Real Estate Course Level 22

Quiz Level 21 c) Yes, loans insured by the FHA are included. RESPA requirements apply when a purchase is financed by a federally related mortgage loan. Federally related loans include loans made by banks, savings associations, FHA loans, VA loans, and others.

Do RESPA requirements apply when a purchase is financed by a loan insured by the FHA? a) Yes, but only if the loan is intended to be sold by the lenders to Fannie Mae, Ginnie Mae, or Freddie Mac. b) No, the purchase must be financed by a federally related mortgage loan. c) Yes, loans insured by the FHA are included. d) No, the loan must be guaranteed by the VA.

Some Red Flags

Here's a list of things you and your client can look for to spot potential mortgage fraud: . Inflated price or appraisal. . A real estate agent is asked to remove the property from MLS (a violation of MLS rules). . Agent asked to increase the price in MLS to a higher price to match the sales price. . False financial statements by the buyer. . Contract calling for payments at closing for future improvements. . High fees to the mortgage broker, real estate broker, or both. . No fee for a title policy on the closing statement. . A title company you have never heard of before. . Last-minute amendments to the contract, such as increasing the sales price.

Subprime Mortgage Crisis Timeline

Here's a timeline showing what happened and when regarding consumer protection laws. (in file: SubprimeMortgageCrisisTimeline)

The Takeaway

I hope you enjoyed part two of our thrilling conversation on consumer protection laws. Whether you were directly affected by the 2008 subprime lending crisis or were just a kid back then (sweet summer child), understanding what caused that implosion and recession is important for all of us (so hopefully we don't do it again). TRID's disclosure forms — the LE and CD — are absolutely something you will see in your day-to-day on the job. In Chapter 2, you learned: ✅ The purpose of the Dodd-Frank Act, the CFPB, and TRID. ✅ How the Dodd-Frank Act affected RESPA and TILA. Next, we'll learn about some more consumer protection laws. Yoni , you simply can't have too much consumer protection!

Quiz Level 22 c) All choices are correct. Anything that causes money to go back to the buyer (at or after closing), without the knowledge of the lender, is illegal. When a property is quickly resold at an artificially inflated price, loan fraud has taken place. A contract calling for future improvements can be a red flag.

Which of the following things can be an indication that a transaction may have involved loan fraud? a) when a property is purchased and then quickly resells at a value that is artificially inflated by false appraisals. b) anything in the transaction that causes money to go back to the buyer without lender approval. c) All choices are correct. d) false financial statements from the buyer.

Facts of a feather a) SAFE Act.

requires mortgage loan originators to register with the NMLS database. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather a) SAFE Act.

requires mortgage loan originators to take pre-licensing and continuing education courses. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather d) Regulation Z.

the regulation that enforces TILA. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather b) Dodd-Frank.

tightened regulations on banks and lenders in response to the 2008 subprime mortgage crisis. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather d) TRID.

. combines TILA and RESPA rules for loans. . provides guidelines for updated loan disclosures, including the Loan Estimate and the Closing Disclosure. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather c) TRID.

. combines the requirements of TILA and RESPA. . administered by the CFPB. . replaced the GFE and HUD-1 forms with the Loan. Estimate (LE) and Closing Disclosure (CD) forms. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather a) TILA.

. created advertising rules for loans. . allows certain borrowers a three-day right of rescission. . requires disclosures, including APR, for all loans. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather b) Dodd-Frank.

. created the CFPB. . tightened regulations on banks and lenders in response to the 2008 subprime mortgage crisis. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather b) Community Reinvestment Act.

. encourages banks to make loans in the low- and middle-income communities they operate in. . an institution's performance in helping their community is taken into account when approving new banks. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather c) ECOA.

. prohibits lenders from asking certain questions when evaluating a credit application. . prohibits lenders from discriminating against protected categories. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather a) SAFE Act.

. requires mortgage loan originators to take pre licensing and continuing education courses. . requires mortgage loan originators to register with the NMLS database. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather d) Regulation Z.

. the regulation that enforces TILA. . once administered by the Federal Reserve Board, now by the CFPB. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Marketing Services Agreements

A Marketing Services Agreement (MSA) usually involves lenders, real estate agents or brokers, title companies, or other providers of settlement services in a mortgage loan transaction. They may also involve third parties who are not settlement services providers, such as membership organizations. MSAs are framed as payments for advertising or promotional services, but in some cases the payments are actually disguised compensation for referrals — which is what Section 8 is attempting to regulate against. Impermissible actions that some MSAs attempt to disguise, such as the steering of business in connection with kickbacks and referral fees, may result in consumers paying higher prices for mortgages than would likely be the case without disguised kickback or referral fees. These practices also tend to indirectly undermine consumers' ability to shop for mortgages, which can raise costs for consumers. CFPB Investigates: In terms of thwarting shopping, one CFPB investigation revealed that consumers' ability to shop was hindered when a settlement service provider buried the disclosure that consumers can shop for settlement services in a description of the services that its affiliate provided. In another CFPB investigation that resulted in an enforcement action, a settlement service provider did not disclose its affiliate relationship with an appraisal management company and did not tell consumers that they had the option of shopping for services before directing them to the affiliate. Tsk tsk. Bad lenders. Very bad.

Buyer Rebates

A buyer rebate sounds like something good, right? A little cash back to take to IKEA after you move into your new house. However, these buyer rebates are illegal, and a kind of mortgage fraud. Anything during the transaction that causes money to go back to the buyer, either at or after closing, without the knowledge of the lender, is illegal. This is known as a buyer rebate. Sometimes the money comes from the seller, sometimes from the real estate agent or a mortgage loan broker, and sometimes through a third party vendor. Party Payment Disclosure It is essential that the lender knows exactly how much money is being paid from the buyer's funds for down payment and closing costs. Anything being paid by any other party in the transaction must be disclosed in the contract and on the closing statement. Most Common Rebate: One of the common forms of rebates happens when the contract calls for money to be paid to a certain vendor for future improvements to be done to the property after closing. EXAMPLE: Here's how a buyer rebate could work: A borrower tells the lender they will pay $20,000 to ABC Home Improvements after closing for future improvements, so the lender makes a loan for the price of the home plus $20,000. ABC Home Improvements is owned by a friend of the buyer, and after closing, the friend and the buyer split the $20,000. No improvements are made, no payments are made, and the lender has to foreclose and finds the property worth less than the loan amount.

Quiz Level 22 b) TRUE. True: An applicant has the right to have a cosigner other than a spouse, if a cosigner is needed.

A loan applicant has the right to have a cosigner other than a spouse. a) FALSE. b) TRUE.

Quiz Level 22 c) 14 months. A lender can keep up to 14 months of payments in escrow.

According to RESPA rules, what is the maximum number of months of payments a lender can keep in escrow for a borrower? a) 1 month. b) 12 months. c) 14 months. d) 6 months.

Quiz Level 22 c) all borrowers seeking credit. All borrowers seeking credit must be given a loan disclosure.

According to TILA, who must a loan disclosure be given to? a) businesses seeking a commercial loan. b) only borrowers seeking FHA loans. c) all borrowers seeking credit. d) borrowers who have already gotten pre-approved.

