NMLS Exam Prep Flashcards
Where will your unique identifier number appear?
1003 Loan Application, Promissory Note, Mortgage Trustees
Where will your unique identifier # not appear?
Appraisal reports
Is the NMLS # and the Unique Identifier the same thing?
yes
How many hours of the NMLS pre-licensing must you complete?
20 hrs
How many hours of continuing education must you complete and how often?
8 hours every year
What is the state MLO test called?
National Exam w/ UST
What does UST stand for?
Uniform State Test
What is.a MU4?
The individual application you must complete.
What is the name of the individual application?
MU4
What are the NMLs steps?
- 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.
What is the passing score for the exam?
75% or higher
What is the waiting period before re-taking a failed test?
30-days
What is the waiting period if you fail the 3rd test?
6 months
To keep your license current, how many hours must you take and by when?
8 hours no later than Dec. 31st.
When does your license expire? Exception?
Dec. 31st each year. Unless you renew during the renewal period.
When is the renewal period?
Nov.1st - Dec. 31st
If you received your license during Nov. 1st - Dec. 31st, do you have to renew your license?
No
How long is your license valid for? Explain.
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.
How many questions are on the test? How many are scored?
125 questions and 115 scored
What law says the borrower has 90 days to request a copy of the appraisal?
Equal Credit Opportunities Act / ECOA/ Reg B
What law says the lender has 30 days to deliver the appraisal to the borrower?
Equal Credit Opportunities Act / ECOA / Reg B
How many days/months does the borrower have to request a copy of the appraisal?
90 days / 3 months
How many days/months does the lender have to provide the appraisal to the borrower?
30 days / 1 month
Appraisal = ________
value
Challenge the value = ________
ECOA
An application for credit can be denied based on ______/_______.
appraisal/value
Which regulation/law allows the borrower to challenge the value stated in the appraisal?
ECOA / Reg B / Equal Credit Opportunities Act
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.
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
Reg B — ________ —– ECOA —- ________________
Be Equal / Equal Credit Opportunities Act
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.
Reg C — _______ — HMDA — _______________
C your home / Home Mortgage Disclosure Act
HMDA = ______
Reg C
Explain Reg C - HMDA.
The law that allows regulators to see where possible discrimination takes place
Where is HMDA information found/collected?
Section 10 (X) of the 1003 loan application
Reg ___— RESPA — ________________
X / Real Estate Settlement Procedures Act
Reg ___ — TIL/TILA — __________________
Z / Truth in Lending Act
_____ the godzilla = Reg ___
TILA / Reg Z
What does TILA deal with?
credit, APR, & advertising of consumer loans
What law deals with credit, APR, and advertising?
Reg Z / TIL/TILA / Truth in Lending Act
What does HPA stand for?
Homeowners Protection Act
What does HPA deal with?
PMI - Private Mortgage Insurance
Does HPA deal with PMI or MIP?
PMI - Private Mortgage Insurance
PMI is on what type of loans?
Conventional Loans
Does PMI related to government loans?
no
When is the borrower required to pay PMI?
when the borrower puts 20% or less down.
Who does PMI protect/cover?
the lender
What does SAFE stand for?
Secure and Fair Enforcement Act
What does HERA stand for?
Housing and Economy Recovery Act
Which law created the SAFE act?
HERA - Housing and Economy Recovery Act
What does FCRA stand for?
Fair Credit Reporting Act
Which regulation is FCRA?
Reg V
What does ECOA deal with?
credit application
What does FACT stand for?
Fair & Accurate Credit Transactions
What is another acronym for FACT Act?
FACTA
Are FACT Act and FACTA the same thing?
yes
What law deals with identity theft?
FACT Act / FACTA
Which law has a section of rules?
FACT Act / FACTA
What is the rule section for FACT Act / FACTA?
Section 114 Rules
What are section 114 rules?
red flag identity theft rules
What does GLBA stand for?
Gramm Leach Bliley Act
Which law does SPF relate to?
GLBA - Gramm Leach Bliley Act
What does SPF stand for?
Safeguarding Policy, Pre-texting Policy, and Financial Privacy Policy
What are the 3 policies under the GLB Act?
Safeguarding, Pre-texting, Financial Privacy
What laws says there must be a safeguarding policy?
Gramm Leach Bliley Act (GLBA)
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.
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).
Which law requires a pretexting policy?
GLBA - Gramm Leach Bliley Act
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.
What law says there must be a financial privacy policy?
GLBA - Gramm Leach Bliley Act
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)
What does HOEPA stand for?
