Act
52
Which regulation is FCRA?
Reg V
53
What does ECOA deal with?
credit application
54
What does FACT stand for?
Fair & Accurate Credit Transactions
55
56
57
What is another acronym for FACT Act?
FACTA
58
Are FACT Act and FACTA the same thing?
yes
59
What law deals with identity theft?
FACT Act / FACTA
60
Which law has a section of rules?
FACT Act / FACTA
61
What is the rule section for FACT Act / FACTA?
Section 114 Rules
62
What are section 114 rules?
red flag identity theft rules
63
What does GLBA stand for?
Gramm Leach Bliley Act
64
Which law does SPF relate to?
GLBA - Gramm Leach Bliley Act
65
What does SPF stand for?
Safeguarding Policy, Pre-texting Policy, and Financial Privacy Policy
66
What are the 3 policies under the GLB Act?
Safeguarding, Pre-texting, Financial Privacy
67
What laws says there must be a safeguarding policy?
Gramm Leach Bliley Act (GLBA)
68
What is a safeguarding policy?
a policy on how companies have to keep our credit card and personal information safe when we use it at their place of business.
69
What is a pre-texting policy?
a policy to keep others from gaining access to your information under false pretenses (pretenders - pretending to be you).
70
Which law requires a pretexting policy?
GLBA - Gramm Leach Bliley Act
71
What is a financial privacy policy?
a policy that governs the collection of non public information (info that cannot be googled) and how its shared with affiliates. They must provide an option to opt in/out to have your information shared.
72
What law says there must be a financial privacy policy?
GLBA - Gramm Leach Bliley Act
73
What law/policy says that the lender has to give you an equal opportunity to opt in/out of having your personal information shared?
Financial Privacy Policy of the GLBA (Gramm Leach Bliley Act)
74
What does HOEPA stand for?
Home Ownership and Equity Protection Act
75
What are the 2 types of HOEPA Loans?
Section 32 / Section 35
76
Are HOEPA loans considered hard money loans?
yes
77
HOEPA Section 32 Loans are equal to = _____________.
High Cost Loans
78
HOEPA Section 35 Loans are equal to = __________
High Priced Loans
79
What law are HOEPA Section 32 and HOEPA Section 35 related to?
TILA - Reg Z
80
Please explain the difference between HOEPA Section 32 and Section 35 Loans.
Section 32 is High Cost Loans and Section 35 is High Priced Loans.
81
Which law regulates High Cost Loans and High Priced Loans?
TILA - Reg Z
82
What does AfBA/ABA stand for?
Affiliated Business Arrangement
83
Please explain AfBA/ABA (Affiliated Business Arrangement).
AfBA/ABA required you to provide a disclosure to your client if you are referencing them to a business that you have part ownership in.
84
If you own more than what percentage of a company, are you required by law to let the client know about a AfBA/ABA?
1% or more
85
When must the AfBA/ABA disclosure be made?
immediately or prior to docs being signed
86
What year was the civil rights act?
1964
87
If you get any question that has civil rights act in it, what is the answer going to relate to?
race
88
Which of the following can you not discriminate against?
AGE
RELIGION
RACE
ALL OF THE ABOVE
all of the above
89
Which of the following according to the civil rights act, can you not discriminate against?
AGE
RELIGION
RACE
ALL OF THE ABOVE
race
90
Explain an Escrow Account.
Includes taxes and insurance - this account is created when you are making a payment for all.
91
What are other names for an Escrow Account?
impound account / reserve account
92
Are an Escrow Account, Impound Account, and Reserve Account all the same thing?
yes
93
What type of a mortgage was created if you have an escrow account/impound account/reserve account?
budget mortgage
94
what is another name for a budget mortgage?
PITI mortgage
95
what does PITI stand for?
principle, interest, taxes & insurance.
96
Consumer Financial Protection Bureau (CFPB)
purpose is to promote financial stability through accountability and transparency.
97
What does CFPB
Consumer Financial Protection Bureau
98
What acts/laws created the CFPB?
Dodd-Frank Act & Consumer Finance Protection Act
99
Please name the places that must report to the CFPB.
Office of the Comptroller of the Currency (OCC)
Office of Thrift Supervison (OTS)
Federal Deposit Insurance Corporation (FDIC)
Federal Reserve
National Credit Union Administration (NCUA)
The Department of Housing & Urban Development (HUD)
Federal Trade Commission (FTC)
100
Who does not report to the CFPB? Why?
The Fair Housing Act. Because it doesn't deal with money and banking, its about discrimination.
101
RESPA (Reg X) Real Estate Settlement Protection Act
The purpose of RESPA is to help consumers become better shoppers for settlement services.
102
What regulation is RESPA?
Reg X
103
What does RESPA stand for?
Real Estate Settlement Protection Act
104
What are settlement services?
escrow stuff = RESPA/Reg X
105
What type of property does RESPA deal with?
1-4 Unit Residential Property (owner occupied)
106
What is another name for residential property?
owner occupied
107
What law deals with owner occupied 1-4 Unit Residential Properties?
RESPA (Reg X) - Real Estate Settlement Protection Act
108
Do you need RESPA (Reg X) for commercial properties?
no
109
What does RESPA (Reg X) not cover?
All cash sales.
Rental properties of more than 4 units.
Commercial property.
Property of 25 acres or more (agricultural).
110
What is a property of 25 acres or more considered?
Agricultural property
111
What is the penalty for violating RESPA (Reg X)?
Fine up to $10,000 and/or imprisonment up to 1 year.
112
What law has a penalty of up to $10,000 and/or 1 year of imprisonment?
RESPA (Reg X) - Real Estate Settlement Protection Act
113
Explain Section 6 of RESPA (Reg X).
Deals with mortgage servicer's. Designed to address servicer's obligation to correct errors and work with home buyers if payments are not being made.
114
What does Section 6 of RESPA (Reg X) deal with?
mortgage servicing and mortgage servicing abuses.
115
Mortgage Servicer
someone who has been hired to handle the payments and pay taxes/insurance
116
What law deals with mortgage servicing and mortgage servicing abuses?
Section 6 of RESPA (Reg X)
117
Explain Section 8 of RESAP (Reg X).
prohibits kickbacks, fee-splitting, and unearned fees. Prohibits or accepting a fee, kickback or "thing of value" in exchange for referrals of settlement service business (allows minimal value promotional items).
118
What law deals with kickbacks, fee-splitting, and unearned fees?
Section 8 of RESPA (Reg X)
119
Kickbacks
Referral fees
120
Thing of Value
tickets, purses, money, anything expensive.
121
Fee Splitting
splitting fees with an unlicensed person
122
Unearned Fees
upfront fees/advanced fees
123
If you take any unearned fees (upfront fees) from a borrower/client, which law are you violating?
Section 8 of RESPA (Reg X)
124
Explain section 9 of RESPA (Reg X).
Deals with title insurance. Prohibits seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Allows buyers to sue for an amount equal 3x (treble damages) all charges made for the title insurance.
125
Any question that deals with title insurance deals with what law?
Section 9 of RESPA (Reg X)
126
Can a borrower sue if there is a requirement/condition to use a specific title company? if so, how much?
yes - treble damages = 3x; the amount equal to 3x all charges made for the title insurance.
127
Which law allows borrowers to sue a lender in regard to title insurance?
Section 9 of RESPA (Reg X)
128
Please explain section 10 of RESPA (Reg X).
deals with escrow accounts. it sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other related charges.
129
What are other words for escrow account?
impound accounts
130
What can lenders require borrowers to pay each month towards escrow accounts?
no more than 1/12th of annual disbursement (basically month to month, cannot take any more upfront)
131
At closing, how much can a lender allow into an escrow account?
cushion of 2 months = 1/6th the annual amount.
132
How much of a cushion?
2 months
133
Which law requires an annual escrow analysis?