Chapter 4: Predatory Lending and Mortgage Fraud

After completing this chapter, you will be able to: . Describe fraudulent practices and red flags which may identify fraud in lending. . Identify signs of predatory lending. Why It Matters: Mortgage fraud and predatory lending hurt everybody: consumers, lenders, and license holders. It's not strictly your job to protect your clients from fraud, but you should do everything in your power to keep an eye out for red flags. We'll learn about some common scams to watch for. Key Terms: . predatory lending . flipping . subprime mortgage . usury

Chapter 2: Dodd-Frank and TRID

After completing this chapter, you will be able to: . Describe the purpose of the Dodd-Frank Act, the CFPB, and TRID. . Explain how the Dodd-Frank Act affected RESPA and TILA. Why It Matters: In the previous chapter, we learned about past consumer protection laws, TILA, and RESPA. In this chapter, we'll learn how the 2008 financial crisis prompted an overhaul of those rules and laws through the Dodd-Frank Act and TRID. This is important because you will need to ensure you're compliant with this legislation (and because those who do not learn history are condemned to repeat it). Key Terms: . Dodd-Frank Act

Chapter 3: Other Financing and Credit Laws

After completing this chapter, you will be able to: . Explain the Equal Credit Opportunity Act (ECOA) and its importance to real estate. . Define and differentiate the ECOA, Community Reinvestment Act, and SAFE Act Why It Matters: The ECOA, the SAFE Act, and the Community Reinvestment Act are three more consumer protection laws you'll need to be familiar with. While none of them will directly impact your practice (they pertain to banks, lenders, and loan originators), knowing these regulations will help you spot lender red flags when you're working with buyer clients. Key Terms: Equal Credit Opportunity Act (ECOA)

Chapter 1: TILA and RESPA

After completing this chapter, you will be able to: . Explain the difference between legislation (RESPA) and regulation (Regulation Z). . Describe the purpose of RESPA, TILA, and Regulation Z. Why It Matters: The laws you're going to learn about in this level are designed to protect homebuyers. The history of our industry has many instances of professionals taking advantage of consumers. These laws are important safeguards for consumers' rights. If you care about your clients (and I know you do!), you want to ensure you're doing right by them. And even if you don't, you can get in hot water for violating these laws, so you might as well learn what's in 'em. Key Terms: . RESPA . Regulation Z

Affiliated Business Arrangement

An affiliated business arrangement (ABA) — previously known as a controlled business arrangement — exists when a real estate brokerage provides services related to closing transactions via subsidiary companies that operate under the corporate umbrella of that brokerage. For example, a real estate firm, title insurance company, mortgage broker, home inspection company, and even a moving company may agree to offer a package of services to consumers. Offering financing, title and hazard insurance, and other related services through an ABA is possible without violating RESPA as long as certain conditions are met. Affiliated Business Arrangement Restrictions: In order to operate within the RESPA regulations, an affiliated business arrangement must: . Provide consumers with written disclosure of the affiliation. . Provide consumers with estimated charges for provided services. . Communicate to consumers that they are free to obtain services elsewhere. . Refrain from charging or paying referral fees among the subsidiary companies.

Applicant Rights

An applicant also has the right to: . Have credit in their birth name (Mary Smith), their first name and their spouse's last name (Mary Jones), or their first name and a combined last name (Mary Smith Jones). . Get credit without a cosigner, if the applicant meets the creditor's standards. . Have a cosigner other than a spouse, if a cosigner is necessary. . Keep their own accounts after they change their name, marital status, reach a certain age, or retire, unless the creditor has evidence that they're not willing or able to pay. . Know whether their application was accepted or rejected within 30 days of filing a complete application. . Know why their application was rejected: The creditor must tell the applicant the specific reason for the rejection or that the applicant is entitled to learn the reason if they ask within 60 days. An acceptable reason might be: "Your income is too low" or "You haven't been employed long enough." "You didn't meet our minimum standards" is not an acceptable reason. That information isn't specific enough. . The consumer has the right to learn the specific reason they were offered less favorable terms than applied for, but only if they reject these terms. For example, if the lender offers a smaller loan or a higher interest rate, and the applicant doesn't accept the offer, they have the right to know why those terms were offered. . They can find out why their account was closed or why the terms of the account were made less favorable, unless the account was inactive or they failed to make payments as agreed.

SAFE Mortgage Licensing Act

Another law that came out of the subprime mortgage crisis is called the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or SAFE Act. It was passed on July 30, 2008. In 2011, Title X of the Dodd-Frank Act gave the CFPB the job of administering the SAFE Act. This law requires mortgage loan originators, or MLOs, to be licensed according to national standards. It also created the Nationwide Mortgage Licensing System and Registry (NMLS), a nationwide database of licensed MLOs, and required every state to participate in the registry. MLO Requirements: Per the SAFE Act, a person is prohibited from engaging in the business of originating residential mortgage loans unless they register as an MLO and receive a unique NMLS identifier. This registration might be federal or state, depending on the financial institution the person works for, and must be updated annually. The SAFE Act requires state-licensed MLOs to pass a written qualified test, complete pre-licensure education courses, and take annual continuing education courses. The SAFE Act also requires all MLOs to submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check. State-licensed MLOs must also provide authorization for NMLS to obtain an independent credit report. The SAFE Act requires that federal registration and state licensing and registration be accomplished through the same online registration system, the Nationwide Mortgage Licensing System and Registry. What's the Point?: The primary purpose of the SAFE Act is to protect consumers and reduce fraud. Additional objectives of the SAFE Act include: . Aggregating and improving the flow of information to and between regulators. . Providing increased accountability and tracking of MLOs. . Enhancing consumer protections and supporting anti fraud measures. . Providing consumers with easily accessible information at no charge regarding the employment history of and publicly adjudicated disciplinary and enforcement actions against MLOs. ] We saw in 2008-2010 what happens when mortgage originators go rogue and do their own thing. The SAFE Act attempts to create more accountability for the people who help buyers obtain loans. (Thanks to the CFPB for this description of the SAFE Act.)

Reg Z: Rescission Rights and Advertising Rules

Another way TILA/Reg Z protects borrowers is by providing rescission rights for people taking out a loan where their home is being used as collateral. For example, TILA/Reg Z protects borrowers refinancing or taking a loan for a second mortgage or for home equity. This right gives borrowers three days after the consummation of their loan to rescind (withdraw) the transaction. The three days ideally give the borrower time to reexamine the contract and ensure that they are comfortable using their home as security for the loan. If the borrower rescinds the contract, the bank is responsible for refunding all fees paid in relation to the loan. This right helps protect consumers against high-pressure sales tactics used by unscrupulous lenders. Reg Z and Advertising: The last Reg Z thing we're going to talk about is the rules for advertising loans. These rules attempt to ensure that advertisements that specify lending terms are not deceiving consumers. Before TILA, a seller might advertise a home's mortgage payments with the best possible terms. For example: "For sale: New four-bedroom, two-bathroom home. Only $2,000/month!" But of course, the mortgage payment depends on many things, such as the down payment and interest rate. So the advertisement cannot accurately say what a borrower's mortgage payment will be. Instead, the advertisement could share the asking price of the property. Advertisements are required to provide accurate and balanced information, in a clear and conspicuous manner, about loan rates, monthly payments, and other loan features. The advertising rules ban several deceptive or misleading advertising practices, including representations that a rate or payment is "fixed" when, in fact, it can change. If an advertisement for credit states specific credit terms, it must state only those terms that actually are offered by the creditor. Trigger Warning: Actually, if a seller or lender wants to put certain specific numbers and facts into an ad, that triggers a requirement that the ad must fully disclose other facts, so as not to be deceptive. If any of the following trigger items appear in an ad, full disclosure becomes a requirement to stay compliant with Reg Z: . Monthly payment amount. . Number of payments. . Amount of down payment. . Finance charges. . Loan terms. Full Disclosure: What does full disclosure mean? If any of the trigger items appear in an ad, ALL of the following items must also appear in the ad: . Cash price . Required down payment . Number, amount, and due date of all payments . Total of all payments to be made, unless the loan is for buying a home . APR There are also other rules about misleading statements, promotional offers, and deferred interest. For the full set of rules, check out the CFPB website. Criminal Liability: Anyone who willingly and knowingly fails to comply with any requirement of TILA/Reg Z will be fined not more than $5,000 or imprisoned not more than one year, or both.

The Truth in Lending Act (TILA)

Back in the bad old days, there were some lenders who took advantage of borrowers, offering loans with deceptively-advertised interest rates or second mortgages that would end up costing the borrower their home. In response, in 1968, Congress passed a law called the Consumer Credit Protection Act. This law applies to all consumer lending — not just real estate — and requires disclosure of the total cost of obtaining a loan. Title I of the Consumer Credit Protection Act of 1968 is known as the Truth in Lending Act (TILA). TILA is intended to ensure that credit terms are disclosed in a meaningful way so consumers can compare credit terms more readily and knowledgeably. Before its enactment, consumers were faced with a bewildering array of credit terms and rates. It was difficult to compare loans because they were seldom presented in the same format. Consumers were basically left comparing apples to oranges. 🍎🍊 Now, all creditors must use the same credit terminology and expressions of rates. TILA seeks to do exactly what its name implies: create truth in lending. What TILA Does: TILA protects consumers against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide consumers with loan cost information so that consumers can comparison shop for certain types of loans. In addition to providing a uniform system for disclosures, the act: . Protects consumers against inaccurate and unfair credit billing and credit card practices. . Provides consumers with rescission rights. . Provides for rate caps on certain dwelling-secured loans. . Imposes limitations on home equity lines of credit and certain closed-end home mortgages. . Provides minimum standards for most dwelling secured loans. . Delineates and prohibits unfair or deceptive mortgage lending practices. What TILA does NOT do, however, is set limits on how much interest a financial institution may charge, nor do they obligate the institution to approve a consumer's request for a loan. What Loans Are Covered by TILA?: TILA covers the following types of loans, so long as the loan is to be repaid in more than four installments and/or a finance charge is made: . Real estate loans . Loans for personal, family, or household purposes . Consumer loans for $25,000 or less Business loans are not covered under TILA.

