Texas License Law and Regulation (20%)

Question 1

Under the Mortgage Banker Regulation Act what persons are required to be registered?

Answer 1

Under the MBRA, unless exempt, a person may not conduct mortgage banker business in Texas without being registered

Question 2

The following persons are exempt from the requirement to register as a mortgage banker

Answer 2

 A federally insured bank, savings bank, savings and loan association, Farm Credit System Institution, or credit union, or a subsidiary of one of those entities
 A licensed consumer lender
 The state or a governmental agency, political subdivision, or other instrumentality of the state, or its employee, acting within the scope of his/her employment

Question 3

To register as a mortgage banker, the applicant must pay a….

Answer 3

$600 nonrefundable registration fee, which includes the NMLS processing fee of $100

Question 4

What is a fund that has been established to reimburse residential mortgage loan applicants for actual damages incurred because of acts committed by residential mortgage loan originators licensed by Texas when the act was committed?

Answer 4

Recovery Fund

Question 5

How many days after the date the information changes must a mortgage banker update personal information contained in the registration?

Answer 5

30 days

Question 6

When does the license of a mortgage banker expire? And how much is the renewal fee?

Answer 6

1. December 31st

2. $500

Question 7

The following individuals or entities, and employees of those entities when acting for the benefit of those entities, are exempt from the RMLA: (1 of 3)

Answer 7

 A registered mortgage loan originator when acting for:
o A depository institution;
o A subsidiary of a depository institution that is owned and controlled by the depository institution, and regulated by a federal banking agency; or an institution regulated by the Farm Credit Administration
 An individual who offers or negotiates the terms of a residential mortgage loan with or on behalf of an immediate family member of the individual

Question 8

The following individuals or entities, and employees of those entities when acting for the benefit of those entities, are exempt from the RMLA: (2 of 3)

Answer 8

 A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney:
o Takes a residential mortgage loan application, and
o Offers or negotiates the terms of a residential mortgage loan
 An individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that serves as the individual’s residence
 A nonprofit organization providing self-help housing that originates zero interest residential mortgage loans for borrowers who have provided part of the labor to construct the dwelling securing the loan

Question 9

The following individuals or entities, and employees of those entities when acting for the benefit of those entities, are exempt from the RMLA: (3 of 3)

Answer 9

 A mortgage banker
 Any owner of residential real estate who in any 12-consecutive-month period makes no more than five residential mortgage loans to purchasers of the property for all or part of the purchase price of the residential real estate against which the mortgage is secured
 An entity that is:
o A depository institution;
o A subsidiary of a depository institution that is: (i) owned and controlled by the depository institution; and (ii) regulated by a federal banking agency; or
o An institution regulated by the Farm Credit Administration

Question 10

Certain individuals are exempt from RMLO licensing requirements, if the individual:

Answer 10

 In any 12-consecutive-month period originates five or fewer closed residential mortgage loans exclusively for a single federally chartered depository institution and the loans are closed within that period
 Is contractually prohibited from soliciting, processing, negotiating, or placing a residential mortgage loan with a person other than the depository institution described above, and
 Is sponsored by a life insurance company, or an affiliate of the company, authorized to engage in business in Texas

Question 11

If the Commissioner determines that the completion of an application for a mortgage loan originator license will be delayed significantly due to the need for additional information to render the application complete and the Commissioner has determined that there is no reason to believe that the application will be denied, the Commissioner may issue a…

Answer 11

Provisional license

Question 12

Before he/she can engage in mortgage loan origination activities, a residential mortgage loan originator must be ________ by a licensed mortgage entity, which is responsible for all of his/her actions.

Answer 12

sponsored

Question 13

Who can terminated the sponsorship relationship for a loan originator?

Answer 13

by either the loan originator or the sponsoring licensee by notifying the Commissioner through the NMLS; the sponsorship remains in effect until a notification has been made. Once the sponsorship is terminated, the loan originator’s license becomes inactive.

