question

Dodd-Frank Wall Street Reform and Consumer Protection Act

answer

Passed in July 2010 Purpose to restore responsibility and accountability in the financial system to give Americans the confidence that there is a system in place that works for and protects them while creating a sound economic foundation to grow jobs, protect consumer, rein wall street, end bailout, and prevent another financial crisis

question

2 titles of Dodd-Frank with biggest impact on mortgage

answer

title X; Consumer financial protection act This created also an independent entity known as the Consumer Financial Protection Bureau (CFPB) title XIV: mortgage reform and anti-predatory lending act

question

Consumer Financial Protection Bureau CFPB

answer

created to ensure that financial products and services americans use every day including credit cards, mortgages, and loans work better for everyone who uses them oversee federal financial laws that specifically deal with consumers protect everyone and make sure banks, credit unions, and other financial companies play by the rules Before the CFPB 7 different agencies did this, led to crash regulates independent payday lenders, private lenders and services, debt collectors, credit reporting agencies, and private student loan companies regulations are published in the CFR

question

Consumer Financial Protection Bureau Oversees:

answer

1.Real Estate Settlement Prodcedures Act (RESPA, REXPA) 2.Truth in Lending Act (TILA, aka ZILA) 3.Homeowners Protection Act (HPA) 4.Equal Credit Opportunity Act (ECOA, aka BCOA) 5.Home Mortgage Disclosure Act (HMDA) 6.Home Ownership and Equity Protection Act (HOEPA) 7.Fair Credit Reporting Act (FCRA) 8.Fair and Accurate Transactions Act (FACTA) 9.The SAFE mortgage licensing act

question

RESPA

answer

Real Estate Settlement Procedures Act

question

Real Estate Settlement Procedures Act (RESPA aka REXPA)

answer

Effective June 20, 1975 Purpose is to help consumers become better shoppers for settlement services and to eliminate unnecessary increases in the costs of settlement services due to kickbacks and referral fees HUD promulgated Regulation X; now implemented by CFPB Section 6—Protects homeowners against loan servicing abuses Section 8—Prohibits kickbacks, fee-splitting, and unearned fees Section 9—States a seller cannot require the use of particular title company Section 10—Identifies amounts that can be charged to maintain escrow accounts

question

section 6

answer

protects home owners against loan servicing abuse

question

section 8

answer

prohibits kickbacks, fee-splitting, and unearned fees

question

section 9

answer

seller cannot require the use of a particular title company

question

section 10

answer

identifies amounts that can be charged to maintain escrow accounts

question

Covered Transactions (Regulation X)

answer

covers loans secured with a mortgage placed on residential properties designed for the occupancy of 1-4 families. applies to most conventional loans and government loans such as FHA, VA and USDA

question

RESPA Provisions

answer

sections that address compensation, title insurance, and escrow accounts

question

Affiliated Business Arrangements

answer

-AFBA -while kickbacks from referrals, fee-splitting, and unearned fees are illegal, AFBA are not -an AFBA is a situation where a person in a position to refer settlement services or an associate of that person has either an affiliate relationship with or a direct beneficial ownership interest in more than 1% in a provider settlement services and who then refers business to that provider or in some way influences the selection of that provider -legitimate fees or wages for "services actually rendered" is permissible and also to accept "bona fide compensation"

question

6 details that trigger RESPA clock to start for loan application

answer

name monthly income ss # address estimate of property value loan amount

question

within 3 days of completed loan app these things must be sent to borrower

answer

1. HUD settlement 2. GFE and settlement costs 3. mortgage servicing disclosure statement this is all regulated by RESPA and reg x

question

Before settlement occurs these must be sent to borrower

answer

1. Affiliated Buss Arrangement (AFBA, ABA) disclosure 2. HUD-1 settlement agreement

question

Good Faith Estimate (GFE)

answer

1. shows $ amount of settlement and charges 2. provided no later than 3 days after completed app 3. settlement charges and terms available for at least 10 business days after it has been issued 4. allows average charge calculations for settlement services

question

GFE form

answer

RESPA requires the borrower to receive a GFE of the settlement charges within 3 business days of receipt of application. GFE Page 1 Explains the purpose of the disclosure and summarizes the critical data needed to "shop" for settlement services. Important Dates Date the specific loan interest rate is available and informs the borrower that changes in the rate can result in changes to origination charges and the indicated monthly payment. Settlement charges estimate must be available for 10 business days.