But It Held Together for a While

Even with all of this high-risk loan-making, things were okay for a while. Waves of new buyers in the market meant that prices rose and inventory shrank (remember supply and demand?). Prices for homes kept going up and up and up. Investors and flippers were making huge profits, turning over houses for much more than they'd paid only a few years ago. Prices went up, more people entered the market because profit seemed guaranteed, prices went up more, and buyers took out huge loans on homes whose values had recently risen drastically. People who owned homes before the upswing suddenly found themselves with a ton of equity, and some borrowed heavily against that new equity. Meanwhile, in the Mortgage Market: At the same time, two new products emerged for investors in the mortgage market. Private-label mortgage-backed securities (PMBS) and collateralized debt obligation (CDOs) are complicated products (and we won't get into exactly how they worked) that essentially repackaged prime loans with subprime loans, giving investors a false sense of security about what they were buying. And for a while, everybody made money. As long as the market kept going up and up and up, even subprime loans were relatively stable. These PMBS and CDO products were, for a while, so profitable that even some investors who should've known better (for example, people who managed large retirement funds) got dollar signs in their eyes and bought mortgage products that were not as safe as they claimed to be.

Failing to Learn from Our Mistakes: The Dodd-Frank Rollback

Ever since Dodd-Frank was signed into being, there are people who have wanted to repeal some or all of the bill's regulations. This process started in May of 2018, as the Economic Growth, Regulatory Relief, and Consumer Protection Act were passed. This law, also known as the Crapo Bill, rolls back some of the more stringent rules for banks, especially small and medium-sized banks and credit unions. There are indications the Volcker Rule could be next on the chopping block, so stay tuned!

Mortgage Fraud Prevention Measures

Fortunately, there are some best practices for preventing mortgage fraud. Here are some things you can recommend to clients (and heck, friends and family) to help keep them on the up-and-up when they're shopping for mortgages: . Get referrals for real estate and mortgage professionals. Check the licenses of the industry professionals with state, county, or city regulatory agencies. . If it sounds too good to be true, it probably is. An outrageous promise of extraordinary profit in a short period of time signals a problem. . Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques. . Look at written information such as recent comparable sales in the area and other documents such as tax assessments to verify the value of the property. . Understand what you are signing and agreeing to — if you do not understand, re-read the documents, or seek assistance from an attorney. . Make sure your name is correct on the loan application. . Review the title history to determine if the property has been sold multiple times within a short period — that could mean that this property has been "flipped" and the value falsely inflated. . Know and understand the terms of your mortgage. Check your information against the information in the loan documents to ensure they are accurate and complete. . Never sign any loan documents that contain blanks. This leaves you vulnerable to fraud.

Common Mortgage Fraud Schemes

Here are some of the most common mortgage fraud scams: . Property flipping . Nominee loans/straw buyers . Fictitious/stolen identity . Inflated appraisals . Foreclosure schemes . Equity skimming . Air loans . Silent second . Chunking Let's take a look at what each of these entails. Property Flipping: I already know what you're thinking, and no, this has nothing to do with Chip and Joanna Gaines. Buying a distressed house, making truly valuable improvements, and reselling it for a fair price and profit is not fraud. The type of flipping I want to tell you about is different, and it's a type of mortgage fraud. When a property is purchased and then quickly resold at a value that is artificially inflated by false appraisals, loan fraud has taken place. No significant repairs or improvements have been made to the property, so the higher resale price is not justified (note that we're not talking about buying an underpriced property and reselling it without making upgrades, or turning over a property in a rapidly rising market — we're talking about someone actively misrepresenting the appraised value of the property). Usually, the first buyer is reselling the property to someone who is participating in the fraudulent activity (in other words, the buyer is in on the scam). What makes this transaction illegal is that the appraisal information is fraudulent. The schemes typically involve one or more of the following: a fraudulent appraisal; doctored loan documentation; inflated buyer income; kickbacks to buyers, investors, property/loan brokers, appraisers, or title company employees. EXAMPLE: If a buyer purchases a home for $400,000 (which is the actual value) and then resells it at $600,000 with help from a phony appraisal and a buyer who is in on the grift, they might each pocket $100,000. No payments are made on the $600,000 loan, and when the lender forecloses, they find the property is only worth $400,000. The lender has to absorb that loss. Nominee Loans/Straw Buyers: The identity of the borrower is concealed through the use of a nominee or straw buyer, who allows the borrower to use the nominee's name and good credit history to apply for a loan. In this scheme, there is the understanding that the straw buyer will not have to make any payments or be out any money. Fictitious/Stolen Identity: A fictitious/stolen identity may be used on the loan application. The applicant may be involved in an identity theft scheme: The applicant's name, personal identifying information, and credit history are used without the person's knowledge. Inflated Appraisals: An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender. The report inaccurately states an inflated property value. Foreclosure Schemes: The perpetrator identifies homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. Perpetrators mislead the homeowners into believing that they can save their homes in exchange for a transfer of the deed and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner. Equity Skimming: An investor may use a straw buyer, false income documents, and false credit reports to obtain a mortgage loan in the straw buyer's name. Subsequent to closing, the straw buyer signs the property over to the investor in a quit claim deed that relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place several months later. Air Loans: This is a loan where the collateral property doesn't actually exist. With an air loan, a scammer invents both a borrower and a property, neither of which actually exist. Air loans are complicated to pull off. The perpetrator has to create a fake agent, buyer, seller, appraiser, credit history, and more. Usually it involves multiple fake phone numbers, P.O. boxes, and other fake architecture. Once the loan goes through, the scammer disappears with the cash, leaving the bank with no money and no home. Silent Second: In this scheme, the buyer negotiates a second mortgage from the seller without either of them disclosing the loan to the lender. This leads the lender to believe the buyer has a larger down payment than they actually do. Chunking: This is when a buyer makes multiple, fraudulent loan applications for the same property, closes them all on one day, and skips town with the cash.

If Discrimination Is Suspected

If an applicant for credit suspects that they are the victim of credit discrimination, they can consider taking the following actions: . Complain to the creditor and see if the creditor can be persuaded to reconsider the application. . Check with the state Attorney General's office to see if the creditor violated state equal credit opportunity laws. . Consider suing the creditor in federal district court. If the applicant wins, they can recover actual damages and be awarded punitive damages if the court finds that the creditor's conduct was willful. They also may recover reasonable lawyers' fees and court costs. Or they might consider finding others with the same claim and getting together to file a class-action suit. An attorney can advise the credit applicant on how to proceed. . Report violations to the appropriate government agency. When denying credit, the creditor must provide the name and address of the agency to contact.