Section 10 of RESPA (Reg X)
134
At what point is a lender required to return any money in regards to an escrow account?
if they took $50 too much.
135
What information is necessary to have a complete application?
1. Name of borrower(s)
2. SSN of ea. borrower
3. Gross mo. income of borrower.
4. Loan Amount
5. Address of Subject Property
6. Estimate of property value.
136
For the subject property for a purchase, what information/exception is acceptable? What is not allowed?
- UNK & TBD (allowed)
- N/A (not allowed)
137
Once a complete application is obtained and the borrower has indicated their intent to proceed, what is required?
initial disclosures
138
When should initial disclosures be provided?
once all 6 required information is received from borrower to have a complete application
139
What are the instances when the lender doesn't have to provide initial disclosures?
1. the applicant withdraws the application (must be within the 1st 3 days)
2. the lender turns down the loan before the 3 business day period end.
140
Does RESPA deal with timing?
yes
141
What are disclosures?
notices the borrower must get
142
Before settlement =
before doc signing
143
Settlement =
doc signing
144
At settlement =
at the doc signing
145
What are the initial disclosures?
- Home Loan Toolkit
- Loan Estimate
- Mortgage Servicing Disclosure Statement
- List of HUD Approved Home Counselors
146
When are the initial disclosures required to be delivered?
at or within 3 business days of application
147
Home Loan Toolkit
RESPA Doc. For purchases ONLY; a booklet given to the borrower and explains how to purchases work.
148
When should a borrower receive the home loan toolkit?
at or within 3 business days of application
149
Loan Estimate
TILA document but RESPA says when the borrower must receive it. Formally the Good Faith Estimate (GFE).
150
What law says a borrower must receive a Loan Estimate?
TILA (Reg Z) - Truth in Lending Act
151
What law says the borrower must receive a Loan Estimate at or within 3 business days of an application?
RESPA (Reg X) - Real Estate Settlement Protection Act
152
Mortgage Servicing Disclosure Statement
Intent. Explains if the lender intends to service the loan themselves or will pass on to someone else.
153
List of HUD Approved Home Counselors
Allows the borrower to have someone not associated with the loan process regarding the loan, terms, etc.
154
What should the borrower receive before settlement (doc signing)?
Affiliated Business Arrangement (AfBA) Disclosure (only if the own 1% or more of the business they referred the client to) and Closing Disclosure (CD)
155
Closing Disclosure (CD)
formally the HUD
156
When do borrowers receive closing disclosures (CD)?
3 days before closing and again at the doc signing
157
Consummation =
doc closing
158
What law says the borrower must receive a Closing Disclosure (CD)?
TILA (Reg Z) - Truth in Lending Act
159
What law says the borrower must receive the closing disclosure 3 days before closing?
RESPA (Reg X) - Real Estate Settlement Protection Act
160
What does the borrower receive after settlement (Doc Signing )?
Escrow statement and servicing transfer statement
161
What does the borrower receive at settlement (doc signing)?
finalized closing disclosures and initial escrow statement
162
When do you need to provide the initial escrow statement?
within 45 days of closing
163
Annual Escrow Statement
a document the borrower receives every year that explains how much they pay taxes and insurance.
164
What law says you must receive the Annual Escrow Statement annually?
Section 10 of RESPA (Reg X)
165
What is another name for the servicing transfer statement?
Goodbye Letter
166
Goodbye Letter
Lets the borrower know who their loan is getting transferred to and who to start making payments to. This is provided after settlement and must be provided 15 days prior to transfer and no penalty for the 1st 60 days.
167
When must the Goodbye Letter be provided?
15 days prior to the transfer of the loan
168
If loan servicing has been transferred, what is the grace period for the borrower on a missed/late payment?
No penalty for the 1st 60 days
169
Which documents are TILA documents?
Closing Disclosure (CD)
Loan Estimate
170
What does the Loan Estimate combine?
Good Faith Estimate (GFE) and the Truth in Lending Statement
171
What can be charged prior to delivering the loan estimate form?
no fee, except the credit report fee
172
When should a loan estimate be delivered/mailed?
3 business days of receipt of complete application
173
How long is the Loan Estimate available/good for?
10 business days
174
What does TIP mean?
Total Interest Percentage
175
What is the difference between TIP and APR?
TIP is the total interest which expresses a percentage. APR is the total interest plus all other fees added together expressed as a percentage
176
TIP
Total Interest Percentage - total interest expressed as a percent
177
APR
Annual Percentage Rate - total interest plus all other fees expressed as a percentage
178
Is the Rate Lock and The Lock the same thing?
yes
179
Where do you find information regarding the rate lock?
on the Loan Estimate
180
Is the rate lock only on the loan estimate?
yes
181
Closing Disclosure (CD)
actual fees, generally must contain the actual terms and costs of the transaction
182
What does the closing disclosure replace?
existing HUD form and the final Truth in Lending Statement
183
Who completed the Closing Disclosure and for whom?
The creditor (bank/lender) is responsible for providing the statement for the borrower.
The settlement agent (title agent) is responsible for providing the statement to the seller.
184
Who provided the CD statement to the borrower?
The creditor (lender/bank)
185
Who provides the CD statement to the seller?
settlement agent (title agent)
186
What does CD stand for?
Closing Disclosure
187
What is a creditor?
bank/lender
188
What is a settlement agent?
title agent
189
When must the initial closing disclosures be delivered to the borrower?
3 business days prior to loan consummation
190
When must a final closing disclosure be delivered?
at loan consummation
191
When does a borrower receive a new 3 day waiting period?
if there is a change to the closing disclosure due to a valid change in circumstance
192
What are the valid change in circumstances to cause a new 3 day waiting period?
1. Changes in loans APR
2. Change in the loan amount
3. the addition of a PPP (pre-payment penalty)
193
What does TILA deal with?
credit, APR, and advertising
194
What law deals with credit, APR, and advertising?
TILA (Reg Z) Truth in Lending Act
195
What regulation is TILA?
Reg Z
196
Which law requires the lender to disclose the complete cost of credit to consumer loan applicants?
TILA (Reg Z) - Truth in Lending Act
197
TILA (Reg Z) requires lenders to disclose ____________________ to consumer loan applicants.
the complete cost
198
3-Day Rescission
in a HELOC/REFI, the borrower has a 3 days to change their mind (even if they sign docs)
199
Which law established a 3-day rescission?
TILA (Reg Z) - Truth in Lending Act
200
What transactions did TILA (Reg Z) establish a 3-day rescission for?
HELOC (Home Equity Line of Credit) & Refinances
201
What type of transactions do borrowers have a right to a 3-day rescission?
HELOC's and Refi's
202
How many borrowers does it take to have a loan cancelled?
only 1 borrower to rescind
203
When does the rescission period start?
the day after the documents are signed
204
How long does the creditor/lender have to return any money collected related to the loan?
20 calendar days
205
When is the deadline for a consumer to rescind the credit transaction?
until midnight of the 3rd business day
206
How many copies must the borrower receive of a Notice of Right to Rescind?
2 copies
207
If a borrower was not properly notified of the Right to Rescind, how long can the rescission period be extended to?
3 years
208
How many installments are needed on a transaction in order for TILA to apply?
more than 4 installments
209
TILA applies to transactions that are payable by written agreement with _______ installments.
more than 4
210
What are the only fees that may be collected prior to TILA (Reg Z) Disclosures?
credit report fees
211
What law only allows credit report fees to be collected?
TILA (Reg Z) - Truth in Lending Act
212
How long must TILA Disclosures be kept? Are there any exceptions? Explain.
2 years.
Exceptions for the Loan Estimate = 3 years; and the Closing Disclosure = 5 years.
213
How long must you keep the Loan Estimate?
3 years
214
How long must you keep the Closing Disclosure?
5 years
215
What do the TILA disclosures include?