question

GFE form continued

answer

Loan Summary Gives a concise summary of terms of the loan including the amount, term, initial interest rate, etc. Escrow Account Information Indicates whether the lender requires an escrow account for taxes or other charges such as hazard insurance. Summary of Settlement Charges Shows the bottom line that most consumers are interested in—the total estimated settlement charges.

question

GFE form page 2

answer

-Documents the settlement charges for the loan. -Amounts in Blocks 1, 2, and 8 cannot increase at settlement. -There is a 10% tolerance applied to the sum of the prices of each service listed in Blocks 3, 4, 5, 6, and 7. -Services in Blocks 4, 5, or 6—where the borrower selects a provider other than one identified by the MLO are not subject to tolerance and would not be included in the sum of charges. -MLOs must provide the borrower permitted to shop for third-party settlement services with a written list of settlement services providers at the time of the GFE.

question

GFE page 3

answer

Understanding which charges can change at settlement Summarizes the categories of charges, according to whether or not they can increase at settlement and to what degree. Tradeoff Table Allows borrowers to see the relationship between the total estimated settlement charges, interest rate, and monthly payment. MLOs must show the borrower the loan amount, alternative interest rate and monthly payment, change in the monthly payment, change in total settlement charges, and total settlement charges for the alternative loan. Shopping Cart A shopping tool provided by the MLO for the borrower to complete, in order to compare GFEs.

question

HUD1 (Housing urban development)

answer

-used for RESPA compliance under REG X -completed by the person conducting the closing (settlement agent) -shows how much $ buyer will need for settlement -sellers, how much $ they will walk away with, or occassionally need to bring -HUD1 used for borrower and seller -HUD1A - borrower and no seller

question

HUD1 basics

answer

Must be completed by the person conducting the closing Itemizes charges imposed upon the borrower and the seller by the MLO, all sales commissions, and other charges. Used for transactions with a borrower and seller. Must be prepared for both the borrower and for the seller (it is permissible to prepare individual statements). Is not required for open-end home equity loans subject to the Truth in Lending Act and Regulation Z. The lender must retain each completed HUD-1 or HUD-1A for 5 years after settlement, unless the lender disposes of its interest in the mortgage and does not service the mortgage.

question

HUD page 3 percentages and fixed rates

answer

Page 3 offers a comparison of the exact amounts from the GFE and the actual settlement charges. Charges That Cannot Increase— Blocks 1 and 2, in Line A, and in Block 8 on the borrower's GFE are entered in the Good Faith Estimate column and cannot change at closing. Charges That Cannot Increase More Than 10%— Blocks 3, 4, 5, 6, and 7 on the borrower's GFE can change by no more than 10% of the total sums Charges That Can Change— The amounts in Blocks 9, 10, and 11 on the borrower's GFE are entered in the Good Faith Estimate column.

question

TILA aka ZILA

answer

Truth in Lending Act

question

TILA basics

answer

Provisions are implemented by Regulation Z. Regulates the disclosure of interest rates or finance charges imposed by lenders. Requires creditors to make disclosures of all finance charges and related aspects of credit transactions. Establishes a 3-day right of recession in certain transactions. Credit offered must be: subject to a finance charge, payable by written agreement more than 4 installments for other than business/commercial purposes

question

discolusres used in 2 areas

answer

Required in two general areas: When creditors offer credit but before the transaction is consummated When credit terms are advertised to potential customers

question

disclosure details

answer

Specific disclosures required by Regulation Z: Truth in Lending Statement and a guide on how to read it Consumer Handbook on Adjustable Rate Mortgages (CHARM booklet) ARM loan program details When Your Home is on the Line Disclosure Effective January 10, 2014, disclosure requirements regarding post-consummation events include: Rate adjustments with a corresponding change in payment Initial rate adjustment

question

Annual Percentage Rate (APR)

answer

The APR tells a borrower the total cost of financing a loan in percentage terms, as a relationship of the total finance charges to the total amount financed. The APR is generally higher than the note rate. The finance charge is the cost of consumer credit as a dollar amount. Finance charges include fees charged by a mortgage broker. 1/8% (.125) for regular transactions 1/4% (.25) for irregular transactions

question

3/7/3 Rule

answer

These disclosure requirements are the 3/7/3 Rule: Initial disclosure must be given within 3 business days of receipt of a completed application. The earliest a loan may be consummated is on the 7 business day. Corrected TIL disclosures must be received by consumers at least 3 business days prior to loan consummation. When considering these waiting periods, Regulation Z defines a business day to be all calendar days except Sundays and the legal public holidays.