Home Ownership and Equity Protection Act
What are the 2 types of HOEPA Loans?
Section 32 / Section 35
Are HOEPA loans considered hard money loans?
yes
HOEPA Section 32 Loans are equal to = _____________.
High Cost Loans
HOEPA Section 35 Loans are equal to = __________
High Priced Loans
What law are HOEPA Section 32 and HOEPA Section 35 related to?
TILA - Reg Z
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.
Which law regulates High Cost Loans and High Priced Loans?
TILA - Reg Z
What does AfBA/ABA stand for?
Affiliated Business Arrangement
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.
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
When must the AfBA/ABA disclosure be made?
immediately or prior to docs being signed
What year was the civil rights act?
1964
If you get any question that has civil rights act in it, what is the answer going to relate to?
race
Which of the following can you not discriminate against?
AGE
RELIGION
RACE
ALL OF THE ABOVE
all of the above
Which of the following according to the civil rights act, can you not discriminate against?
AGE
RELIGION
RACE
ALL OF THE ABOVE
race
Explain an Escrow Account.
Includes taxes and insurance - this account is created when you are making a payment for all.
What are other names for an Escrow Account?
impound account / reserve account
Are an Escrow Account, Impound Account, and Reserve Account all the same thing?
yes
What type of a mortgage was created if you have an escrow account/impound account/reserve account?
budget mortgage
what is another name for a budget mortgage?
PITI mortgage
what does PITI stand for?
principle, interest, taxes & insurance.
Consumer Financial Protection Bureau (CFPB)
purpose is to promote financial stability through accountability and transparency.
What does CFPB
Consumer Financial Protection Bureau
What acts/laws created the CFPB?
Dodd-Frank Act & Consumer Finance Protection Act
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)
Who does not report to the CFPB? Why?
The Fair Housing Act. Because it doesn’t deal with money and banking, its about discrimination.
RESPA (Reg X) Real Estate Settlement Protection Act
The purpose of RESPA is to help consumers become better shoppers for settlement services.
What regulation is RESPA?
Reg X
What does RESPA stand for?
Real Estate Settlement Protection Act
What are settlement services?
escrow stuff = RESPA/Reg X
What type of property does RESPA deal with?
1-4 Unit Residential Property (owner occupied)
What is another name for residential property?
owner occupied
What law deals with owner occupied 1-4 Unit Residential Properties?
RESPA (Reg X) - Real Estate Settlement Protection Act
Do you need RESPA (Reg X) for commercial properties?
no
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).
What is a property of 25 acres or more considered?
Agricultural property
What is the penalty for violating RESPA (Reg X)?
Fine up to $10,000 and/or imprisonment up to 1 year.
What law has a penalty of up to $10,000 and/or 1 year of imprisonment?
RESPA (Reg X) - Real Estate Settlement Protection Act
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.
What does Section 6 of RESPA (Reg X) deal with?
mortgage servicing and mortgage servicing abuses.
Mortgage Servicer
someone who has been hired to handle the payments and pay taxes/insurance
What law deals with mortgage servicing and mortgage servicing abuses?
Section 6 of RESPA (Reg X)
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).
What law deals with kickbacks, fee-splitting, and unearned fees?
Section 8 of RESPA (Reg X)
Kickbacks
Referral fees
Thing of Value
tickets, purses, money, anything expensive.
Fee Splitting
splitting fees with an unlicensed person
Unearned Fees
upfront fees/advanced fees
If you take any unearned fees (upfront fees) from a borrower/client, which law are you violating?
Section 8 of RESPA (Reg X)
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.
Any question that deals with title insurance deals with what law?
Section 9 of RESPA (Reg X)
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.
Which law allows borrowers to sue a lender in regard to title insurance?
Section 9 of RESPA (Reg X)
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.
What are other words for escrow account?
impound accounts
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)
At closing, how much can a lender allow into an escrow account?
cushion of 2 months = 1/6th the annual amount.
How much of a cushion?
2 months
Which law requires an annual escrow analysis?
Section 10 of RESPA (Reg X)
At what point is a lender required to return any money in regards to an escrow account?
if they took $50 too much.
What information is necessary to have a complete application?
- Name of borrower(s)
- SSN of ea. borrower
- Gross mo. income of borrower.
- Loan Amount
- Address of Subject Property
- Estimate of property value.
For the subject property for a purchase, what information/exception is acceptable? What is not allowed?
- UNK & TBD (allowed)
- N/A (not allowed)
Once a complete application is obtained and the borrower has indicated their intent to proceed, what is required?
initial disclosures
When should initial disclosures be provided?
once all 6 required information is received from borrower to have a complete application
What are the instances when the lender doesn’t have to provide initial disclosures?