1. Loan Estimate and Closing Disclosure.
2. Consumer Handbook on Adjustable Rate Mortgage (CHARM Booklet).
3. When your Home is on the Line Disclosure (HELOC/Refi)
216
What does CHARM stand for?
Consumer Handbook on Adjustable Rate Mortgages
217
When would the borrower get the CHARM Booklet?
when they are getting an adjustable rate mortgage
218
When would the borrower get the When your Home is on the Line Disclosure?
if they are getting a HELOC or Refi
219
Which law requires the disclosure of the annual percentage rate (APR)?
TILA (Reg Z) - Truth in Lending Act
220
What disclosure does TILA (Reg Z) require?
Annual Percentage Rate (APR)
221
What does APR stand for?
Annual Percentage Rate
222
What is another word for APR?
Effective Rate
223
What are the penalties for violating TILA?
1. $5,000 per day for single violation..
2. $25,000 per day for reckless violation.
3. $1,000,000 per day for knowingly violating TRID.
224
What is the penalty for a single violation of TILA (Reg Z)?
$5,000 per day
225
What is the penalty for knowingly violating TRID?
$1,000,000 per day
226
What does MDIA stand for?
Mortgage Disclosure Improvement Act
227
Is MDIA apart of TILA?
yes
228
What is another name for Mortgage Disclosure Improvement Act (MDIA)?
3/7/3 Rule
229
Are 3/7/3 Rule and MDIA the same thing?
yes
230
Please explain Mortgage Disclosure Improvement Act (MDIA) / 3/7/3 Rule.
- initial disclosures sent within 3 business days of receipt of completed application.
- earliest consummation on 7th business day after disclosures delivered/mailed.
- redisclosed - consumer must receive corrected disclosure at least 3 business days before loan can be consummated if there was a significant variance in the APR.
231
What does consummation mean?
close/closing
232
What does redisclose always meant?
always 3 business days
233
Explain 3/7/3 Rule
MDIA;
3 business days initial disclosures.
7 business days is the soonest they can close.
3 business days to redisclose.
234
Explain TILA Accuracy/Redisclosure.
APR is accurate if no variance above or below initial disclosure by more than:
1/8 (.125%) for regular transactions (30 yr fixed).
1/4 (.25%) for irregular transactions (not 30 yr fixed)
235
1/8 is equal to
.125
236
1/4 is equal to
.25
237
Regular transaction
30 year fixed
238
Irregular transaction
not a 30 year fixed
239
If you quote someone 4.25% and then once they receive official paperwork at 6%, do you need to redisclose?
yes, because the loan changed by more the 1/8 or 1/4.
240
When do you have to redisclose for a regular transaction (30 year fixed)?
if the rate changes by 1/8 (.125) or more.
241
When do you have to redisclose for a irregular transaction (not a 30 year fixed?
if the rate changed by 1/4 (.25) or more.
242
When can the redisclosure period be waived?
bona fide financial emergency
243
Who determines a bona fide financial emergency?
the lender
244
In which of the following can a redisclosure be waived:
- House Burned down
- borrowers dad died
- cat died
- bona fide financial emergency
bona fide financial emergency
245
What is a business day according to TILA?
all calendar days except sundays and legal public holidays
246
What law says saturday is a work day?
TILA (Reg Z) Truth in Lending Act
247
What law says sunday and legal public holidays are NOT working days?
TILA (reg Z) - Truth in Lending Act
248
What is the exception to TILA's business day rule?
"initial loan Estimate" - any day in which the creditors office is open for business
249
Initial Loan Estimate
any day in which the creditors office is open for business
250
Does TILA also deal/mandate advertising?
yes
251
Difference between business day vs. calendar day?
if its 0-9 its a business day.
if its 10 or over its a calendar day.
252
If an advertisement contains any one of the triggering terms about the loan, that advertisement must include:
1. Amount of percentage of down payment.
2. Terms of Repayment.
3. Annual Percentage Rate, using the term spelled out in full or APR.
253
What if an ad contains only APR?
no additional disclosures are required
254
Does triggering terms require you to redisclose?
yes
255
Do non-triggering terms require you to redisclose?
no
256
Examples of triggering terms.
- 20% down.
- Pay only $700 per month.
- only 360 payments
- 1% finance charge
- 30 year financing available
257
Examples of non-triggering terms.
- 5% APR loan available here.
- Easy mo payments
- FHA financing available.
- Terms to fit your budget
- 100% VA financing available.
258
If someone asked you for the current rates and you provide them a rate percentage, did you violate TILA (Reg Z)?
yes and you need to redisclose
259
If someone asked you questions regarding a mortgage loan and all you provided was an APR, did you violate TILA (Reg Z)?
no
260
If you provide a rate, % down, mo payment, or any figure associated with actual terms to help trigger a borrower, what must you include?
1. Amount or percentage of down payment.
2. Terms of Repayment
3. Annual Percentage Rate, using that term-spelled out in full or APR.
261
Is a qualified mortgage (QM) apart of TILA (Reg Z)?
yes
262
If a lender issues a qualified mortgage (QM) and the borrower later goes into foreclosure, what do they receive?
safe harbor
263
Explain the QM Rule.
Creates new categories of mortgages and imposes minimum underwriting standards for most home loans, which is referred to as the ability-to-repay (ATR) requirements.
264
What are the prominent clauses of the QM Rule requirements?
1. No doc loans / NINA Loans (not allowed).
2. Sets a maximum debt to income ratio of 43%.
3. Capts points and fees at 3% / 3 points.
4. Loan terms over 30 years prohibited.
5. Interest only loans not allowed / negative amortization loans not allowed.
6. Prohibits use of teaser rates in affordability calculations.
7. Requires that adjustable rate mortgages (ARM's) be underwritten to the maximum interest rate that can be charged during the first 5 years of the loan term.
8. PPP are prohibited, except for certain fixed rate, qualified loans.
265
What does ATR stand for?
Ability to Repay
266
What are the 8 types of information creditors must consider when establishing a borrowers ATR on a mortgage loan?
1. Current income/assets.
2. Current employment status.
3. Borrowers credit history.
4. Monthly payments for mortgage.
5. Borrowers monthly payment on other simultaneous mortgage loans.
6. Monthly payments for other mortgage related expenses.
7. Other debts of the borrower.
8. Monthly debt payments compared to the borrowers monthly income (DTI cannot exceed 43%).
267
What does HOEPA stand for?
Home Ownership and Equity Protection Act
268
What law is HOEPA apart of?
TILA (Reg Z) - Truth in Lending Act
269
What are the sections of HOEPA?
Section 32 and Section 35
270
What does APOR stand for?
Average Prime Offer Rate
271
What is an Average Prime Offer Rate (APOR)?
exactly that, the average rates today.
272
HOEPA Section 32 are.....?
Higher cost loans
273
What are the triggers for Section 32 of HOEPA (Home Ownership and Equity Protection Act)?
6.5% on First Lien Loans and 8.5% on Second Lien Loans
274
Please explain in detail, the triggers for Section 32 of HOEPA (Home Ownership and Equity Protection Act).
The APR exceeds the APOR by more than 6.5% on First Lien Loans of $50,000 or higher or more than 8.5% on First Lien Loans of less than $50,000.
When the APR exceeds the APOR by more than 8.5% on Second Lien Loans.
If the total fees charged exceed 5% of the total loan amount.
275
The APOR is 4%, Danny applied to a loan with cash but they approved him with 26%, is it a section 32 or section 35 of HOEPA?
Section 32 of HOEPA because it exceeded by more than the 6.5% and 8.5%.
276
HOEPA Section 35 are......?
Higher priced loans
277
When are HOEPA Section 35 (higher priced loans) triggered?
when loans exceed the average prime offer rate by:
- 1.5% for First Mortgage Lien
- 2.5% for First Lien Jumbo Loans over $417,000.