Dodd-Frank Wall Street Reform and Consumer Protection Act

In July 2010, The Dodd-Frank Wall Street Reform and Consumer Protection Act, a sizable piece of financial reform legislation named after sponsors U.S. Senator Christopher J. Dodd and U.S. Representative Barney Frank, was passed. The act was a huge Wall Street reform bill, and provided common-sense protections, creating a new consumer watchdog to prevent mortgage companies and pay-day lenders from exploiting consumers. The main goal of Dodd-Frank was to protect people from unfair and abusive financial practices, and to make sure things like the financial crisis didn't happen again (good luck with that, Dodd-Frank!). This act created the most significant financial reforms to the American banking system since the post-Great Depression legislation. The act's numerous provisions were implemented over a period of several years and were intended to decrease various risks that could plague the U.S. financial system in the future. This act ultimately established some new government agencies to oversee various components of the act and, by extension, various aspects of the banking system. Dodd-Frank Reforms: The Dodd-Frank Act includes a large group of financial reforms, including: . The Volcker Rule . Regulation of derivatives . Creation of the Consumer Financial Protection Bureau . Creation of the Office of Credit Ratings Volcker Rule: The Volcker Rule was originally proposed by American economist and former U.S. Federal Reserve Chairman Paul Volcker. The rule did several important things. It: . Restricted United States banks from making certain speculative investments that did not benefit their customers. . Prohibited banks from conducting investment activities with their own accounts. . Limited banks ownership of hedge funds or private equity funds to 3% of total ownership interest. Volcker felt that all of these activities played a large role in the financial crisis. The Volcker Rule is thought of primarily as a ban on proprietary trading by commercial banks. What does this mean exactly? Deposits are used to trade on the bank's own accounts (even though a number of exceptions to this ban were included in the Dodd-Frank Act.) The Volcker Rule went into effect on July 21, 2015, and in August 2016, many large banks requested a 5-year delay to exit illiquid investments. Dodd-Frank FDIC Regulations: Dodd-Frank abolished the Office of Thrift Supervision and gave control over state savings associations (building and loan, savings and loan, homestead association, and cooperative banks that are state-chartered) to the FDIC. Dodd-Frank also increased the insured deposit amount from $100,000 to $250,000. More safe money! In addition to all of these initiatives, the FDIC sets real estate lending standards. Real estate lending standards are the set standards that banks use to determine their lending criteria. Banks need to have a policy in place to establish appropriate limits and standards for all extensions of credit. Consumer Financial Protection Bureau (CFPB) In perhaps the most important move for our world, Dodd-Frank created an independent agency to develop and enforce clear and consistent rules for the financial marketplace and hold financial firms to higher standards. Its name? The Consumer Financial Protection Bureau, or CFPB. The CFPB is responsible for supervising banks, credit unions, and other financial companies to enforce federal consumer financial laws. The CFPB was also given the job of enforcing TILA and RESPA. Hey, you know those guys!

Quiz Level 22 c) a phony appraisal and a straw buyer. In loan fraud, "flipping" involves buying a property and then quickly reselling it for a lot more money with a loan, using a phony appraisal and a straw buyer.

In loan fraud, flipping involves buying a property and then quickly reselling it for a lot more money with a loan, using: a) a phony appraisal and a legitimate buyer. b) a valid appraisal and a straw buyer. c) a phony appraisal and a straw buyer. d) a valid appraisal and a legitimate buyer.

All Types of Fraud

In this chapter, we will be talking about mortgage fraud and predatory lending. There is a difference between the two: Mortgage fraud is when a borrower deceives a lender (for their own gain), and predatory lending is when a lender deceives or takes advantage of a borrower. Mortgage Fraud: Let's begin by talking about mortgage fraud. Almost anyone involved in a home-buying transaction could be involved in committing fraud: the agents, mortgage broker, appraiser, or title company. The mortgage lenders are usually the targets of mortgage fraud. Mortgage fraud usually involves tricking a lender into loaning money for a property worth less than the loan amount, or that doesn't exist at all. The cost of this fraud eventually ends up being passed on to other borrowers — everybody loses!

Level 22: Government Oversight of the Real Estate Industry

In this level, we are going to learn about the laws that protect consumers of credit, plus how to be on the lookout for mortgage fraud and predatory lending. Objectives: By the end of this level, you will be able to: Identify and explain key provisions of important legislation regulating the real estate industry nationwide Describe fraudulent practices and red flags which may identify fraud in lending. Overview: This level is approximately three hours long, which is how long you can leave a burrito sitting in a hot car before food poisoning becomes basically guaranteed. There are four chapters: Chapter 1: TILA and RESPA Chapter 2: Dodd-Frank and TRID Chapter 3: Other Financing and Credit Laws Chapter 4: Mortgage Fraud and Predatory Lending

Other RESPA Rules: Title Companies and Escrow

It is a violation of RESPA for a seller to require a buyer to purchase title insurance from a specific title company in order to purchase the property offered for sale. However, if the seller were to pay for all the costs for themselves and the buyer, then the seller would be free to mandate the title company with whom they wish to do business. RESPA Escrow Rules: RESPA sets limits on the amount of money a lender is allowed to keep in an escrow account: up to 14 months of payments (that is, one year of payments, plus a maximum cushion of one-sixth of that amount). It's important to note that the establishment of escrow accounts, cushions, and interest paid on these accounts are not required by law but are all options available to the lender. RESPA Repayment Rules: RESPA also sets guidelines on the repayment of monies owed to, or by, the borrower. If the escrow account contains an amount in excess of the allowable limit, but less than $50 in excess, the lender may either return the money to the borrower or apply it to future payments, reducing the monthly escrow payment amount. If the amount owed to the borrower is in excess of $50, the lender has 30 days to return the funds to the borrower. On the other hand, if the borrower owes the lender less than one month's escrow payment, the lender may request that the funds be paid within 30 days. Otherwise, the lender must spread the repayment over a 12-month period, thereby increasing the monthly escrow payment.

Quiz Level 22 b) FALSE. Signing a document with blanks leaves a borrower open to fraud.

It's fine to sign a loan document with blanks left to be filled in. a) TRUE. b) FALSE.

Predatory Lending

Next, let's learn about predatory lending. But first I want to make an important disclaimer. Of course, the majority of lending professionals play by the rules and care about their customers. Unfortunately, there are some bad actors out there who take advantage of people, and that's why you need to learn about predatory lending. You can't make your clients' lending decisions for them, but you can attempt to bring their attention to potential issues with their loan. What Is Predatory Lending?: Predatory lending includes the unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. While there are no legal definitions in the United States for predatory lending, an audit report on predatory lending from the office of the inspector general of the FDIC broadly defines predatory lending as, "imposing unfair and abusive loan terms on borrowers."

RESPA

Now let's take a look at another law that protects consumers during the borrowing process. Congress enacted the Real Estate Settlement Procedures Act (RESPA) in 1974 as a response to abuses in the real estate settlement process, including the practice of kickbacks, referral fees, or fee-splitting, which had the effect of needlessly increasing the costs of settlement services. RESPA aims to: . Help consumers become better shoppers for settlement (loan closing) services by requiring disclosures that spell out the costs associated with closing. . Eliminate kickbacks and unearned referral fees that unnecessarily increase the costs of closing a transaction 💰. Before TRID transferred the responsibility to the CFPB, RESPA was administered by the Department of Housing and Urban Development, using Regulation X (but nobody calls RESPA Reg X). Why do people call TILA by its regulation name but RESPA by its law name? I don't know, Yoni , life is a rich tapestry, full of surprise and delight. Which Loans Does RESPA Cover?: For a loan to fall under RESPA, it has to be what is called a federally related mortgage loan. This is a loan that is directly or indirectly supported by federal regulation, insurance, guarantees, supplements, or assistance. This also includes loans that the originating lender intends to sell to a federal program, like Fannie Mae. RESPA applies to most loans that are secured by a mortgage lien placed on a one- to four-family residential property. These loans include: . Purchase loans. . Assumptions. . Property improvement loans. . Refinancing loans and equity lines of credit (generally). . One- to four-family structures, individual units of condos or cooperatives, or manufactured homes. . Property where a new dwelling will be constructed. . Installment sales contracts, land contracts, or contracts for deeds. RESPA rules also apply to the following: . Loans made by a lender, creditor, or dealer. . Loans made or insured by an agency of the federal government. . Loans made in connection with a housing or urban development program administered by an agency of the federal government. . Loans made and intended to be sold by the originating lender or creditor to Fannie Mae, Ginnie Mae, or Freddie Mac. . Loans that are the subject of a home equity conversion mortgage or reverse mortgage issued by a lender or creditor subject to the regulation. Exceptions to RESPA: As you can tell, RESPA covers a lot of residential mortgage loans. But there are a few exceptions: . Loans on a property of 25 acres or more. . Loans for business, commercial, or agricultural purposes. . Temporary construction loans. . Loans on vacant land. . Assumption without lender approval. . Conversion of a federally-related mortgage loan to different terms, if a new note is not required. . Transfer of a loan in the secondary market.

Practice: Would This Trigger a Disclosure?

Okay, Yoni , that's TILA and RESPA for you. We're going to revisit them in the next chapter when we talk about TRID rules, but first I wanted to do some practice with you about TILA advertising disclosures. Out of everything we've talked about in this chapter so far, the two things you're most likely to run afoul of in your future job are: 1. Not taking kickbacks (pretty easy to remember) 2. Not violating TILA advertising rules So let's look at a few ads, and you can decide if they trigger a TILA disclosure or not. Scenario: Little Stego Neighborhood: Here's an ad: "Amazing deal on a cute bungalow in trendy Little Stego neighborhood. 4 beds, 2 baths, neighborhood pool access, only $2,500 a month!"