question

RIght of Recision

answer

Consumers have the right to rescind certain credit transactions. This applies to credit transactions involving the establishment of a security interest in their principal residence, such as: Home equity loans Home improvement loans Refinances Home equity lines of credit

question

Right of recision does not apply to

answer

1.Purchase loans 2.Construction loans 3.Commercial loans 4.Loans on vacation or second homes 5.Refinancing or consolidation by the same creditor 6.Transactions in which a state agency is a creditor

question

ROR other key points

answer

When more than one consumer has the right to rescind, the exercise of the right is effective for all consumers. If a consumer chooses to exercise the right to rescind, the mortgage is void and the creditor must return any money collected related to the loan within 20 calendar days. Consumers may rescind the credit transaction until midnight of the 3rd business day following loan consummation, delivery of the rescission notice, or delivery of material disclosures, whichever occurs last.

question

Homeowners Protection Act (HPA)

answer

Provide disclosures concerning private mortgage insurance (PMI) on residential mortgage transactions. single family residence A single-family dwelling is defined as a residence consisting of one family dwelling unit. Ensure refinance or service home mortgages comply with its terms.

question

HPA exclusions

answer

The HPA does not cover loans that do not have private mortgage insurance or are secured by second or multi-family homes. Nor does it apply to: Veterans Affairs (VA) or Federal Housing Administration (FHA) loans. Loans with lender-paid PMI.

question

Qualified Mortgage

answer

-no excessive upfront points and fees -no toxic loan features -includes -no interest only loans -negative amortization loans -no terms beyond 30 years -no balloon loans

question

Limits on Debt to Income Ratios

answer

-will be lended to borrowers with a DTI less than 43% -this prevents borrowers from taking loans they most likely cannot realistically afford -this is called the ABility-to-pay rule (ATR) -lenders that document this financial ability on part of the borrower are protected if the borrower defaults by the "Safe Harbor" and "Rebuttable Presumption"

question

Disclosure provisions of HPA

answer

Lenders must provide an initial written disclosure regarding PMI cancellation including: Borrower Cancellation. Right to request a cancellation of PMI when a mortgage has been paid down to 80%. Loan must have: A good history of payment, No second or subordinate loans/liens Home value has not declined. Automatic Termination. The automatic cancellation of PMI by the lender when a mortgage has been paid down to 78%. The borrower's right to make additional payments that bring the loan-to-value ratio to 80%.

question

More HPA discolsures

answer

Disclosure requirements for adjustable or fixed rate home mortgages vary based on interest accruement (must be written): Fixed Rate Mortgages. At loan closing, lenders must provide an initial amortization schedule with a notice stating a cancellation date that the borrower may cancel PMI. Adjustable Rate Mortgages. Lenders must inform the borrower when the LTV reaches 80%, but an amortization schedule would not be provided at closing. A final disclosure must be sent to the borrower after the PMI coverage has been terminated or canceled.

question

Equal Credit Opportunity Act (ECOA)

answer

Original legislation adopted in 1974 Implemented as Regulation B by the CFPB Ensures all consumers are given equal chance to obtain credit Must be followed when: -Taking a loan -Evaluating an application -Approving or denying a loan

question

ECOA disclosures

answer

30 days to notify applicants of decision Approved: Commitment Letter (optional) Incomplete: Notice of Incomplete Application Denied or offered less favorable terms: Statement of Adverse Action, in writing With specific reason, or Notice of right to request reason within 60 days Right to request appraisal report used within 90 days of credit decision/ must deliver within 30 days of request Creditors required to furnish written appraisal no later than 3 business days prior to close for first lien loan

question

ECOA protected classes

answer

Sex Age * Marital status National origin Exercised rights under the Consumer Credit Protection Act Color Receipt of public assistance Race Religion

question

Fair Housing Act (FHA)

answer

Title VIII of the Civil Rights Act of 1968 is commonly called the Fair Housing Act. Extends protection against Race, color, religion, sex, national origin, disability, and familial status Americans with Disabilities Act (ADA)