- 3.5% Subordinate Mortgage Lien
278
When a First Mortgage Lien exceeds the average prime rate by ___%, what HOEPA Section is triggered?
1.5%
Section 35
279
When a First Lien Jumbo Loan over $417,000 exceeds the average prime rate by ___%, what HOEPA Section is triggered?
2.5%
Section 35
280
When a Subordinate Mortgage Lien exceeds the average prime rate by ___%, what HOEPA Section is triggered?
3.5%
Section 35
281
What does ECOA stand for?
Equal Credit Opportunity Act (Reg B)
282
What regulation is ECOA (Equal Credit Opportunity Act)?
Regulation B
283
What does Equal Credit Opportunity Act (ECOA) - Reg B deal with?
The discrimination when granting credit.
284
What is the difference between ECOA (Reg B) versus Fair Housing?
ECOA (Reg B) deals with discrimination when granting credit. Vs. Fair Housing deals with discrimination in the sale/lease of property.
285
Explain ECOA (Reg B).
A federal law that ensures that all consumers are given an equal chance to obtain credit.
286
How long do creditors/lenders have to notify applicants of their lending decision?
within 30 days of the filing of a complete application.
287
What is a Adverse Action Letter?
A denial letter
288
What is a protected class?
A class of individuals that cannot be used as a source of discrimination/denial when approving a credit application.
289
What are the protected classes of ECOA (Equal Credit Opportunity Act) - Reg B?
Sex, Race, Religion, Color, National Origin, Age, Marital Status, & Public Assistance.
290
What classes are protected by Fair Housing?
Sex, Race, Religion, Color, & National Origin.
291
What classes are ONLY protected by ECOA?
Age, Marital Status, & Public Assistance
292
What does Public Assistance mean?
Social Security Income, Child Support Income, Alimony, Retirement, etc. (Any type of non-taxed income).
293
Under ECOA (Reg B), when can & cannot a creditor deny a loan?
A creditor cannot deny a loan based on the borrowers income source but they can deny based on the amount of income.
294
Can a creditor deny a borrower based on their source of income?
No
295
Can a creditor deny a borrower based on the amount of income?
Yes
296
According to ECOA (Reg B), what is the correct way to ask about marital status?
Are you married, unmarried, or seperated?
297
Unmarried is equal to....?
single, divorced, widowed
298
Under ECOA (Reg B), the creditor CANNOT consider age unless....?
the applicant is under 18 or the applicant is at least 62 years of age for a reverse mortgage.
299
How long must ECOA Disclosures be retained/kept for?
25 months (2 years and 1 month)
300
How long does a borrower have to sue (civil action filed) under ECOA Violations?
up to 24 months (2 years)
301
Why must ECOA Disclosures be retained/kept for 25 months?
Civil action may be filed for ECOA Violations for up to 24 months (2 years) if a consumer believes his rights have been violated.
302
What is the penalty for violating ECOA?
$10,000 for each individual action.
303
If an application is denied based on the appraisal report, how long does the consumer/borrower have to request a copy of the appraisal report? How long does the lender have to provide the appraisal?
Borrower has 90 days (3 months) to request the appraisal report.
The lender has 30 days (1 months) to provide the appraisal report.
304
If an application is approved, how long does the lender have to provide the appraisal to the consumer/borrower?
No later than 3 business days prior to the close of the first lien loan.
305
Fair Housing Act
Prohibits discrimination against protected classes in the sale or lease of a residential property.
306
What are the protected classes of the Fair Housing Act?
Sex, Race, Religion, Color, National Origin, Disability, & Familial Status.
307
What the classes that are protected ONLY by the Fair Housing Act?
Disability & Familial Status.
308
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 values will decline.
309
What is Familial Status?
Anything having to do with children, being pregnant, etc.
310
What are the 3 laws under the Fair Housing Act?
Blockbusting, Steering, Redlining
311
Steering
Channeling prospective real estate buyers or tenant to particular neighborhoods based on their race, religion, or ethnic background.
312
Redlining
Refusal to make loans on property located in a particular neighborhood for discriminatory reasons.
313
How long does a borrower have to sue under the Fair Housing Act?
1 year (12 months)
314
Blockbusting
Panic selling
315
Please briefly explain Redling, Steering and Blockbusting (these are apart of the Fair Housing Act).
Redlining is drawing a line or boundary on what location they lend. Steering pushes buyers to buy in certain areas. Block busting is panic selling.
316
What law deals with Blockbusting, Steering, and Redlining?
Fair Housing Act
317
Who can possibly redline a borrower?
the lender
318
Who can possible blockbust/panic sell a borrower?
Real estate agent
319
Who can possibly steer a borrower?
Real estate agent
320
Is redlining the law that led o the creation of HMDA?
yes
321
What law led to HMDA?
Redlining
322
What requires the house logo with 2 thick lines and says "Equal Housing Opportunity"?
Fair Housing Act
323
What does HPA stand for?
Homeowners Protection Act
324
Explain Homeowners Protection Act (HPA).
Requires lenders/servicers to provide disclosures concerning private mortgage insurance (PMI) on residential transactions.
325
What does PMI stand for?
Private Mortgage Insurance
326
When can a borrower request to cancel PMI?
at 80% Loan-to-Value (LTV)
327
When is PMI automatically cancelled?
at 78% Loan-to-Value (LTV), if the borrower is current.
328
How much of the loan must be paid off in order for the borrower to request a cancellation of PMI?
20%
329
How much of the loan must be paid off in order for the lender to automatically cancel PMI?
22% and the borrower must be current.
330
What does HMDA stand for?
Home Mortgage Disclosure Act
331
What regulation is HMDA?
Regulation C
332
Explain the Home Mortgage Disclosure Act (HMDA - Reg C).
This is designed to identify possible discriminatory lending patterns.
333
What does Home Mortgage Disclosure Act (HMDA - Reg C) require of lenders?
To file "monthly" reports regarding the ethnicity, race, sex of all applicants. Monthly reports are called LAR (Loan Activity Reports).
334
How often do lenders have to file Loan Activity Report (LAR)?
monthly
335
What does LAR stand for?
Loan Activity Report
336
What law requires lenders to file monthly reports regarding ethnicity, race and sex of their applicants? What is the report called?
HMDA - Home Mortgage Disclosure Act.
Loan Activity Report (LAR)
337
What section is HMDA on the loan app? What is another name for it?
Section 10.
Information for Government Monitoring Purposes.
338
What does FCRA stand for?
Fair Credit Reporting Act
339
What regulation is Fair Credit Reporting Act (FCRA)?
Regulation V
340
What does Fair Credit Reporting Act (FCRA - Reg V) deal with?
credit reporting agencies
341
According to the Fair Credit Reporting Act (FCRA - Reg V), consumers have what 5 rights?
1. The right to an Adverse Action Notice (denial letter).
2. Free copy of Consumer Credit File/Credit Report.
3. Request credit score (although credit is not free).
4. The right to dispute incomplete or inaccurate info.
5. The right to limit prescreened offers.
342
What law says a lender MUST provide the consumer with the name , address, and phone number of the agency that they used to pull the credit report, if app is denied?
Fair Credit Reporting Act (FCRA - Reg V)
343
Per the Fair Credit Reporting Act (FCRA - Reg V), consumers are entitled to a free copy of their credit report, if what 4 reasons occur?
1. Info resuled in adverse action (denial).
2. Victim of identity theft with fraud alert.
3. Inaccurate info was a result of fraud.
4. On public assistance or unemployed.
344
Can the credit reporting agencies report outdated negative credit info?
no, per the Fair Credit Reporting Act (FCRA - Reg V)
345
How long can negative credit info stay on a credit report?
no more than 7 years
346
How long do bankruptcies stay on credit reports?
10 years
347
How long do unpaid federal tax liens stay on report?
they do not expire
348
How long do criminal conviction stay on credit reports?