Well, Not Exac-TILA

Okay, so when we talk about TILA, what we're actually talking about is Regulation Z. You see, TILA is a law passed by Congress. In that law, Congress gave the Federal Reserve Board the power to administer the law. Regulation Z explains how the provisions in the law will be carried out in practical terms. This isn't just TILA. This is how most laws work. The law spells out what the law is, and a federal agency administers the law by making and enforcing regulations. That's how a law becomes actionable rules. In the real world, people will often use the terms TILA and Regulation Z interchangeably. But Wait, There's More: This rabbit hole goes even deeper, Yoni . After the 2008 financial crisis, new legislation created the Consumer Financial Protection Bureau (CFPB) and handed them the job of administering TILA (Reg Z) and another law we'll talk about in a moment, RESPA (administered by Regulation X). The CFPB issued a new set of regulations, called TRID. So many acronyms! Don't sweat it, we will cover all of this step by step. I just want to make you aware that some of these historical TILA and RESPA rules have been changed so you don't FREAK OUT when we get to TRID. Okay, so let's talk Regulation Z. What Does Regulation Z Regulate?: Regulation Z applies to credit transactions where credit is: . Extended to consumers. . Offered on a regular basis (that is, Mr. A offering his friend Mr. B a loan would not fall under Regulation Z, but a car dealership that offered consumer financing on a regular basis would). . Either subject to a finance charge (such as an interest rate or financing fees) or is to be paid in four or more installments. . To be used for personal, family, or household purposes (that is, not for business, commercial, or agricultural purposes). . A closed-end transaction (that is, any line of credit that is not open-end or revolving).

Practice: Can They Ask That?

Okay, to get a handle on what's covered in the ECOA, let's play a little game. Let's pretend you're a secret shopper for the CFPB. Your job is to go to various banks and apply for a loan, then evaluate whether or not the lending institution complied with ECOA rules. (But Ace, wouldn't you just apply online? Does anybody actually walk into a bank to apply for a loan these days? Shhh, Yoni , it's a game, let's play pretend, okay?) Your first job is to go to Possum National Bank and apply for a loan without a co-borrower (you live in a non-community property state). You sit down with the loan officer, and they start taking down your information. "So," says the loan officer after collecting your address and employment information. "What's your marital status?" "Oh, I'm not applying with a co-borrower," you say. "It's just me on the application." The loan officer glances at your empty left ring finger. "Soooo, single then? Divorced? Widowed? Quirky-alone?" "What?" you say, confused a little flustered. Is this on the loan application?

Annual Percentage Rate

Per the list on the previous screen, lenders have to disclose a loan's APR (annual percentage rate), but what is that? What does it mean? An APR is a powerful tool that gives non-expert consumers the ability to compare loans directly. A loan's APR is the TOTAL cost of getting that loan, expressed as a percentage. In other words, it is the ratio of the total cost of financing to the loan amount. The cost of financing includes interest paid, discount points, and loan fees, but does not include other fees that would have to be paid regardless of financing (for example, title insurance or home inspection fees). Previously, lenders could offer a very low interest rate, but then hide the true cost of the loan in fees. This made the actual amount the borrower paid much higher than the interest rate would lead them to believe. The loan's APR shows the consumer the true cost of the loan, allowing them to easily compare one lender's offer to another. EXAMPLE: Let's say you're looking to take out a $100,000 fixed-rate loan with a 10-year repayment term. You shop around and find that Slimy National Bank is offering loans at 3% interest (with a financing charge of $9,000, hidden way down in the fine print). Meanwhile, Wholesome Credit Union offers loans at 4.5% interest, with no financing fees. You might get tricked into taking Slimy's loan. But the Slimy National Bank's loan has an APR of 5%, while Wholesome's APR is 4.5%. Seeing the APR lets you choose the actual best deal. APR Calculations: The APR is not simple to calculate, and it is not always calculated in the same way. Each lender decides which fees and charges go into the calculation. The following are usually, but not always, included in a lender's APR calculation: . Application fee . Discount points . Document preparation fees (when paid for the lender's document preparation) . Origination fee . Private mortgage insurance (PMI) premiums . Processing fee . Underwriting fee Good News: You don't have to learn how to calculate a loan's APR. That's what us robots are for! Go online and find an APR calculator if you simply must do it, but it's more important that you understand why APR is important rather than how it's calculated.

Answer: Yes "Amazing deal on a cute bungalow in trendy Little Stego neighborhood. 4 beds, 2 baths, neighborhood pool access, only $2,500 a month!" Yes, that ad mentions a monthly payment, so it would trigger a TILA disclosure. Remember, that means disclosing: . Cash price . Required down payment . Number, amount, and due date of all payments . Total of all payments to be made, unless the loan is for buying a home . APR Let's try another one. Scenario: Condo With Pool: Here's the ad: "Gorgeous new-build condo, 2br, 2ba, 1,700 square feet. Building full of amenities: pool, fitness center, free parking, playground. No HOA dues! $345,0000."

Question 1: Does this ad trigger a TILA disclosure? Why or why not? "Amazing deal on a cute bungalow in trendy Little Stego neighborhood. 4 beds, 2 baths, neighborhood pool access, only $2,500 a month!"

Answer 1: No! They can't ask that! It's not permissible to ask a person taking out a loan without a co-borrower about their marital status (unless you're in a community property state). Beyond that, they can only ask if you are married, unmarried, or separated. They can't use language like "divorced" or "widowed." That loan officer was breaking the law, even if it was a ham-fisted attempt at flirting with you. Especially then. Answer 2: Yes! Yes, it was legal to ask about your race or ethnicity. And you were free to decline to answer. What would not be allowed is offering you different terms or denying your loan based on your race or ethnicity. Lending institutions collect information about customer race and ethnicity so that they have data about whether they are, in fact, offering the same terms to customers with similar credit profiles regardless of race. Answer 3: Not Cool! Your loan officer is not allowed to ask you about your reproductive plans, even in the context of friendly, grandpa-aspiring chit chat. No, he didn't mean anything by it, and would almost certainly not use the information to deny you a loan or change your terms, but it's still not something that a loan officer should ask you. Plus, it's annoying. Mind your own business, gramps.

Question 1: Under the ECOA, can this loan officer ask you about your marital status if you're applying for the loan without a co-borrower? Why or why not? Question 2: Here's your next assignment: Head on over to Raccoon Credit Union and apply for a home equity loan to remodel your kitchen. You walk in and hand the loan officer all of the paperwork she asked you to bring in: ID, pay stubs, old tax returns. "Okay!" she says brightly. "I just need you to sign this form authorizing us to pull your credit report." She slides the form across the table with a pen. As you're signing, she says, "And what is your race or ethnicity?" You pause. "I'd rather not say," you answer. Was she allowed to ask that??? Was it legal under the ECOA for the loan officer to ask you what your race or ethnicity was? Why or why not? Question 3: You're being sent to Gecko Quality Used Car Lot to fill out an application for dealer financing. You're buying a minivan, and your two small kids are with you, tearing around the car dealership offices as you fill out paperwork. Your loan officer, a kindly older man, is getting down all of your information as he watches little Odin and Amelie throw the free popcorn at each other in the lobby. "Okay, we're almost done, do you have any questions for me?" he says. "No, I think I'm good," you say. "Odin! Stop that! Pick up that corn! Amelie! Stop hitting your brother!" He chuckles. "They're a handful, but they grow up so fast. Treasure this time!" You fake a smile. He means well, no doubt. But you need to get your hellions out of here before they destroy anything else. "Are you going to stop with just the two? Or will there be a lucky number three?" he says. "I've got two boys and two girls, all in their twenties, and I keep asking them where my grandkids are. I'm grandpa ready!" You nod noncommittally, but something about the encounter feels off. Was there anything about that conversation that violates the ECOA? If so, what, and why? if not, feel free to take a moment to type some of your favorite words.

Answer 2: No "Gorgeous new-build condo, 2br, 2ba, 1,700 square feet. Building full of amenities: pool, fitness center, free parking, playground. No HOA dues! $345,0000." No, that ad is in compliance with TILA's advertising rules. It only mentions a sale price, not any details of financing. A full disclosure is not necessary. Scenario: Farm House for Sale: Here's one more for you: "Large farmhouse on 10 acres of land. Create your dream garden, zoned for chickens and goats! 4-bed, 4-bath, two-story home, recently updated, 2,600 sf. This can all be yours for just $30,000 down!!! Call today."