question

FHA exemptions

answer

AKA Mrs Murphy Act Rental of a room or unit in a dwelling with no more than four independent units, provided that the owner occupies one unit as a residence Single-family home sold or rented by a private owner without the use of a broker Housing operated by organizations Housing operated by private clubs

question

civil rights act of 1866

answer

Prohibits public and private racial discrimination in any property transaction in the United States Applies to all property, real or personal, residential or commercial, improved or unimproved Prohibits any discrimination based on ancestry

question

Home Mortgage Disclosure Act (HMDA)

answer

HMDA enacted 1975 and enforced by the Federal Reserve Board as Regulation C Applies to financial institutions/non-depository institutions Assets in excess of $10 million Originate more than 100 loans per year Does not prohibit any specific activity of lenders nor establish loan quotas Collects and publishes data that can be used to determine whether financial institutions are: Serving the housing needs of their communities Showing signs of discriminatory lending practices

question

HMDA continued

answer

Makes it permissible to ask for certain information from applicants (e.g., ethnicity, race, sex) Applicants may refuse to furnish If refused, interviewer is required to make a visual observation when application is in person Used for monitoring lender compliance with equal credit and equal housing laws

question

community reinvestment act (CRA)

answer

Enacted in 1977 to encourage financial institutions to help meet local credit needs of low- and moderate-income neighborhoods Requires periodic evaluation of depository institutions by supervising regulator Considers an institution's application for deposit facilities, including mergers and acquisitions CRA provisions may be extended to mortgage lenders in some states

question

Safe Harbor

answer

defined-lender is considered to have legally satisfied their obligations with regard to ATR

question

NMLS

answer

nationwide mortgage licensing system allows every mortgage officer to be tracked across all states and to ensure loans and work is done properly, each licensed officer has a unique # used for every loan they orginate

question

Rebuttable Presumption

answer

defined- gives lenders less legal protection from borrower challenges, it applies in higher priced loans where the note rate is more than 1.5% above the prime rate

question

Settlement services included

answer

- Origination of a federally related mortgage loan - Mortgage broker services - Services related to the origination, processing, or federal mortgage loan funding - Title services

question

settlement services not included

answer

• Building/remodeling contractors • Service and repair contractors • Moving companies • Landscaper • Home improvement or design companies

question

Dodd-Frank Act

answer

Passed in July 2010 Purpose:To promote financial stability To end "too big to fail" To protect taxpayers by ending bailouts To protect consumers from abusive practices For other purposes Established the Consumer Financial Protection Bureau (CFPB)

question

Dodd-Frank Act Legislation

answer

Title X (Consumer Financial Protection Act) Created the CFPB Assumed rule-making and enforcement of prior regulations pertaining to the mortgage industry Title XIV (Mortgage Reform and Anti-Predatory Lending Act) Concerned with regulations such as RESPA, TILA, and others Addresses concerns of borrowers and guidelines of mortgage industry to ensure this

question

consumer financial protection act

answer

Provides authority for rules/enforcement Provides states with more regulation over chartered institutions Imposes additional requirements for data collection/ reporting Mandates studies on issues that could result in additional legislation Supervision, examination, and enforcement of: All insured depository institutions and credit unions with assets over $10 billion All non-depository institutions that broker, originate, or service mortgage loans Any other provider of consumer services at their discretion, with some exceptions

question

CFPB Regulatorty Authority

answer

Consolidated consumer protection responsibilities previously handled by: Office of the Comptroller of the Currency Office of Thrift Supervision Federal Deposit Insurance Corporation Federal Reserve National Credit Union Administration HUD Federal Trade Commission

question

CFPB structure

answer

Offices of: Fair Lending and Equal Opportunity Financial Education Service Member Affairs Financial Protection for Older Americans Units: Research Unit Community Affairs Unit Complaints Unit Consumer Advisory Board

question

Federal Disclosure Laws

answer

Requirements for real estate transactions: Truth in Lending Act (TILA / Reg. Z) Mortgage Disclosure Improvement Act (MDIA) Home Ownership and Equity Protection Act (HOEPA) Home Mortgage Disclosure Act (HDMA / Reg. C) Real Estate Settlement Procedures Act (RESPA / Reg. X) Homeowners Protection Act (HPA) Equal Credit Opportunity Act (ECOA / Reg. B)