They do not expire
349
Paid federal tax lien is equal to....?
negative credit info will expire in 7 years
350
When can you pull someone's credit?
if you have a legitimate business need ONLY.
351
What does FACT Act stand for?
Fair and Accurate Credit Transaction Act
352
What is another name for FACT Act?
FACTA
353
What law amended Regulation V (FCRA)?
FACT Act/FACTA - Fair Accurate Credit Transaction Act
354
What is the purpose of FACT Act/FACTA?
To. help consumers fight identity theft.
355
What is another name for Section 114 Rules?
FTC Red Flags Rule (Identity Theft Rule)
356
Which law has Section 114 rules/FTC Red Flags Rule (Identity Theft Rules)?
FACT Act/FACTA - Fair and Accurate Credit Transaction Act
357
What does Section 114 rules require?
Requires card issuers to assess the validity of change of address requests.
358
What law says they must verify the validity of any change of address?
Section 114 of FACTA/FACT Act
359
What law allows consumers to receive a free credit report each year (annually)?
FACT Act/FACTA - Fair and Accurate Credit Transaction Act
360
What is the website that FACT Act/FACTA uses for borrowers to get their free annual credit report?
www.annualcreditreport.com
361
What are the rights under the FACT Act law?
1. Businesses to truncate credit/debit card receipts.
2. Consumer can place fraud alerts and credit freezes.
3. Requires measures to secure and dispose of sensitive consumer credit info
362
What does truncate mean?
shorten - for ex: on receipt they only put the last 4 of the card #.
363
What law says businesses must truncate (shorten) the credit/debit card receipts?
FACT Act/FACTA - Fair and Accurate Credit Transaction Act
364
What law requires consumers to place a credit freeze or fraud alert (password)?
FACT Act/FACTA - Fair and Accurate Credit Transaction Act
365
Secure and Dispose is equal to....?
burn/shred/locked
366
Which law requires businesses to secure/dispose (burn/shred/lock) of sensitive consumer credit info?
FACT Act/FACTA - Fair and Accurate Credit Transaction Act
367
What law did the Loan Officer violate, if he left his computer unlocked during his lunch?
FACT Act/FACTA - Fair and Accurate Credit Transaction Act
368
What does GLBA stand for?
Gramm-Leach Bliley Act
369
What is another name for Gramm-Leach Bliley Act (GLBA)?
Financial Services Modernization Act
370
What does SPF stand for?
Safeguard Rule
Pretexting Provisions
Financial Privacy Rule
371
What law is SPF (Safeguard Rule, Pretexting Provisions, Financial Privacy Rule) apart of?
Gramm-Leach Bliley Act (GLBA)
372
What are the 3 laws/policies of the Gramm-Leach Bliley Act (GLBA)?
Safeguard Rule
Pretexting Provisions
Financial Privacy Rule
373
What law deals with Safeguard Rule?
Gramm-Leach Bliley Act (GLBA)
374
What law deals with Pretexting Provisions?
Gramm-Leach Bliley Act (GLBA)
375
What law deals with Financial Privacy Rule?
Gramm-Leach Bliley Act (GLBA)
376
Safeguard Rule
Requires financial institutions to design and maintain safeguards to protect of consumer data.
377
Pretexting Provisions
Protects consumers from individuals and companies that obtain their personal financial information under false, fictitious or fraudulent pretense.
378
Financial Privacy Rule
Governs collection of non-public personal info and how its shared. Consumers have the right to opt in/out.
379
What law requires that lenders must verify DOB, SS#, and Ethnicity?
U.S.A Patriot Act
380
Why was the U.S.A Patriot Act created?
in response to the 911 Terrorist Attacks
381
What law requires the establishment of anti-money launering programs?
USA Patriot Act
382
What does DNC stand for?
Do Not Call List
383
What does the Do Not Call List (DNC) allow for consumers?
The ability to file complaints with FTC.
384
What must the Loan Originator do prior to calling the consumer?
Search the internet do not call list.
385
How often should the LO/telemarketer check the do not call list (DNC) & delete names from the call list?
Every 31 days
386
What are the 2 types of Do Not Call List (DNC)?
National List
Internal List
387
How often is the National List Updated?
Every 90 days/3 months
388
How often is the internal list updated?
Every 30 days/1 month
389
What is the penalty for violating the Do Not Call List?
Fines up to $16,000 per incident
390
Anna called one consumer twice on the Do Not Call List, what is the max fine she can be penalized?
$32,000
($16,000 x2)
391
Anna called someone 2x on the DNC list, what is the max penalty per incident?
$16,000 - due to asking per incident not overall.
392
What does EBR stand for?
Established Business Relationship
393
What is the meaning of Established Business Relationship (EBR)?
that you've done business with them
394
If someone is on the DNC List & you closed business with them, how long can you call the consumer?
18 months after the last transaction
395
If someone is on the DNC List, the consumer made an inquiry/submitted an application, how long can you call the consumer?
3 months after inquiry made
396
Dana just closed a loan with you, she is on the DNC List. She expressed for you to stop calling. How often can you call her?
you can't continue calling her.
397
What does MARS stand for?
Mortgage Assistance Relief Services Rule
398
What law/rule addresses loan modification, short sale, and foreclosure to relief scams?
MARS - Mortgage Assistance Relief Service Rule.
399
What law bans collecting fees until homeowners have acceptable written offer from lender/servicer?
MARS - Mortgage Assistance Relief Service Rule.
400
What law prohibits advising consumers to discontinue communication with lenders?
MARS - Mortgage Assistance Relief Service Rule.
401
What is the fine for violating MARS - Mortgage Assistance Relief Service Rule?
$11,000 per occurrence & $11,000 per day may be incurred.
402
What does BSA stand for?
Bank Secrecy Act
403
What is another name for Bank Secrecy Act (BSA)
Anti-Money Laundering Act (AMLA)
404
What does AMLA stand for?
Anti-Money Laundering Act
405
If a consumer deposits withdrawals or transports cash transactions exceeding $10,000, what happens? What law is this?
Financial institutions are required to file reports on the consumer.
BSA/AMLA - Bank Secrecy Act / Anti-Money Laundering Act
406
What is the definition for a Non-Traditional Mortgage according to the SAFE Act?
Anything other than a 30-year fixed rate mortgage.
407
According to what law is a 30-year fixed rate mortgage a Traditional Mortgage?
SAFE Act
408
Conforming mortgages meet the standards of who?
Fannie Mae & Freddie Mac
409
Non-conforming loans do not meet the standards of who?
Fannie Mae & Freddie Mac
410
Where can conforming loans be sold?
Secondary Market
411
Can non-conforming loans be sold on the secondary market?
no
412
What is another name for a non-conforming loan?
Jumbo Loan
413
Do subprime loans allow more risk than are allowed in the conforming loan market?
yes
414
Secondary Financing
buyer borrowers money from another source (other than the primary lender) to pay part of the purchase price or closing costs.
415
How much of a down payment do secondary lenders require?
5% down payment
416
Fixed Rate
won't change; loan terms remain constant for the life of the loan. Generally 15-30 years
417
Interest Only
Straight note; Only paying the interest. Period of induced payments for a specified time, then payment increases to fully amortizing by end of term.
418
Adjustable Rate Mortgage (ARM)
At some point the rate will adjust. Interest rate periodically adjusted to reflect fluctuations in cost of money.
419
Another name for note?
Promissory Note
420
How many promissory notes?
4
421
What are the promissory notes?
1. Straight Note/Interest Only Note
2. Partially Amortizing Installment Note/Installment Note w/ Balloon
3. Negative Amortization
4. Fully Amortizing Installment Note
422
Straight Note/Interest Only Note
Only paying interest
423
Partially Amortizing Installment Note/Installment Note w/ Balloon
Means it has a balloon payment at end of term to pay off balance due. Includes periodic payments of principal/interest during loan term.