Question 2: Does this advertisement trigger a TILA disclosure? why or why not? "Gorgeous new build condo, 2br, 2ba, 1700-square-feet. Building full of amenities: pool, fitness center, free parking, playground. No HOA dues! $345,000."

Answer: Yes "Large farmhouse on 10 acres of land. Create your dream garden, zoned for chickens and goats! 4-bed, 4-bath, two-story home, recently updated, 2,600 sf. This can all be yours for just $30,000 down!!! Call today." Yes, because this ad mentions a down payment amount, it triggers a TILA disclosure. You can't talk about a down payment amount without talking about all of the loan terms, which makes sense. Who knows if a buyer can even qualify for a loan with that down payment? And that's it for TILA and RESPA!

Question 3: Does this ad trigger a TILA disclosure? Why or why not? "Large farmhouse on 10 acres of land. Create your dream garden, zoned for chickens and goats! 4-bed, 4-bath, two-story home, recently updated, 2,600 sf. This can all be yours for just $30,000 down!!! Call today."

Reg Z Made E-Z

Regulation Z is concerned with all of the things TILA is concerned with: protecting consumers in the mortgage market from unfair practices and wrongdoings. The four big Reg Z rules to know are: . Loan originator compensation rules. . Disclosure of loan terms. . Right of rescission for loans using an already-owned house as collateral. .Rules for advertising loan rates. Let's look at each of those, one at a time. Loan Originator Compensation Rules: Basically, people who help consumers find loans can't get a kickback or steer borrowers toward loans where they get paid more. Let's let the Federal Reserve's website give us the nitty-gritty: The rule prohibits a creditor or any other person from paying, directly or indirectly, compensation to a mortgage broker or any other loan originator that is based on a mortgage transaction's terms or conditions, except the amount of credit extended. The rule also prohibits any person from paying compensation to a loan originator for a particular transaction if the consumer pays the loan originator's compensation directly. The rule also prohibits a loan originator from steering a consumer to consummate a loan that provides the loan originator with greater compensation, as compared to other transactions the loan originator offered or could have offered to the consumer, unless the loan is in the consumer's interest. The rule provides a safe harbor to facilitate compliance with the prohibition on steering. These prohibitions mainly deal with consumer loans secured by a dwelling or property that includes a dwelling. The rule does not apply to open-end home equity lines of credit or time-shares. Nor does it apply to loans secured by real property if the property doesn't include a dwelling. When Reg Z talks about payments to a "loan originator" and a "mortgage broker," that could be referring to an individual person or a mortgage brokerage, including companies that close loans in their own names but use funding from a third party. It also includes employees of creditors and loan officers. Disclosing Under Regulation Z: Regulation Z requires that certain disclosures be made to all consumers seeking credit (for example, someone shopping for a mortgage or home equity loan). In their disclosure statement, lenders must disclose: . The application fee for obtaining the loan. . The address of the property that is to be collateral for the loan. . The total sale price, including the down payment. . The amount financed, which is the sale price plus any other financed fees, less the down payment. . The loan's finance charge, which is the sum of the discounts, fees, and interest payments. . The total amount of the loan payments. . The annual percentage rate (APR), which is the ratio of the finance charge to the total amount of the loan payments. . Any prepayment penalties. . The charge for late payments. . Whether the loan is assumable or not. . If the loan is an adjustable rate mortgage, what the highest possible interest rate is. . If the loan is an ARM, how the periodic interest rate is calculated and how monthly payments are derived from it. What a list! It's almost like this legislation aims to ensure that consumers are fully informed! (It does.)

Consumer Protection Laws

Remember all of the consumer protection laws we learned? Let's review! in file (ConsumerProtectionLaws)

Quiz Level 22 d) TILA is a law, Regulation Z are the rules for how the law is carried out. TILA is a law, Regulation Z are the rules for how the law is carried out.

What is the relationship between TILA and Regulation Z? a) TILA is the law passed by the House, in the Senate it was called Regulation Z. b) TILA is for business loans, Regulation Z is for consumer loans. c) TILA covers all lending, while Regulation Z only covers real estate lending. d) TILA is a law, Regulation Z are the rules for how the law is carried out.

Say Hello to TRID

Section 1032(f) of the Dodd-Frank Act required that the CFPB submit integrated TILA and RESPA disclosures for public comment by July 21, 2012. In November of 2013, the CFPB integrated the RESPA disclosures with the TILA disclosures to create the Know Before You Owe (KBYO) mortgage initiative known as the TILA-RESPA Integrated Disclosure or TRID. The Backstory: To give you a little more historical perspective regarding the creation and purpose of TRID, I'm going to share with you selections from the introduction section of CFPB's TILA-RESPA Integrated Disclosure: Guide to the Loan Estimate and Closing Disclosure forms. You can find the complete document here. 30 Years in the Making: For more than 30 years, federal law has required lenders to provide two different disclosure forms to consumers applying for a mortgage. The law also has generally required two different forms at or shortly before closing on the loan. Two different Federal agencies developed these forms separately under two Federal statutes: the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA). The information on these forms was overlapping, and the language inconsistent. Not surprisingly, consumers often found the forms confusing. It is also not surprising that lenders and settlement agents found the forms burdensome to provide and explain. Here Comes TRID: On December 31, 2013, the Bureau published a final rule with new, integrated disclosures - "Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z)" (TILARESPA Final Rule). On January 20, 2015 and July 21, 2015, the Bureau issued amendments to the TILA-RESPA Final Rule. Additionally, the Bureau published technical corrections on December 24, 2015, and a correction to supplementary information on February 10, 2016. The TILA-RESPA Rule Is Born: The TILA-RESPA Final Rule, the amendments, and corrections are collectively referred to as the TILA-RESPA Rule. The TILA-RESPA rule also provides a detailed explanation of how the forms should be filled out and used.

RESPA by Section

Some of RESPA's regulations — such as its disclosure requirements — apply only to lenders. However, some RESPA regulations also apply to license holders. RESPA by Section: Let's look at a few sections of RESPA that are relevant to our interests. Section 8(a) - Business Referrals: Section 8(a) of RESPA specifically prohibits: The giving and accepting of any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person. Did you catch that? It prohibits anyone from engaging in these activities. Not just real estate agents. To reiterate, RESPA explicitly prohibits the payment of kickbacks, or unearned fees, in any real estate settlement service. It prohibits referral fees when no services are actually rendered. For example, a mortgage lender would be prohibited from giving money or anything of value to a real estate agent for the agent's referring one of their customers to the lender. A 2010 RESPA rule prohibits a broker or agent from receiving a fee for referring a particular homebuyer or seller to a home warranty company; such a payment would be an illegal kickback. These Are Okay: The following are fees that are NOT considered illegal kickbacks: . Fee splitting among cooperating brokers or members of multiple listing services. . Brokerage referral arrangements. . The division of a commission between a broker and their sales agents. . Referrals made by an employee to generate business for the company itself. Section 8(b) - Splitting Charges: On fee-splitting, Section 8(b) states that: No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. For example, a mortgage lender can't share part of their origination fee with a license holder for referring a client. Even though it doesn't cost the borrower any extra — they're just sharing the fee they would charge any borrower — it's still prohibited by RESPA. Section 8(c) - Fees, Salaries, Compensation, or Other Payments: Section 8(c)(2) states: Nothing in this section shall be construed as prohibiting... the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed. 8(c) is just trying to make sure you get paid for your work, Yoni . Payment for labor? That gets the RESPA Thumbs Up™ 👍. Payment for something other than a service performed or item of value? That's a no from RESPA 👎. Computerized Loan Origination (CLO): A broker may charge a fee for using a computerized loan origination (CLO) system to help a buyer select and originate a mortgage as long as the fee is disclosed on the estimate of closing costs and is reasonably related to the value of services provided. The SAFE Act requires a person who takes a loan application or discusses/negotiates rates or terms to be licensed as a residential mortgage loan originator.

The Takeaway

TILA and RESPA are laws put into place to protect consumers. We can't all be experts on mortgages, that would be a ridiculous expectation. It's the job of the government to ensure consumers can make informed decisions when purchasing complicated financial products. In Chapter 1, you learned: ✅ The difference between legislation (RESPA) and regulation (Regulation Z). ✅ The purpose of RESPA, TILA, and Regulation Z. Next, we're going to continue on our journey into government regulations with the Dodd-Frank Act and TRID. Dodd-Frankly, I think you're going to love it.