Question 14

The Texas S.A.F.E. Act establishes minimum standards for the licensing of mortgage loan originators. The Commissioner cannot issue a license to an applicant unless the applicant can meet the following standards:

Answer 14

 Has not had a residential mortgage loan originator license revoked in any governmental jurisdiction
 Has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court:
o During the seven-year period preceding the date of application, or
o At any time preceding the date of application, if the felony involved an act of fraud, dishonesty, breach of trust, or money laundering
 Demonstrates financial responsibility, character, and general fitness so as to command the confidence of the community and to warrant a determination that the individual will operate honestly, fairly, and efficiently as a residential mortgage loan originator
 Provides satisfactory evidence that the applicant has completed pre-licensing education courses
 Provides satisfactory evidence of having passed both the state and national components of the licensing written test, and
 Has paid a recovery fund fee or obtained a surety bond as required under the appropriate state regulatory law

Question 15

In addition to the RMLO license, the Texas Department of Savings and Mortgage Lending issues and oversees RMLO licenses related to specific types of residential mortgage loan companies. These include:

Answer 15

 Mortgage Companies
 Credit Union Subsidiary Organizations, and
 Auxiliary Mortgage Loan Activity Companies

Question 16

A determination that an individual has not shown financial responsibility may include:

Answer 16

 An outstanding judgment against the individual, other than a judgment imposed solely as a result of medical expenses
 Outstanding tax lien or other governmental liens and filing
 A foreclosure during the three-year period preceding the date of the license application
 A pattern of seriously delinquent accounts during the three-year period preceding the date of the application

Question 17

The Commissioner will establish, administer, and maintain one ______ ______ for the purposes of claims by applicants for residential mortgage loans against residential mortgage loan originators.

Answer 17

recovery fund

Question 18

With the recovery fund The Commissioner has the authority to:

Answer 18

 Set fee amounts for deposit in the recovery fund, and
 Enforce disciplinary action for a person’s failure to comply with the applicable provisions of those chapters relating to the recovery fund and with applicable rules adopted under those chapters

Question 19

For those RMLOs who are not acting in that capacity as employees for mortgage bankers, the use of the recovery fund is limited to…

Answer 19

to reimbursement for out-of-pocket losses caused by the licensee’s violation.

Question 20

(Recovery Fund) If the residential mortgage loan originator acts in that capacity as an employee of a mortgage bank, then reimbursement may be made to…

Answer 20

residential mortgage applicants if the licensee causes actual damage to the applicant.

Question 21

Amounts in the recovery fund may be invested and reinvested in the same manner as funds of the Employees Retirement System of Texas, and the _____ from these investments must be deposited to the credit of the fund.

Answer 21

Interest

-An investment may not be made if the investment will impair the necessary liquidity required to satisfy judgment payments awarded to residential mortgage applicants

Question 22

On an application for an original license or for renewal of an RMLO license, the applicant, in addition to paying the original application fee or renewal fee, must pay a fee in an amount determined by the Commissioner. How much is the fee?

Answer 22

not to exceed $20. The fee will be deposited in the recovery fund.

Question 23

If the balance remaining in the recovery fund at the end of a calendar year is more than ___ million, the amount of money in excess of that amount will be available to the Commissioner to offset the expenses of participating in and sharing information with the NMLS.

Answer 23

$3.5 million

Question 24

An application for the recovery of actual damages from the recovery fund may not be filed after the ______ _______ of the date of the alleged act or omission causing the actual damages or the date the act or omission should reasonably have been discovered.

Answer 24

second anniversary

Question 25

If the preliminary determination is not otherwise resolved by agreement and is not disputed by written notice to the Commissioner before the _____ after the notification date, the preliminary determination automatically becomes final and the Commissioner shall make permitted payment from the recovery fund.

Answer 25

31st day

Question 26

A person entitled to receive payment out of the recovery fund is entitled to receive reimbursement of actual, out-of-pocket damages. A payment for claims:

Answer 26

 Arising out of the same transaction, including interest, is limited in the aggregate to $25,000, regardless of the number of claimants, and
 Against a single person licensed as a residential mortgage loan originator arising out of separate transactions, including interest, is limited in the aggregate to $50,000 until the fund has been reimbursed for all amounts paid

Question 27

For annual continuing education, the S.A.F.E. Act requires state-licensed RMLOs to complete:

Answer 27

 Three hours of Federal law and regulations
 Two hours of ethics that must include instruction on fraud, consumer protection, and fair lending issues
 Two hours of training related to lending standards for the nontraditional mortgage product market, and
 One hour of undefined instruction on mortgage origination

Question 28

The following restrictions apply to credit granted for continuing education courses:

Answer 28

 Loan originators are only awarded credit for a course in the year in which the course is taken
 In order to receive credit for continuing education courses, loan originators may not take the same course twice in one year or in successive years

Question 29

When must the residential mortgage loan originator and the residential mortgage loan company notify the Commissioner if the sponsorship of a residential mortgage loan originator is terminated? If another loan company wants to sponsor the LO how much is the fee?