question

Privacy?Identification Laws

answer

Laws protecting privacy and consumer identification: Fair Credit Reporting Act (FCRA) Fair and Accurate Credit Transactions Act (FACTA / Red Flag Rules) Gramm-Leach-Bliley Act National Do Not Call Registry U.S. Patriot Act

question

Predatory Lending Laws

answer

Laws prohibiting predatory lending: Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) Home Ownership Equity Protection Act (HOEPA) Higher Priced Loans (Regulation Z) MLO Compensation Rule (Regulation Z)

question

FCRA

answer

Fair Credit Reporting Act

question

FCRA

answer

Created in 1968 and Implemented in 1970 by Regulation V Deals with: Granting of credit Access to credit information Rights of debtors Responsibilities of creditors

question

FCRA consumer rights

answer

Adverse Action Notice Any entity that uses a credit report or another type of consumer report to deny an application for credit, must supply this notice Copy of Consumer Credit File Request Credit Score (not free) Dispute Incomplete or Inaccurate Information Limit Prescreened Offers If an application is denied: The creditor must provide the consumer with name, address and phone number of the agency that provided that information A loan officer is NOT to give the borrower a copy of the credit report used to deny the application

question

Fair and Accurate Credit Transaction Act

answer

FACTA

question

FACTA

answer

Intended to help consumers fight identity theft Major Titles Identity Theft Prevention/Credit History Restoration Improvements to Use and Access to Credit Information Enhancing the Accuracy of Consumer Report Info Limiting Use and Sharing of Medical Information in the Financial System Financial Literacy and Education Improvement Protecting Employee Misconduct Investigations Relation to State Laws

question

FACTA consumer protections

answer

Prohibits businesses from printing more than 5 digits of any customer's credit/debit card number or expiration date on any receipt Requires businesses to: Burn or shred papers that contain consumer report information Destroy or erase electronic files or media so that information cannot be recovered Lock up all pending loan documents during and at the end of the workday

question

FACTA access to credit reports

answer

Allows consumers: Access to credit report Home Loan Applicant Credit Score Information Disclosure notice Free copy of credit report once every 12 month To place fraud alerts and credit freezes Protects members of military deploying overseas from fraud

question

FACTA red flag rules

answer

Applies to: Federal and state chartered banks and credit unions Non-bank lenders Mortgage brokers Any person/entity participating in credit decision Financial institutions and creditors to implement written identity theft protection program Card issuers to assess the validity of change of address requests Users of credit reports to reasonably verify the identity of subject in case of address discrepancy

question

Grahm-Leacg-Biley Act

answer

AKA Financial Services Modernization Act of 1999 Financial Privacy Rule Safeguards Rule Pretexting Provisions Gives agencies and states the authority to administer/enforce privacy for: Financial institutions, including banks, securities firms and insurance companies Companies that provide products and services to consumers

question

safeguard rule

answer

Requires financial institutions to design, implement, and maintain safeguards to protect and control consumer data Written Safeguards Policy must: Ensure security and confidentiality Protect against anticipated threats or hazards Protect against unauthorized access that could harm or inconvenience consumers

question

pretexting provisions

answer

Protects consumers from individuals and companies that obtain their personal financial information under false, fictitious, or fraudulent pretenses

question

Financial Privacy Rule

answer

Governs collection of nonpublic personal info: What a consumer puts on an application Data about individual from another source Transactions, such as balance and purchases Whether individual is customer or consumer Restricts when information may be disclosed to affiliates and nonaffiliated third parties Requires Consumer Privacy Notice Provides opt-out opportunity

question

USA Patriot Act

answer

Enhances the discretion of law enforcement and immigration authorities in detaining and deporting immigrants suspected of terrorism-related acts and money laundering Requires lenders and banks to create and maintain customer identification programs including the following: Name Address Date of birth Social Security Number or TIN, passport number and country of issuance, alien ID card number, or number and country of issuance of any other government-issued document

question

National do not call registry

answer

Managed by the FTC, the FCC, and states Applies to interstate sales phone calls Does not apply to charities, political organization, or surveys Companies must maintain: National list (update every 3 months) Internal list (update every 30 days) Allows consumers to file complaints with FTC Fines up to $16,000 per incident