Quiz Level 22 c) TILA and RESPA. TRID combined the TILA and RESPA disclosures.

TRID combined disclosures from which two previous laws? a) the CFPB and the Volcker Rule. b) the ECOA and the Fair Housing Act. c) TILA and RESPA. d) CERCLA and SARA.

TRID Disclosures

TRID requires that lenders give borrowers two disclosures: the Loan Estimate and the Closing Disclosure. Loan Estimate: TRID calls for the use of a Loan Estimate for the loans it covers. The Loan Estimate is just what it sounds like — an estimate of what the terms of the loan will be and how much it will cost. A few key things about the Loan Estimate: . It must contain a good faith estimate of credit costs and transaction terms. . The creditor must deliver or place it in the mail no later than the third business day after having received the consumer's application. . It must also be delivered or placed in the mail no later than the seventh business day before consummation of the transaction. In the Old Days: Settlement Statement: RESPA used to require that both the borrower (the buyer) and the seller receive something called the Settlement Statement (HUD-1 form) at closing. It was a standard form that showed all of the borrower's and seller's charges arising from the settlement of their real estate transaction (for example, the buyers' and sellers' closing costs). The Closing Disclosure Is the New Wave: In 2015, the HUD-1 Settlement Statement was replaced by a document called the Closing Disclosure (CD) that consolidates the HUD-1, Good Faith Estimate, and Truth in Lending Act (TILA) disclosures. The Closing Disclosure (also called the closing statement) is a form used to itemize services and fees charged to the borrower by the lender when applying for a real estate loan. For loans that require a Loan Estimate and that proceed to closing, creditors must provide the Closing Disclosure reflecting the actual terms of the transaction. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. The Closing Disclosure should contain the actual terms and costs of the transaction. The Closing Disclosure Must Be Accurate: If the actual terms or costs of the transaction change prior to consummation, the creditor must provide a corrected disclosure that contains the actual terms, which results in a new three-day waiting period before consummation. To be clear: The Closing Disclosure is the official name of the RESPA/TILA form that serves as the closing statement, which is still sometimes called the settlement statement. And You Get All of These Disclosures for the Low, Low Price of $0: For loans subject to RESPA, no fee may be charged for preparing the Closing Disclosure, Loan Estimate, escrow account statement, or any other disclosures required by the Truth in Lending Act. When TRID Does Not Apply: The integrated disclosures are NOT used to disclose information about: . Reverse mortgages. . Home equity lines of credit (HELOCs). . Chattel-dwelling loans such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land) . Other transactions not covered by the TILA-RESPA Integrated Disclosure rule. The final rule also does NOT apply to loans made by a creditor who makes five or fewer mortgages in a year. Creditors originating these types of mortgages must continue to use, as applicable, the appropriate disclosures.

Quiz Level 22 a) This is predatory lending because Tammy, the lender, was deceptive. Leslie was deceived by Tammy, making this a case of predatory lending.

Tammy (a lender) deceives Leslie (a woman who looking for a loan so she can buy a home in Florida) during the loan process. As a result, Leslie has a lot of trouble meeting her monthly loan payments. Analyze if this is mortgage fraud or predatory lending, and explain why. a) This is predatory lending because Tammy, the lender, was deceptive. b) This is mortgage fraud because Tammy, the lender, was deceptive. c) This is mortgage fraud because Leslie, the borrower, was deceptive. d) This is predatory lending because Leslie, the borrower, was deceptive.

What Creditors May NOT Do

The ECOA attempted to change all of that (though, as we noted, lending discrimination is still very much a real thing). Here are the ECOA's rules for lenders. When a consumer applies for credit, creditors may not: . Discourage anyone from applying or reject an application because of race, color, religion, national origin, sex, gender presentation, sexuality, marital status, age, or because public assistance is received. . Consider race, sex, or national origin, although a consumer may be asked to disclose this information if they want to. It helps federal agencies enforce anti discrimination laws. A creditor may consider immigration status and whether a consumer has the right to stay in the country long enough to repay the debt. . Impose different terms or conditions, like a higher interest rate or higher fees, on a loan based on race, color, religion, national origin, sex, gender presentation, sexuality, marital status, age, or receipt of public assistance. . Ask if the applicant is widowed or divorced. A creditor may use only the terms: married, unmarried, or separated. The term unmarried includes widowed and divorced. . Ask about marital status if the consumer is applying for a separate, unsecured account. A creditor may ask for this information from those who live in "community property" states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A creditor in any state may ask for this information if the consumer is applying for a joint account or one secured by property.

Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) was passed in 1974. The Equal Credit Opportunity Act (ECOA) was passed in 1974. It prohibits lending discrimination on the basis of race, color, religion, national origin, sex, marital status, age, sexuality, gender presentation, or use of public assistance. It's administered by the Federal Trade Commission (FTC). On March 9, 2021, the CFPB issued an interpretive rule clarifying that the ECOA prohibited discrimination based on sexual orientation or gender identity. "The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit," said CFPB Acting Director David Uejio. Creditors may ask for most of this demographic information in certain situations, but they may not use it when deciding whether to give credit or when setting the terms of credit. Not everyone who applies for credit gets it or gets the same terms. Factors like income, expenses, debts, and credit history are among the considerations lenders use to determine creditworthiness. The History of Credit Discrimination: We'll go into this much, much deeper in our fair housing level, but for a long time, lenders freely discriminated against people of color, women, and religious minorities when extending credit. In a practice known as redlining, mortgage lenders would delineate areas on a map in red (usually low-income areas or areas that were predominantly non-white) and refuse to lend money to purchase homes in those areas. Lenders have historically discriminated against non-white borrowers in general, a practice that made it much harder for minority communities to build generational wealth through homeownership and small business ownership. The effects of these practices are still being felt today. Janelle Jones writes in the Economic Policy Institute's Working Economics Blog: Overall, housing equity makes up about two-thirds of all wealth for the typical (median) household. In short, for median families, the racial wealth gap is primarily a housing wealth gap. This is no accident. Besides facing discrimination in employment and wage-setting, for generations even those African-American families that did manage to earn decent incomes were barred from accessing the most important financial market for typical families: the housing market. Credit Discrimination Is Still a Problem: Despite the passage of the ECOA over 40 years ago, Black and Latinx borrowers are denied conventional loans at twice the rate of white borrowers. Why? The reasons are as complex as the intersection of race and class in America. Credit Scores Aren't Neutral: For one thing, credit scores are often used as a way of determining a person's creditworthiness. And while it's tempting to think of credit scores as value-neutral, they instead encapsulate the results of decades of policies that have disadvantaged people of color. Writes Sarah Ludwig in the Guardian: Credit reports and scores are not race neutral. Rather, they embed existing racial inequities in our credit system and economy - to the point that a person's credit information serves as a proxy for race. You see, when credit scores were implemented, they were developed to reflect the reality at the time, without accounting for the historical factors that caused that reality. It's like pointing out that someone running a race isn't in first place without accounting for the fact that they started late. There's nothing wrong with the information itself, but it's lacking context and incomplete. Discrimination Persists: Even when you're comparing borrowers with similar credit profiles, a study from the Urban Institute found that Black borrowers are still denied loans 1.2x more often than white borrowers. An expert sums up the discrepancy in Business Insider this way: "Race and ethnicity should not be a factor in determining lending decisions," says Samuel Deane, a financial planner with Deane Financial Partners. "Yet, even with similar creditworthiness, whether face to face or online, the Black community is unfairly being charged higher interest rates and refinance costs — a practice that is deeply rooted in systematic racism." What Does This Mean for You?: I'm not telling you this to make you feel bad about credit discrimination, Yoni . Instead, I'm telling you so that you can feel empowered to stand up for clients who maybe facing credit discrimination. If you are working with someone and find that they're being denied credit or offered worse terms than other clients, ask questions about why. We'll talk more about what to look for and what to do when we talk about predatory lending in the next chapter. While we can't change structural inequalities as individuals, we can still work to be a force for good in our industry. I know you're up to the challenge!

Quiz Level 22 d) mortgage loan originators. The SAFE Act regulates the licensure of mortgage loan originators.

The SAFE Act regulates the licensure of which type of real estate professionals? a) title agents. b) real estate attorneys. c) home inspectors. d) mortgage loan originators.