- the applicant withdraws the application (must be within the 1st 3 days)
- the lender turns down the loan before the 3 business day period end.
Does RESPA deal with timing?
yes
What are disclosures?
notices the borrower must get
Before settlement =
before doc signing
Settlement =
doc signing
At settlement =
at the doc signing
What are the initial disclosures?
- Home Loan Toolkit
- Loan Estimate
- Mortgage Servicing Disclosure Statement
- List of HUD Approved Home Counselors
When are the initial disclosures required to be delivered?
at or within 3 business days of application
Home Loan Toolkit
RESPA Doc. For purchases ONLY; a booklet given to the borrower and explains how to purchases work.
When should a borrower receive the home loan toolkit?
at or within 3 business days of application
Loan Estimate
TILA document but RESPA says when the borrower must receive it. Formally the Good Faith Estimate (GFE).
What law says a borrower must receive a Loan Estimate?
TILA (Reg Z) - Truth in Lending Act
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
Mortgage Servicing Disclosure Statement
Intent. Explains if the lender intends to service the loan themselves or will pass on to someone else.
List of HUD Approved Home Counselors
Allows the borrower to have someone not associated with the loan process regarding the loan, terms, etc.
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)
Closing Disclosure (CD)
formally the HUD
When do borrowers receive closing disclosures (CD)?
3 days before closing and again at the doc signing
Consummation =
doc closing
What law says the borrower must receive a Closing Disclosure (CD)?
TILA (Reg Z) - Truth in Lending Act
What law says the borrower must receive the closing disclosure 3 days before closing?
RESPA (Reg X) - Real Estate Settlement Protection Act
What does the borrower receive after settlement (Doc Signing )?
Escrow statement and servicing transfer statement
What does the borrower receive at settlement (doc signing)?
finalized closing disclosures and initial escrow statement
When do you need to provide the initial escrow statement?
within 45 days of closing
Annual Escrow Statement
a document the borrower receives every year that explains how much they pay taxes and insurance.
What law says you must receive the Annual Escrow Statement annually?
Section 10 of RESPA (Reg X)
What is another name for the servicing transfer statement?
Goodbye Letter
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.
When must the Goodbye Letter be provided?
15 days prior to the transfer of the loan
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
Which documents are TILA documents?
Closing Disclosure (CD)
Loan Estimate
What does the Loan Estimate combine?
Good Faith Estimate (GFE) and the Truth in Lending Statement
What can be charged prior to delivering the loan estimate form?
no fee, except the credit report fee
When should a loan estimate be delivered/mailed?
3 business days of receipt of complete application
How long is the Loan Estimate available/good for?
10 business days
What does TIP mean?
Total Interest Percentage
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
TIP
Total Interest Percentage - total interest expressed as a percent
APR
Annual Percentage Rate - total interest plus all other fees expressed as a percentage
Is the Rate Lock and The Lock the same thing?
yes
Where do you find information regarding the rate lock?
on the Loan Estimate
Is the rate lock only on the loan estimate?
yes
Closing Disclosure (CD)
actual fees, generally must contain the actual terms and costs of the transaction
What does the closing disclosure replace?
existing HUD form and the final Truth in Lending Statement
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.
Who provided the CD statement to the borrower?
The creditor (lender/bank)
Who provides the CD statement to the seller?
settlement agent (title agent)
What does CD stand for?
Closing Disclosure
What is a creditor?
bank/lender
What is a settlement agent?
title agent
When must the initial closing disclosures be delivered to the borrower?
3 business days prior to loan consummation
When must a final closing disclosure be delivered?
at loan consummation
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
What are the valid change in circumstances to cause a new 3 day waiting period?
- Changes in loans APR
- Change in the loan amount
- the addition of a PPP (pre-payment penalty)
What does TILA deal with?
credit, APR, and advertising
What law deals with credit, APR, and advertising?
TILA (Reg Z) Truth in Lending Act
What regulation is TILA?
Reg Z
Which law requires the lender to disclose the complete cost of credit to consumer loan applicants?
TILA (Reg Z) - Truth in Lending Act
TILA (Reg Z) requires lenders to disclose ____________________ to consumer loan applicants.
the complete cost
3-Day Rescission
in a HELOC/REFI, the borrower has a 3 days to change their mind (even if they sign docs)
Which law established a 3-day rescission?
TILA (Reg Z) - Truth in Lending Act
What transactions did TILA (Reg Z) establish a 3-day rescission for?
