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MLO Licensing > RESPA & TILA > Flashcards

RESPA & TILA Flashcards

1
Q

What’s in The Real Estate Settlement Procedures Act (RESPA, Reg X)?

A

Home Loan Tool Kit - must be given to all borrowers on purchases.

HELOC - the booklet “When your home is on the line” must be given at the time of a HELOC application.

Closing Disclosure (CD) - On a purchase, copies of the CD must be given to both the borrower and the seller. The borrower’s copy has both the borrower and seller information.

The terms and costs are to match the LE, with a 10% tolerance

The borrower’s copy is not to be given to anyone, unless authorized by the borrower.

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2
Q

Violations of RESPA’s Section 8 anti-kickback, referral fees, and unearned fees may be subject to what penalty?

A

Fine of up to $10,000 and imprisonment for up to one year.

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3
Q

What is the purpose of RESPA?

A

To help consumers become better shoppers for settlement services.

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4
Q

What does RESPA not cover?

A

All cash sales, rental property of more than 4 units, commercial property and 25+ acre properties

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5
Q

What property type does RESPA cover?

A

1-4 unit residential property (owner occupied).

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6
Q

What are the penalties for violating RESPA?

A

Fine up to $10,000 and/or imprisonment up to 1 year

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7
Q

What is settlement service per RESPA?

A

Title insurance, appraisal, realtor commission, credit report, title report, termite certificate

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8
Q

What is the Reg Letter for RESPA?

A

Reg X

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9
Q

What does RESPA stand for?

A

Real Estate Settlement Procedures Act

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10
Q

What is the penalty for Section 8 RESPA anti-kickback rules?

A

$10,000 plus up to 1 year in jail

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11
Q

The MLO exam deals with which 4 sections of RESPA?

A

Sections 6, 8, 9 & 10

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12
Q

What is section 6 of RESPA?

A

Deals with mortgage servicers. Designed to address servicers’ obligation to correct errors and work with home buyers if payments are not being made.

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13
Q

What is section 8 of RESPA?

A

Prohibits kickbacks, fee-splitting and unearned fees.

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14
Q

What are 2 other words for unearned fees?

A

Upfront fees & advance fees

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15
Q

What is section 9 of RESPA?

A

Deals with Title Insurance.

It’s illegal for a property seller to require the buyer to use a particular title insurance company, either directly or indirectly, as a condition of the sale unless the sellers pays title fees.

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16
Q

What are treble damages?

A

Legal term that means 3 times the amount.

Section 9 of RESPA, if violated, allows buyers to sue for an amount equal to three times (treble damages) all charges made for title insurance.

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17
Q

What is section 10 of RESPA?

A

Escrow Accounts.

Sets limits on the amount that a lender may require to put into an escrow account.

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18
Q

What is the limit, each month, that lenders can require borrowers to pay into the escrow account?

A

No more than 1/12th of annual disbursement.

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19
Q

What is the limit AT CLOSING for escrow accounts per RESPA Section 10?

A

Cushion of 2 months (1/6th the annual amount).

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20
Q

What must be done to an escrow account annually per RESPA Section 10?

A

Annual Escrow Analysis

21
Q

If there is an overage after the annual escrow analysis, when does a consumer get money back?

A

If the excess is over $50 and the borrower is not delinquent (within 30 days)

22
Q

RESPA is mostly concerned with the _____ of disclosures.

A

Timing

23
Q

What are the 4 timelines under RESPA for disclosure timing?

A
  1. At or within 3 business days of application
  2. Before settlement/doc signing
  3. At settlement
  4. After settlement
24
Q

What is Higher-Priced? (Section 35 of TILA)

A
  • Triggers are 1.5% for first mortgages

- 3.5% for 2nd mortgages with no fee trigger

25
Q

What are the 8 topics under the Truth In Lending Act (TILA - Regulation Z)

Tip: A CALLM HQ (Be CALM around GodZilla/TILA)

A
  1. Annual Percentage Rate
  2. CHARM Booklet
  3. Advertising
  4. Loan Estimate (LE)
  5. Loan Officer
  6. MDIA (Mortgage Disclosure Improvement Act)
  7. HOEPA
  8. Qualified Mortgage
    Compensation
26
Q

Advertising Under TILA. What 4 items must be on all marketing materials? What also must be added if there is a number on the advertising? (mortgage amount, interest rate, etc.)

A
  1. Company Name
  2. NMLS #
  3. Phone #
  4. Address

2 additional items: Equal Housing logo and an APR

27
Q

TILA (Reg Z) deals with the following:

A

Credit, APR & Advertising of loans.

28
Q

What 2 disclosures are TILA documents?

A

Loan Estimate & Closing Disclosure

29
Q

What is the purpose of TILA?

A

Requires lenders to disclose the complete cost of credit to consumer loan applicants.

30
Q

APR is required to be disclosed by the lender under which law?

A

TILA

31
Q

What transactions does TILA apply to?

A

Payable by written agreement with MORE than 4 installments

32
Q

What law established the 3-day right of rescission rule?

A

TILA

33
Q

If it’s a HELOC or REFI and it’s a borrower’s primary residence the borrower has how many days to rescind?

A

3 (only takes one borrower to rescind for the loan to be cancelled)

34
Q

What is day 1 of the 3-day right of rescission?

A

The day AFTER the documents are signed

35
Q

If a borrower rescinds a loan how many days does the creditor have to return any money collected related to the loan?

A

20 calendar days

36
Q

How many copies of the Notice of Right to Rescind must each borrower receive?

A

2 copies

37
Q

How long must TILA disclosures be kept?

A
  • general disclosures 2 years
  • loan estimate 3 years
  • closing disclosure 5 years
38
Q

TILA disclosures include the following 6:

A
  1. Loan Estimate & Closing Disclosure
  2. CHARM booklet
  3. When Your Home is on the Line Booklet (HELOC/REFI)
  4. Notice of Right to Rescind
  5. Rate adjustments (60 days notice)
  6. An initial rate (provided 7-8 months before)
39
Q

What is another word for APR?

A

Effective Rate

40
Q

What are 2 other words for Interest Rate?

A

Note Rate & Nominal Rate

41
Q

What law created the definition for a business day?

A

TILA

42
Q

What is considered a business day?

A

All calendar days except Sundays and legal public holidays

43
Q

What is an exception to the business day rule?

A

Loan Estimates (business day is any day in which the creditor’s office is open for business)

44
Q

What is a triggering term?

A

If you use a number to describe credit terms and that number is not the APR then it triggers

45
Q

What 3 items must an advertisement include if it contains a triggering term?

A
  1. Amount or % of down payment
  2. Terms of repayment
  3. Annual Percentage Rate or APR
46
Q

If a lender issues a Qualified Mortgage (QM) - it receives ___________ (legal protection) if the borrower later goes into foreclosure.

A

Safe Harbor

47
Q

What’s the QM rule?

A

Creates new categories of mortgages and imposes minimum underwriting standards for most home loans, which is referred to as the ability-to-repay requirements

48
Q

What are the most prominent 8 clauses of the QM rule?

A
  1. No-doc/NINA loans not allowed (must go full doc)
  2. Max DTI 43%
  3. Caps points/fees at 3%/3 points
  4. Loan terms over 30 years prohibited
  5. Interest only/Negative amortization not allowed
  6. Prohibits use of teaser rates in affordability calculations
  7. ARMS be underwritten to the max interest rate that can be charged during the first 5 years of the loan term
  8. Prepayment penalties are prohibited

MLO Licensing (11 decks)

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