Answer 29

• Immediately

- $25

Question 30

Any person licensed under the RMLA must notify the Commissioner not later than the ____ day after the date of any change of the person’s name for the issuance of an amended license

Answer 30

10th

Question 31

A mortgage banker employee who is a residential mortgage loan originator shall notify who in writing of a change of sponsorship? How much is the fee?

Answer 31

the Commissioner or authorized designee in writing of a change of sponsorship. The notice must be accompanied by a fee of $25.

Question 32

An LO license issued under RMLA is valid through?

Answer 32

December 31st

Question 33

A person whose license has expired may not engage in activities that require a license until the license has been renewed. A person who is otherwise eligible to renew a license, but has not done so before January 1, may renew the license before _______ by paying the Commissioner a reinstatement fee in an amount equal to _____ of the required renewal fee.

Answer 33

• March 1st

- 150%

Question 34

If the Commissioner denies an application for licensure or renewal. How many days must the applicant request a hearing on the adverse action?

Answer 34

-Within 10 days of notice

Question 35

How many days must a hearing be set after the request of notice is received?

Answer 35

90 days

Question 36

The person requesting a hearing must pay a deposit in an amount not to exceed _____.

Answer 36

$500, refundable if the person prevails

Question 37

A person whose license application has been denied may not apply again for a period of ___ _____ from the date of the denial, unless permitted by the Commissioner because of special circumstances.

Answer 37

two years

Question 38

When will the Commissioner send a renewal notice to licensees?

Answer 38

at least 60 days prior to expiration.

Question 39

How much must a loan company pay a fee of for each branch office?

Answer 39

$50

Question 40

Before the ____ day preceding the effective date of an address change, a residential mortgage loan company must notify the Commissioner in writing of the new address accompanied by a change of address fee of ___.

Answer 40

• 10th

- $25

Question 41

How much must a registered financial services company Pay an annual registration fee in an amount determined as follows:

Answer 41

-0 - 2,000 exclusive agents:$200,000
o 2,001 - 2,500 exclusive agents: $225,000 fee
o 2,501 - 3,000 exclusive agents: $250,000 fee
o 3,001 - 5,000 exclusive agents: $300,000 fee
o 5,001 or more exclusive agents: $350,000 fee

Question 42

How long must licensees maintain loan records at the location specified on their application?

Answer 42

3 years

Question 43

Loan originators are required to maintain a file for each loan application. The file must contain the following:

Answer 43

 A copy of the signed and dated residential mortgage loan application (including any attachments, supplements, or additions)
 Either a copy of the signed closing statement or documentation of the timely denial or other disposition of the application for a mortgage loan
 A copy of the disclosure statement required by the RMLA (See under Required Conduct in the Compliance section)
 A copy of each item of correspondence, each evidence of any contractual arrangement or understanding (including, but not limited to, any interest rate lock-ins or loan commitments), and all notes and memoranda of conversations or meetings with any residential mortgage loan applicant or any other party in connection with that mortgage loan application or its ultimate disposition
 A copy of the notice to applicants required by Finance Code § 343.105 (Notice of Penalties for Making False or Misleading Statement) (See under Required Conduct in the Compliance section)

Question 44

Loan originators must also maintain a Mortgage Transaction Log, maintained on a current basis containing:

Answer 44

 The name of each mortgage applicant and how to contact him/her
 The date of the residential mortgage loan application
 A description of the disposition of the application for a residential mortgage loan
 The identity of the person or entity who initially funded and/or acquired the residential mortgage loan and information as how to contact them
 The name of the originator and NMLS ID

Question 45

How often must Loan originators maintain a Mortgage Transaction Log?

Answer 45

7 days from the date on which the matters they relate to occurred

Question 46

How will The Commissioner or Department staff provide notice when they conduct periodic inspections of residential mortgage loan originators to determine compliance with the Act

Answer 46

will provide the licensee with advance notice via mail or email.

Question 47

Whenever the Department must travel out-of-state to conduct an examination of a residential mortgage loan originator or mortgage company, who is responsible for the cost?

Answer 47

the mortgage company will be required to reimburse the Department for the actual cost the Department incurs in connection with such out-of-state travel including, but not limited to, transportation, lodging, meals, employee travel time, telephone and fax communication, courier service and any other reasonably related costs.

Question 48

How often must Companies must submit at least their application and origination activity information?

Answer 48

On a quarterly basis through NMLS