The Loan Process Flashcards
What are the two types of mortgage fraud?
Profit and Property
What is fraud for profit?
Criminal scheme for netting large sums of money; usually involves multiple people
What is fraud for property?
Misrepresentation of income or down payment info in order to obtain property
What are flip sales?
House is bought and immediately resold at a much higher price
What is equity skimming?
Landlord collects rent for a property but doesn’t pay mortgage; already recouped initial investment by time lender is aware
What is a Straw Buyer?
Individual is paid to purchase property for someone who is ineligible
What is contract kiting?
2 sales contracts are drawn up for different amount, the higher of which goes to the lender
What is churning?
Several people purchase homes in same neighborhood and then sell them to each other to inflate the price
What is a builder bailout?
Builders need to sell inventory to pay off a construction loan, sells to straw buyer
What the impact of fraud on the mortgage industry?
$30 bil in losses per year; average loss per loan is 50%
What are the consequences of mortgage fraud?
Loss of professional licensing, fines and financial restitution, seizure of property, prison sentences
Equal Credit Opportunity Act (ECOA)
Regulation B; To promote availability of credit to all creditworthy applicants without discrimination
Fair Housing Act
Prevents discrimination
Home Mortgage Disclosure Act (HMDA)
Regulation C; provides data for determining if lenders are serving the housing needs of their communities
Truth in Lending Act (TILA)
Regulation Z; Provides uniform disclosures so borrowers can make informed decisions about loans (Loan Estimate); also gives borrowers right to cancel credit transactions involving a lien on their principal dwelling
Fair Credit Reporting Act (FCRA)
Requires procedures for providing info that is fair regarding confidentiality, accuracy, and relevancy
Flood Disaster Protection Act (FDPA)
Makes borrowers aware if they are in flood zone
Community Reinvestment Act (CRA)
Regulation BB; Assists depository institutions in meeting credit needs of the community
Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)
Sets minimum standards for licensing and registration of mortgage officers
Nationwide Mortgage Licensing System and Registry
NMLS, all mortgage loan officers should be registered here
What are the two types of disclosures?
General on federal level; state specific
What is a commitment letter?
Indicates loan has been approved and lists conditions for approval to be valid
What does an Automated Underwriting System do?
Evaluates mortgage risk consistently and objectively to eliminate potential discrimination
What are the loan statuses from DU?
Approve/Eligible; Approve/Ineligible; Refer/Eligible; Refer with Caution/Ineligible; Out of Scope
What are the loan statuses for LPA?
Accept; Caution; Refer
What are four outcomes of underwriting?
Clear Approval; Approval with Conditions; Suspense Letter; Denial
When will the majority of conditions be met?
At closing
Who should the borrower be able to contact?
Loan Officer, Processor, and Assistant (if applicable)
How many days can the borrower review the closing disclosure?
3 days before closing
What does the closing disclosure do?
Provides the final loan terms and projected payments, closing costs, other costs, summary of the transaction, and other disclosures