424
Negative Amortization
Monthly payment not sufficient to cover the accrued interest from previous month.
425
What do you call a loan that continues to grow but you have a monthly payment on?
Negative Amortization
426
What is another name for a Fully Amortizing Installment Loan?
Self-Liquidating Loan
427
What type of loan is it when the borrower makes a payment every month for 30 years and at the end of the 30-years the whole thing is paid off?
Fully Amortiizing
428
Acceleration Clause
Speeds up when the payment is due because of default. Loan balance due immediately due to default/violation of contract provisions.
429
Alienation Clause
Transfers of ownership in the property (due on sale clause)
430
Index + Margin =
Rate
431
Index
Part that goes up and down; what makes it adjust.
432
Margin
Stays the same for the life of the loan; profit the bank makes.
433
What part goes up and down and adjust?
Index
434
What stays the same for the life of the loan and is how the bank makes profit?
Margin
435
Are Buydown Plans and Discount Points the same thing?
yes
436
Buydown
discount points paid to buy down interest rate and/or lower monthly mortgage payments
437
Point
1% of the loan amount
438
How old does the borrower have to be to qualify for a reverse mortgage?
62 years
439
In a reverse mortgage, what increases and what decreases?
Loan increases (debt) & equity shrinks (equity)
440
What does HECM stand for?
Home Equity Conversion Mortgage
441
What is a Home Equity Conversion Mortgage (HECM)?
FHA name for a reverse mortgage
442
Tenure
over time
443
Tenure Payment Option
Equal monthly payments while living in the property
444
What are instances for a reverse mortgage to be over?
Death of last surviving borrower.
Sells home
Ceases to live in home for 12 consecutive months.
Non-payment of taxes and insurance.
445
What is FHA's name for a reverse mortgage?
Home Equity Conversion Mortgage (HECM)
446
For a reverse mortgage, how long must you reside in the home?
12 consecutive months
447
Balloon Payment
Also known as a partially amortized loan. It's a type of fixed-rate mortgage with a monthly payment based on a 30-year schedule.
448
What is another name for a balloon payment?
Partially Amortizing Loan
449
What is another name for a partially amortizing loan?
Balloon Payment
450
Balloon Payment is equal to
Partially Amortizing Loan
451
What type of payment has a fixed-rate mortgage with a monthly payment based on a 30-year schedule?
Balloon Payment/Partially Amortizing Loan
452
Hybrid ARM
An adjustable rate mortgage with an initial fixed rate period greater than one year (period). For example, 3/1, 5/1, 7/1, or 10/1 ARM's
453
What do you call a 3/1, 5/1, 7/1, or 10/1?
ARM's
454
What type of payment/loan allows for an adjustable rate mortgage with an initial fixed rate period greater than one year (period)?
Hybrid ARM
455
What are examples of Hybrid ARMs?
3/1, 5/1, 7/1, & 10/1
456
Bi-Weekly Mortgage
Payment plan on fixed rate mortgage setup like a standard 30-year conventional loan but payments are made every 2 weeks instead of every month. 26 annual payments = one extra payment each year.
457
For a bi-weekly mortgage, how many payments in a year?
26
458
Blanket Mortgage
Covers more than one parcel of land or lot and is usually to finance subdivision developments.
459
Partial Release Clause
Allows the borrower to pay a certain amount to release some of the lots with the mortgage continuing to cover the remaining lots.
460
What type of mortgage usually allows borrowers to have a partial release clause?
Blanket Mortgage
461
Bridge Mortgage
Occurs between the termination of one mortgage and the beginning of the next. When the mortgage is taken out, the bridge mortgage is repaid.
462
Cash Out Mortgage is equal to...?
Refinance
463
Cash out Mortgage/Refinance
Allows borrowers to get cash for the equity that has built up in a property (Home equity loan for a specific purpose or refi's and receives cash at the closing). Tap into equity + retain ownership.
464
Home Equity Loan
A one-time loan for a specific amount of money/specific purpose (closed-end loan)
465
WHat type of loan must have a net-tangible benefit?
Cash-Out Refi Mortgage
466
Home Equity Line of Credit (HELOC)
Money that is available to the homeowner to be borrower as needs arise (open-end loan).
467
What does HELOC stand for?
Home Equity Line of Credit
468
Please explain the difference between Home Equity Loan and Home Equity Line of Credit (HELOC).
HELOC is open-end loan and Home Equity Line is close-end loan
469
Construction Mortgage is equal to...?
Interim Loan
470
Construction Mortgage (interim Loan)
A temporary loan used to finance the construction of improvement and buildings on lands.
471
Explain the process of buying a home that is being built from ground up.
1. Construction Loan/Interim Loan
2. Once construction is complete the appraiser verifies that specifications have been met and the original opinion is valid.
3. Take out loan/permanent loan.
472
Take Out Loan
The loan that replaces the construction (interim loan) once the project is completed permanen financing.
473
What is another name for Equity Participation Mortgage?
SAM = Shared Appreciation Loan or Participation Loan
474
Equity Participation Mortgage (SAM)
Permits the lender to share part of the earnings, income, or profits from a real estate project (participation plan).
475
What is an example of a Equity Participation Mortgage (SAM)?
Borrower is upside down or behind on payments. The bank/lender agrees to do the loan but agreement is once the home is sold, the lender gets 5% of the equity.
476
Package Mortgage
A mortgage that includes personal property, like appliances in the property sale and all are financed together in one contract but generally requires an added security instrument to lien the personal portion of the sale.
477
Wrap Around Mortgage
When an existing loan on a property is retained while the lender gives the buyer another larger loan.
The total = new second loan + existing loan - is treated like one loan and the borrower pays one payment.
478
Are you considered a loan officer or a loan originator?
Loan Originator
479
What are the steps to the loan process?
1. origination
2. processing
3. underwriting
480
Origination
loan originator (LO); the process of making or initiation a new loan.
481
Processing
verifying data in the loan file; coordinating loan process (processor)
482
Underwriting
Evaluation and deciding whether to make a new loan (bank/lender)
483
Is servicing apart of the loan process?
no, this is the result of completion/approval from the loan process.
484
Servicing
Continued maintenance of a loan after close
485
What is the standard loan application for Fannie Mae?
Form 1003 = Uniform Residential Loan Application (URLA)
486
What is the standard loan application for Freddie Mac?
Form 65
487
What are the types of underwriting?
Automated (AUS) and Manual
488
Explain underwriting.
Underwriter evaluates the documentation, borrower info, and various risk factors to make a decision.
489
Automated Underwriting (UW) or AUS
Information fed into automated underwriting system
490
Manual Underwriting (UW)
Done by individual who works for the lender
491
What UW system does Fannie Mae use?
Desktop Underwriter (DU)
492
What UW system does Freddie Mac use?
Loan Prospector (LP)
493
Is a conventional loan insured or guaranteed by a government entity?
no
494
What loan type is insured by the government?
FHA
495
What loan type is guaranteed by a government entity?
VA
496
What is the qualifying ratio for a conventional loan?
28% / 36%
497
Please explain the 2 parts to the qualifying ratios for loans.
Top % = housing expense ratio
Bottom % = total debt to income ratio
498
For a conventional loan, when is the PMI required?
if LTV is greater than 80%
499
What is the late fee on a convetional loan?
5% of the P&I Only.
500
Are FHA loans insured?
yes
501
Explain FHA loans.
FHA insures mortgage loans made by approved lenders.
502
What is the down payment for an FHA loan?
3.5%
503
What are the qualifying ratios for an FHA loan?
31%/43%
504
How much can a seller contribute for an FHA loan?
up to 6% of the lesser of the sales price of the appraised value toward closing costs.
505
For an FHA loan, the borrower must occupy as principal residence within...?
60 days of closing the loan, for at least 12 months.
506
What loan requires MIP?