HELOC (Home Equity Line of Credit) & Refinances
What type of transactions do borrowers have a right to a 3-day rescission?
HELOC’s and Refi’s
How many borrowers does it take to have a loan cancelled?
only 1 borrower to rescind
When does the rescission period start?
the day after the documents are signed
How long does the creditor/lender have to return any money collected related to the loan?
20 calendar days
When is the deadline for a consumer to rescind the credit transaction?
until midnight of the 3rd business day
How many copies must the borrower receive of a Notice of Right to Rescind?
2 copies
If a borrower was not properly notified of the Right to Rescind, how long can the rescission period be extended to?
3 years
How many installments are needed on a transaction in order for TILA to apply?
more than 4 installments
TILA applies to transactions that are payable by written agreement with _______ installments.
more than 4
What are the only fees that may be collected prior to TILA (Reg Z) Disclosures?
credit report fees
What law only allows credit report fees to be collected?
TILA (Reg Z) - Truth in Lending Act
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.
How long must you keep the Loan Estimate?
3 years
How long must you keep the Closing Disclosure?
5 years
What do the TILA disclosures include?
- Loan Estimate and Closing Disclosure.
- Consumer Handbook on Adjustable Rate Mortgage (CHARM Booklet).
- When your Home is on the Line Disclosure (HELOC/Refi)
What does CHARM stand for?
Consumer Handbook on Adjustable Rate Mortgages
When would the borrower get the CHARM Booklet?
when they are getting an adjustable rate mortgage
When would the borrower get the When your Home is on the Line Disclosure?
if they are getting a HELOC or Refi
Which law requires the disclosure of the annual percentage rate (APR)?
TILA (Reg Z) - Truth in Lending Act
What disclosure does TILA (Reg Z) require?
Annual Percentage Rate (APR)
What does APR stand for?
Annual Percentage Rate
What is another word for APR?
Effective Rate
What are the penalties for violating TILA?
- $5,000 per day for single violation..
- $25,000 per day for reckless violation.
- $1,000,000 per day for knowingly violating TRID.
What is the penalty for a single violation of TILA (Reg Z)?
$5,000 per day
What is the penalty for knowingly violating TRID?
$1,000,000 per day
What does MDIA stand for?
Mortgage Disclosure Improvement Act
Is MDIA apart of TILA?
yes
What is another name for Mortgage Disclosure Improvement Act (MDIA)?
3/7/3 Rule
Are 3/7/3 Rule and MDIA the same thing?
yes
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.
What does consummation mean?
close/closing
What does redisclose always meant?
always 3 business days
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.
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)
1/8 is equal to
.125
1/4 is equal to
.25
Regular transaction
30 year fixed
Irregular transaction
not a 30 year fixed
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.
When do you have to redisclose for a regular transaction (30 year fixed)?
if the rate changes by 1/8 (.125) or more.
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.
When can the redisclosure period be waived?
bona fide financial emergency
Who determines a bona fide financial emergency?
the lender
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
What is a business day according to TILA?
all calendar days except sundays and legal public holidays
What law says saturday is a work day?
TILA (Reg Z) Truth in Lending Act
What law says sunday and legal public holidays are NOT working days?
TILA (reg Z) - Truth in Lending Act
What is the exception to TILA’s business day rule?
“initial loan Estimate” - any day in which the creditors office is open for business
Initial Loan Estimate
any day in which the creditors office is open for business
Does TILA also deal/mandate advertising?
yes
Difference between business day vs. calendar day?
if its 0-9 its a business day.
if its 10 or over its a calendar day.
If an advertisement contains any one of the triggering terms about the loan, that advertisement must include:
- Amount of percentage of down payment.
- Terms of Repayment.
- Annual Percentage Rate, using the term spelled out in full or APR.
What if an ad contains only APR?
no additional disclosures are required
Does triggering terms require you to redisclose?
yes
Do non-triggering terms require you to redisclose?
no
Examples of triggering terms.
- 20% down.
- Pay only $700 per month.
- only 360 payments
- 1% finance charge
- 30 year financing available
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.
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
If someone asked you questions regarding a mortgage loan and all you provided was an APR, did you violate TILA (Reg Z)?
no
If you provide a rate, % down, mo payment, or any figure associated with actual terms to help trigger a borrower, what must you include?
- Amount or percentage of down payment.
- Terms of Repayment
- Annual Percentage Rate, using that term-spelled out in full or APR.
Is a qualified mortgage (QM) apart of TILA (Reg Z)?
yes
If a lender issues a qualified mortgage (QM) and the borrower later goes into foreclosure, what do they receive?
safe harbor