question

HOEPA

answer

Home Ownership and Equity Protection Act

question

HOEPA

answer

1994 amendment to the Truth in Lending Act Establishes disclosure requirements and prohibits deceptive and unfair practices in lending Establishes requirements for loans with high interest rates and/or fees Commonly referred to as High Cost or Section 32 loans Enforced by: FTC for non-depository lenders Each state's attorney general CFPB for federally regulated depository institutions Lender who violates may be sued by consumer or consumer may rescind loan for up to 3 years

question

Regulation Z and HOEPA

answer

Establishes two new forms, effective August 1, 2015, that replace existing closing forms: Loan Estimate: Provide summary of key features, costs, and risks Closing Disclosure: Provide disclosure of closing transaction costs Lenders must provide list of homeownership counseling organizations to consumers: Within three business days of mortgage loan application Excludes reverse mortgages and mortgage loans secured by a timeshare

question

reg z and hoepa

answer

Implements a new requirement that creditors must obtain confirmation that a first-time borrower has received homeownership counseling from a federally certified or approved homeownership counselor: Before making a loan that provides for or permits negative amortization to the borrower Effective Date: January 10, 2014

question

High Cost Loans

answer

HOEPA provisions: Must be complied with after the triggers for a "high cost loan" have been met High Cost Loan: A closed-end loan secured by a borrower's principal residence that meets the triggers The rules primarily affect refinancing and home equity installment loans that also meet the definition of high-rate or high-fee loans Most types of mortgage loans, refinances, closed-end home equity loans, and open-end credit plans are potentially subject to HOEPA coverage HOEPA does not regulate construction loans or reverse mortgages

question

HOEPA loan definition

answer

Total fees and points meet or exceed 5 percent of the total loan amount for a transaction of $20,000 or more 8 percent of the total loan amount or $1,000 for a transaction of less than $20,000 APR exceeds the APOR Index by more than 6.5 percentage points Second mortgage - APR exceeds the APOR Index by more than 8.5 percentage points $632 average per year

question

Required HOEPA disclosures

answer

3 business days prior to closing, must disclose (in addition to the other required Truth in Lending disclosures): APR Regular payment amount Loan amount, when includes credit insurance premiums For variable rate loans, amount of the maximum monthly payment (which may increase) For mortgage refinancing, total amount borrowed, including premiums and other charges for optional credit insurance or debt cancellation coverage Intended to protect consumers from pressure tactics

question

HOEPA prohibited loan terms

answer

-Balloon payment in less than 5 years -Negative amortization -Repayment schedule that consolidates more than 2 periodic payments that are to be paid in advance from the proceeds of the loan -Default interest rates higher than pre-default note rates and increase due to a default of the borrower Acceleration due to default Prepayment penalties, unless: -Limited to the first 2years of the loan or if the source of the prepayment funds is a refinancing by the lender or affiliate. -The amount of the periodic payment of principal, interest, or both will not change at any time during the first 4 years. -Borrower's debt-to-income ratio does not exceed 50%. -Demand clauses, including any provision that enables the creditor to call the loan before maturity

question

HOEPA prohibited acts and practices

answer

Granting loans solely on the property value without regard to the borrower's ability to repay the loan Disbursing proceeds from home improvement loans to anyone other than the borrower Selling or otherwise assigning the loan without furnishing the HOEPA statement to the purchaser or assignee Refinancing a HOEPA loan into another HOEPA loan within the first 12 months of origination, unless the new loan is in the borrower's best interest. The prohibition also applies to assignees holding or servicing the loan

question

verifying repayment ability

answer

Amounts used to verify repayment ability cannot be greater than the amounts the creditor could have verified when the loan was consummated. Must determine the borrower's repayment ability using the largest payment of principal and interest scheduled in the first 5 years Must consider current and mortgage-related obligations and assess borrower's repayment ability, based on: Account ratio of total debt to income, or Income left after paying debt May not grant loans solely based on the collateral value of the property without regard to borrower's ability to repay the loan.