FHA
507
Explain MIP in regards to an FHA loan.
Required regardless of down payment
508
When is MIP required?
On all FHA loans regardless of the down payment.
509
What loan also required UFMIP?
FHA Loans
510
Does FHA loans have Prepayment Penalty Fee (PPP)?
no
511
What is the late fee for an FHA loan?
4% of the P&I only
512
What does MIP stand for?
Mortgage Insurance Premium
513
What does UFMIP stand for?
Upfront Mortgage Insurance Premium
514
What does VA stand for?
Veteran Administration
515
Who is VA guaranteed through?
The Veteran Benefits Administration
516
What is the max guaranty for a VA loan?
25% of the purchase price or appraised value (whichever is lower)
517
518
With VA loans, veterans eligibility is based on length of service with what required documentation?
DD-214 & COE
519
What is a DD-214?
Discharge papers
520
What does COE stand for?
Certificate of Eligibility
521
522
Certificate of Eligibility (COE)
Tells the borrower the max they are qualified for.
523
What is the qualifying ratio for VA?
41% (total debt to income ratio - back end only)
524
WHat are the 2 names for VA appraisal?
CRV - Certificate of Reasonable Value
NOV - Notice of Value
525
Do VA loans require a down payment?
no
526
Do VA loans have PPP fee?
no
527
What kind of loan has a non-refundable variable funding fee?
VA Loans
528
When can a non-refundable variable funding fee be waived?
If you are a disabled veteran or surviving spouse.
529
For a VA loan, when must the borrower occupy as a principal residence?
Within 60 days of closing the loan, for at least 12 months.
530
What is the late fee for a VA loan?
4% of P&I Only
531
On a VA loan, lenders can charge a flat fee of what?
Up to 1% to cover lender cost.
532
USDA Loan
Provides financial support to low-income home buyers in rural communities or farm communities.
533
Section 502 Loans =
USDA Loans
534
What is another name for a USDA Loan?
Section 502 Loans
535
What loans are 100% fianncing?
USDA Loans/Section 502 Loans
536
Rural
can include small towns up to 35,000 people.
537
WHere does the money come from for a USDA Loan?
The Department of Agriculture
538
Who administers USDA Loans/Section 502 Loans?
The Department of Agriculture
539
Do USDA Loans have a max loan amount?
no
540
Do USDA loans have a PPP fee?
no
541
What is the late fee for USDA Loans?
4% of the P&I Only
542
What are the types of appraisal approaches?
1. Sales Comparison/Market Approach
2. Cost Approach/Replacement Cost Approach
3. Income Approach/Capitalization Approach
543
Sales Comparison Approach =
Market Approach
544
Sales Comparison/Market Approach
Compares property being appraised with other similar properties (comparables/comps) sold recently in the same market area; best for residential properties.
545
What appraisal approach is best for residential properties?
Sales Comparison/Market Approach
546
How many comparables/comps are required for a sales comparison approach/market approach? Why?
Minimum of 3 comparables/comps.
Ensures an accurate appraisal from sufficient data.
547
Cost Approach =
Replacement Cost Approach
548
Cost Approach/Replacement Cost Approach
Calculates cost of the land, site improvements, and to build the structure, any depreciation, and best used for relatively new construction, vacant land, and unusual or special purpose properties with few or no comparables and that do not produce income. Also used when evaluating the cost to replace property that was damaged due to natural disasters.
549
What does the cost/approach/replacement cost approach calculate?
Cost of land, site improvements, and to build the structure and any depreciation.
550
What is the cost approach/replacement cost approach best used for?
Relatively new construction vacant land, and unusual or special purpose properties with few or no comparables and that do not produce income. When evaluating the cost to replace property that was damaged due to natural disasters.
551
Income Approach =
Capitalization Approach
552
Income Approach/Capitalization Approach
Estimates values by analyzing current or potential revenue compared it to other similar properties; best for commercial or investment properties.
553
What is the purpose of the income approach/capitalization approach?
Estimates value by analyzing current or potential revenue compares it to other similar properties.
554
What is the income approach/capitalization approach best used for?
Commercial or Investment Properties.
555
If a borrower is self-employed what employment documentation is required?
Personal and Corporate Tax Returns (Min. of 2 years)
556
If a borrower is a wage earner, what employment documentation is required?
Continuous employment for 2 years in the same field (W-2, Tax Returns, Paystubs); if not, changes for advancement or special education and training is acceptable.
557
What source of income is optional for the borrower to use?
Alimony
Child Support
Maintenance
558
What law must accept alimony and/or child support?
ECOA - Equal Credit Opportunity Act
559
For tax fee/public assistance income, how much can be grossed up?
25%
560
In order for the borrower to use alimony and/or child support, what is required?
Must continue for 3 years.
561
Tax Free/Public Assistance income MUST be grossed up by how much?
25%
562
If the child is over 18 and NOT in college, can the borrower still use child support income for their loan?
no
563
What is rental income calculated by? Why?
75%
To allow for vacancy loss of 25%.
564
What is a 4506-T?
Document used to order a transcript of the borrowers tax return.
565
What is an 8821?
Document used to get the full copy of a tax return.
566
To do any income calculation, what should you start with?
Gross monthly income
567
What is the difference between bi-weekly and bi-monthly?
Bi-weekly = 26
Bi-monthly = 24
568
For any math problem, what figure do you use, the sales price or the appraised value?
Which ever is lower
569
Wage income calculation?
Hourly Wage x Hours worked per wk x 52 (weeks per yr) / 12
570
Weekly income calculation?
of weeks x 52 (weeks per yr) / 12
571
Bi-weekly income calculation?
Bi-weekly pay x 26 (# of paydays per yr) / 12
572
Semi-Monthly/Bi-Monthly income calculation?
Pay x 24 (# of paydays per year) / 12
573
LTV Calculation?
1st loan amount / Lesser of the sales price or appraised value
574
The combined loan-to-value (CLTV) calculation?
(1st loan amount + 2nd loan amount) / lesser of the appraised value or sales price
575
If you have a home that has an appraised value of $120,000, a sales price of $125,000 and the loan amount on the 1st TD of that home is $90,000 and the loan amount on the 2nd TD is $10,000.
What is the LTV? What is the CLTV?
$90,000 / $120,000 = 0.75 or 75% LTV
$90,000 + $10,000 = $100,000
$100,000 / $120,000 = 0.8333 or 83% CLTV
576
Front End Ratio =
Housing Expense Ratio (HER)
577
Front End Ratio/Total Obligations Ratio (TOR)
The relationship of the borrower's total monthly housing expense (PITI) to income, expressed as a percentage.
578
Formula for Front End Ratio/Housing Expense Ratio?
PITI / Gross Monthly Income = Ratio %
579
Back End Ratio =
Total Obligations Ratio (TOR)
580
Back End Ratio/Total Obligations Ratio (TOR)
The relationship of the borrowers total monthly debt obligations (PITI + long term debts) to income, expressed as a percentage.
581
How many payments allows you to not count for the back end ratio/total obligations ratio?
10 payments or less do not count, unless its a lease you have to count every time.
582
Formula for Back End Ratio/Total Obligations Ratio (TOR)?
(PITI + Debt) / Gross Monthly Income = Ratio %
583
What debt should you calculate in your equations?
only calculate debt that shows up. on the credit report.
584
Smith's annual income is $60,000. The expected PITI is $1,550 and monthly recurring debt payments are $450. What is the borrowers front-end ratio and back end ratio?
$1,550 / $5,000 = 0.31 or 31% Front End.
$1,550 + $450 = $2,000
$2,000 / $5,000 = 0.4 or 40% Back End
Answer: 31/40
585
How to determine maximum mortgage amount for an FHA and Conv. loan?
1. Monthly gross income x Front Ratio = Max PITI.
2. (Monthly gross income x Back Ratio) - debt = Max PITI
3. The lower of the 2 is the answer to the problem.
586
A borrower has a stable monthly income of $4,000 and recurring debts of $600. If he is getting an FHA loan, what's the maximum monthly payments for which he would qualify?
A - $1,054
B - $1,120
C - $1,240
D - $1,462
B - $1,120
1.
$4,000 x .31 = $1,240
2.
$4,000 x 0.43 = $1,720
$1,720 + 600 = $1,120
3.
Whichever is lower of the 2 = $1,120
587
FHA Qualifying Ratio?
31/43
588
What do you do if they are asking you to calculate a ratio?
Divide
589
What do you do if they are asking you to calculate a payment?
Multiply
590
Fraud
misrepresentation, concealment, or omission of material facts
591
Actual Fraud
Intent to deceive
592
Constructive Fraud
Unintentional; the result of carelessness or negligence.
593
Mortgage fraud
Any misrepresentation or concealment used in an attempt to obtain a mortgage loan.
594
What is another name for mortgage fraud?
Consumer fraud
595
What are the differences between actual fraud and constructive fraud?
Actual fraud is intentional and constructive fraud is unintentional.
596
Fraud for Property (Consumer Fraud)
Borrower's misrepresented info on loan applications to qualify such as, income, expenses, lying about the property being owner occupied versus tenant occupied, lying about the source of income of the down payment.
597
Who commits fraud for property?
Homeowners, potential consumers, homebuyers
598
Who commits fraud for profit?
Industry insiders
599
Fraud for Profit
More sophisticated version of mortgage fraud because it involves real estate agents, appraisers, lenders, and closing agents or attorneys.
600
What are examples of fraud for profit?
flipping, straw buyers, bogus sales, inflated appraisals, and air loans.
601
Air Loan
Non-existent loans and no-collateral loans.
602
Deed Scam
Forged seller's signature on the deed. Properties is fraudulently transferred and deed recorded.
603
Double Sold Loans
Primary mortgage holder sells loan to fraudulent company for servicing. The borrower signs multiple copies of the same application or documents that the loan originator submits to different lenders.
604
Unrecorded or Silent Second
Buyer gives a seller a second mortgage without informing the lender or makes the lende aware but never intends to file the lien of to make any payments to the seller agreement.
605
Equity Skimming
Make loans or rescues knowing that the borrower will not be able to pay.
606
Loan Flipping
Refinance with fee-rich loan that has no benefits to the borrower.
607
Straw buyer
A person who makes a purchase on behalf of another person. They are used when the real buyer cannot complete the transaction for some reason.
608
Bait and Switch
Alluring but insincere offer to sell product or service. Purpose is to switch consumers from buying advertised product.
609
Bona Fide Offer
Refusal of advertiser to show, demonstrate or sell product offered. Disparagement of advertised product. Showing or demonstrating product that is defective, unusable, or impractical for purpose represented.
610
What law created the SAFE Act?
HERA - Housing & Economic Recovery Act
611
What does HERA stand for?
Housing & Economic Recovery Act
612
What does SAFE Act stand for?
Secure & Fair Enforcement Act - for mortgage licensing act
613
What does the N stand for in NMLS?
Nationwide
614
What is the SAFE Act also known as?
Title V (Title 5) of HERA
615
Secure & Fair Enforcement Act (SAFE)
Requires states to implement an MLO licensing process that meets certain standards through the nationwide mortgage licensing system and registry (NMLS or NMLSR).
616
What does the R stand for in NMLSR?
Registry
617
What 2 entities created the entire NMLS?
CSBS - Conference of State Bank Supervisors
AARMR - American Association of Residential Mortgage Regulators
618
Who establishes minimum standards for licensing or registration of all MLO's?
CSBS - Conference of State Bank Supervisors
AARMR - American Association of Residential Mortgage Regulators
619
What does an LO (Loan Originator) rol consist of?
1. Takes a residential mortgage loan application.
2. Offers or negotiates terms of a residential mortgage loan for compensation or gain.
620
When do you need an LO License?
1. Takes a residential mortgage loan application.
2. Offers or negotiates terms of a residential mortgage loan for compensation or gain.
621
What do you not need an LO (Loan Originator) license?
1. Administrative or clerical tasks.
2. Extending credit on timeshare plans.
3. Negotiating mortgage loan for themselves or immediate family members.
4. A loan processor or UW who does not represent to the public through advertising.
5. Attorney who negotiates loan terms as an ancillary service and who aren't compensated by a LO/lender.
622
The SAFE Act requires all MLO's to be identified by a unique NMLS Identifier # either as, what?
Registered Loan Originator or State-Licensed Loan Originator
623
Registered Loan Originator
Loan Originator who is an employee of a depository institution (a bank) regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration.
624
State-Licensed Loan Originator
Loan Originator who is licensed by his or her state, registered with the NMLSR and isn't employed by a depository institution.
625
If you had an MLO license revoked in any government jurisdiction, can you get it back/requalify?
never
626
What are the MLO License qualifications when it pertains to an individual being convicted or plead guilty or nolo contendere to a felony?
1. Cannot have a felony in the past 7 years (unless it was pardoned).
2. Can NEVER have any felony involving an act of fraud, dishonesty, or a breach of trust or money laundering.
627
How many hours for pre-licensing for NMLS?
20 hours
628
How many hours of Federal Law and Regulation for NMLS?
3 hours
629
How many hours of lending standards for non-traditional mortgage products for NMLS?
2 hours
630
What do the continuing education (CE) hours consist of?
3 hours - Federal Law & Regulation
2 hours - Ethics, including Fraud, consumer protection, & fair lending
2 hours = Non-traditional mortgage products
1 hour = elective
631
Successive Year Rule
A licensed MLO may only receive credit for a CE course in the year in which the course is taken.
632
Who is in charge of MLO's?
State Regulatory Authority
633
What 3 protection options does the state regulatory authority requires each state to have in place?
1. Minimum net worth
2. Surety Bonding
3. State Recovery Fund
634
Can the state & federal regulating authorities impose a prison sentence?
no
635
What is the penalty for violating the SAFE Act for each act or ommission?
$25,000 each
636
What does the state regulatory authority provide?
Effective supervision and enforcement of the law (suspension, termination, etc) for a violation of state or federal law.
637
Who ensures all state-licensed MLO's operating in the state are registered with NMLS?
State Regulatory Authority
638
Who regularly reports violations, as well as enforcement actions to the NMLS?
State Regulatory Authority
639
Whas the authority to conduct investigations and deal with violations or complaints arising under the SAFE Act?
State Regulatory Authority
640
Who has access to such records and may interview the MLO's and related persons concerning their business?
State Regulatory Authority
641
Who issues licenses to conduct business, including the authority to write rules or regulations or adopt procedures necessary for licensing?
State Regulatory Authority
642
Who can deny, suspend, condition or revoke licenses issued under the act?
State Regulatory Authority
643
644
How many hours must and LO complete every year for continuing education (CE)?
8 hours
645
How many hours of electives for NMLS?
12 hours
646
How many hours of Ethics including fraud, consumer protection, and fair lending?
3 hours
647
Qualified Mortgage (QM)
sees if the lender qualifies for a safe harbor (legal protection / bail out money).
648
What is a safe harbor?
legal protection / bail out money
649
What does QM stand for?
Qualified Mortgage
650
Triggering Terms
if they use a number to describe credit terms and the number is not the APR, then it triggers. If they use the APR, they don't have to say anything else.
651
What is the penalty for reckless violation of TILA (Reg Z)?
$25,000 per day
652
What is another word for Interest Rate?
Note Rate or Nominal Rate
653
How can you remember Reg V?
don't you want a Very good credit report = FCRA = Fair Credit Reporting Act
654
What does FCRA deal with?
credit report / credit reporting agencies
655
FCRA --- ________________ --- Reg ____
Fair Credit Reporting Act / Reg V