question

verifying repayment ability continued

answer

A creditor is not in compliance if: Regular periodic payments for the first 5 years of the transaction would cause the principal balance to increase The term of the loan is less than 5 years and the regular periodic payments when aggregated do not fully amortize the outstanding principal balance Does not apply to temporary or "bridge" loans with terms of 12 months or less

question

higher priced loans (section 35)

answer

Regulation Z: Amended to set forth the specific requirements for higher priced loans (Housing and Economic Recovery Act of 2008). Effective January 18, 2014 Higher priced loans: Closed-end mortgage loans secured by borrower's principal dwelling Loan where the APR exceeds the average prime offer rate by: 1.5% for a first mortgage lien, 2.5% for a first lien Jumbo loan (loan amt over $417k) 3.5% for a subordinate mortgage lien.

question

higer priced loans

answer

MLO may verify if loan is a HOEPA or higher priced loan by determining the APR and entering data at FFIEC Rate Spread Calculator website APR calculation based on the locked interest rate of the prospective loan. This site will calculate the rate spread between the APR and the APOR in effect. If "higher priced loan", MLO must establish: Borrower's ability to repay the mortgage loan, and An escrow account for property taxes, homeowners insurance, private mortgage insurance, etc. for a 5-year term

question

requirements for certain higher priced loans

answer

Implemented January 18, 2014, requires creditors to: Use a licensed or certified appraiser who prepares a written report based on physical inspection Disclose to applicants the purpose of the appraisal and provide consumers with a free copy of any appraisal report (minimum of 3 days prior to close of escrow) If seller acquired the property for a lower price during the prior 6 months, this is considered a "flip" sale. A second appraisal may be required at no cost to the consumer If price difference exceeds 10% of the seller's original acquisition cost during the first 90 days or 20% of the original cost during the first 6 months, creditors are required to obtain a second appraisal

question

higher priced loans exemptions

answer

Qualified mortgages Temporary bridge loans Construction loans (12 month term or less) Loans for new manufactured homes, Loans for mobile homes, trailers, and boats that are dwellings. Second appraisal requirement to facilitate loans in rural areas and other transactions

question

SAFE

answer

secure and fair enforcement of mortgage licensing act

question

The SAFE Act

answer

HERA- Housing and Economic Recovery Act Modernized Federal Housing Administration, foreclosure prevention, and enhancement of consumer protections Title V, Secure And Fair Enforcement for Mortgage Licensing Act or SAFE Act Requires states to implement an MLO licensing process that meets certain standards through the Nationwide Mortgage Licensing System & Registry (NMLS)

question

Objectives of SAFE Act

answer

Provide uniform license applications and reporting requirements for state-licensed MLOs. Provide comprehensive licensing and supervisory database. Aggregate and improve flow of information to and between regulators. Provide increased accountability and tracking of MLOs. Streamline licensing process and reduce regulatory burden. Enhance consumer protections and support anti-fraud measures. Provide consumers with free, easy-to-access information about an MLO's employment history and public disciplinary /enforcement actions.

question

Objectives of SAFE continued

answer

Establish means for residential MLOs to act in the best interests of the consumer. Facilitate responsible behavior in the subprime mortgage marketplace. Provide comprehensive training and examination requirements related to nontraditional mortgage products. Facilitate collection and disbursement of consumer complaints on behalf of state mortgage regulators.

question

SAFE Act mandates for states

answer

Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) work with HUD to: Establish minimum standards for licensing or registration of all MLOs Develop model state law that meets minimum standards in the SAFE Act, including definitions, education, testing requirements, financial responsibility, and background standards for MLOs

question

MARS

answer

Mortgage Assistance Relief Services

question

MARS

answer

October 2010 - FTC adopted MARS Administration transferred to CFPB Provisions include: Ban on collecting fees until after homeowners have written offer Must disclose key information to consumers Prohibition against making false/misleading claims about services Prohibition from advising consumers to discontinue communication with lenders

question

BSA

answer

Bank Secrecy Act

question

BSA

answer

Requires financial institutions to maintain appropriate records/file reports for criminal, tax, or regulatory investigations Used to investigate financial transactions related to potential terrorist activities Title I Financial Recordkeeping: Requires insured financial institutions to maintain certain records Title II Reports of Currency and Foreign Transactions: Requires reporting of transactions greater than $10,000 by financial institutions into, out of, and within the U.S.

question

AML

answer

anti money laundering

question

AML/BSA

answer

Money laundering: Process of concealing illicit sources of money to make it appear to be legitimate money. Involves three steps: Placement - Illegitimate funds introduced into legitimate financial system Layering - Money moved around to create confusion Integration - Money integrated into financial system through additional transactions until the "dirty money" appears "clean

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