Let's Hear from the Experts

The Washington State Department of Financial Institutions explains predatory lending really well, so I'll borrow some of their words here: Lending and mortgage origination practices become "predatory" when the borrower is led into a transaction that is not what they expected. Predatory lending practices may involve lenders, mortgage brokers, real estate brokers, attorneys, and home improvement contractors. Their schemes often target people who have small incomes but substantial equities in their homes. Products Aren't Predatory: Products themselves are not predatory. For example, a loan with a variable interest rate can be a very good financial tool for many borrowers. However, if the borrower is sold a loan with a variable interest rate disguised as a mortgage loan with a fixed interest rate, the borrower is the victim of a bait and switch or predatory lending practice. In short, this type of conduct is nothing more than mortgage fraud practiced against consumers. Aggressive Tactics: Consumers can be lured into dealing with predatory lenders by aggressive mail, phone, TV, and even door-to-door sales tactics. Their advertisements promise lower monthly payments as a way out of debt, but don't tell potential borrowers that they will be paying more and longer. They may target minority communities by advertising in a specific language, or target neighborhoods with high numbers of elderly homeowners, or homeowners with little access to credit. Disclosure Documents: Within three days of filling out a loan application, your mortgage broker or lender must provide you with a written document giving you most of the information you will need to know about the loan. (This is a provision of TRID, but I'm sure you remembered that, Yoni .)

To Review, Here's What TRID Requires, Disclosure-Wise

The main takeaways for you regarding TRID are: . The TILA-RESPA Integrated Disclosure (TRID) initiative combined the efforts of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA). . The two integrated closing forms created to help the consumer control costs and understand the closing process are the Loan Estimate and Closing Disclosure forms. . Loans subject to TRID include most closed-end consumer mortgages. . Loans exempt from TRID include home equity lines of credit, reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property — as well as loans made by persons who are not considered "creditors." Your Home Loan Toolkit: In 2015, the CFPB issued an update to the HUD booklet, Shopping for Your Home Loan: Settlement Cost Booklet (also known as the Special Information Booklet). The CFPB's new version of the booklet, Your Home Loan Toolkit: A Step-by-Step Guide, is designed to work with the new TILA-RESPA Integrated Disclosures (TRID) forms that were required as of August of 2015. Lenders are required to deliver or mail the "toolkit" no later than three days after receipt of an application. The "toolkit" is available digitally with interactive worksheets and checklists with the goals of: . Providing consumers with the information needed to get the best mortgage for their situation. . Giving consumers a better understanding of their closing costs. . Counseling consumers on successful homeownership.

The Subprime Mortgage Crisis and the 2007-2010 Recession

The next set of consumer protection laws we will learn about are a direct reaction to the subprime mortgage crisis and resulting recession in 2007-2010. The effects of this meltdown are still being felt today, and we would be wise to learn lessons from what happened (and yet the human condition seems to be that greed outweighs wisdom, so, shrug). We're going to take a little historical detour so that we understand where Dodd-Frank and its resulting regulations, TRID, came from. Credit Expands and the Market Bubbles Up: (Of course, any global economic movement is going to be incredibly complicated, so a quick caveat that what follows is the simplified version.) Essentially, in the early 2000s, lenders started loosening credit requirements for borrowers. From 2004-2006, the percentage of subprime mortgages created went from 8% to around 20%, with some areas at much higher rates, as shady subprime lenders targeted low-income and minority-majority areas that historically have had difficulty accessing credit. Now, subprime loans are not inherently bad. "Subprime" just means lending money to a borrower that has a lower credit score than optimal. People with low credit scores are not bad or irresponsible borrowers! But subprime loans are considered higher-risk, because often the same factors that cause a person to have a lower credit score (job loss, no inherited wealth to fall back on) can cause them to default on a loan. Statistically, subprime loans have higher default rates. Making Bad Loans: Many of these products were not just subprime mortgages, but bad loans that should not have been made. Lenders were charging high fees and high interest rates, and making adjustable-rate and balloon loans that borrowers would not be able to pay if the market changed. Some lenders were obscuring the true cost or terms of the loans they were offering, or switching more expensive loans for rates they advertised without making the borrowers aware. Zero-down or very-low-down-payment mortgages were being offered for homes whose value had recently skyrocketed. New, looser credit requirements allowed new kinds of loans to be made, and some lenders took advantage of that. Borrowers were assured they could just refinance their loans when the balloon hit (or the rate was adjusted upward), which was true, as long as the market kept going up. (You should already be hearing the ominous music in the background). Unscrupulous lenders were making loans to borrowers they knew would probably not be able to repay those loans, and some predatory lenders were offering loan products that were not in the consumers' best interest. These Bad Loans Were Often Targeted to People of Color: In an article for Contexts entitled Black Debt, White Debt, Louise Seamster writes: Partially in response to calls to rectify prior generations of redlining and loan discrimination, predatory mortgages with high, often variable interest and overwhelming final "balloon" payments, targeted Black and Latinx neighborhoods (as did foreclosures). The rules of Black debt are different: segregation scholar Jacob Faber found that high-income Black borrowers were more likely than low-income White borrowers to get these subprime loans. Seamster terms this "predatory inclusion." Lawsuits against Wells Fargo include whistleblower testimony outlining how the lender targeted minority borrowers for their subprime products while referring to their customers using derogatory language and racial slurs. Because of predatory inclusion, the effects of the recession were felt much harder in Black and Latinx communities than white ones.

What the CFPB Does

These are the primary goals of the CFPB: . Create easier-to-use mortgage disclosure forms . Improve consumer understanding . Aid in comparison shopping for the borrower . Prevent surprises at the closing table, a.k.a. "Know Before You Owe". Basically, the Consumer Financial Protection Bureau exists to protect borrowers from dishonest lending practices. This bureau can sometimes be confused with the Fair Housing Act, and although they are both public protectors, the CFPB does not field complaints from minorities about lending companies. Know Before You Owe: One CFPB program, Know Before You Owe, combines two federally required mortgage disclosures into a single, simpler form that makes the costs and risks of the loan clear and allows consumers to comparison shop. This program and other ongoing federal oversight of nonbank companies and banks in the mortgage market work to protect borrowers from unfair, deceptive, or other illegal mortgage lending practices. The CFPB Regulates Consumer Financial Products CFPB regulates all consumer financial products (including mortgages) and holds jurisdiction over the enforcement of TILA and RESPA. Some types of loans, however, are exempt from CFPB regulations, including: . Reverse mortgages. . Home equity lines of credit. . Mobile home loans (when the mobile home is not attached to the real property). CFPB Penalties: If CFPB regulations are broken, people can face daily penalties up to: . $5,000 for failure to follow the law. . $25,000 for gross negligence. . $1,000,000 for intentional violations.

The Takeaway

Those are the last of the consumer protection laws we're going to cover in this level. As a whole, they represent an effort to reckon with our nation's history of discriminatory and predatory lending, reckless investing, and consumer disempowerment. You should understand both the content of these laws (especially as it applies to your future job) and the historical context in which they were passed. In Chapter 3, you learned: ✅ What the ECOA is and why it is important to real estate. ✅ To define and differentiate the ECOA, Community Reinvestment Act, and SAFE Act. In the next chapter, we're going to talk about mortgage fraud and predatory lending. The fun never stops!

Penalties for Violating RESPA Rules

Violators of RESPA prohibitions could face civil and criminal penalties, including: . Civil liability to the parties affected, equal to three times the amount of any charge paid for such settlement service. . Paying the costs associated with any court proceeding together with reasonable attorney's fees. . A fine of not more than $10,000 or imprisonment for not more than one year, or both.

Quiz Level 22 b) that banks create loans in the communities they operate in. The CRA requires banks to create loans in the communities they operate in.

What does the Community Reinvestment Act require? a) that banks commit to offering the same terms to all borrowers. b) that banks create loans in the communities they operate in. c) that banks seek investors from within the community the bank is located in. d) that banks hire from within the community they operate in.

Quiz Level 22 d) when a buyer receives money during a closing without the lender's knowledge. A buyer rebate is when a buyer receives money during a closing without the lender's knowledge.

What is a buyer rebate? a) when a seller lowers the price of the home due to. issues found on the inspection report. b) when a buyer pays for discount mortgage points. c) when a seller opts to pay for the title insurance. d) when a buyer receives money during a closing without the lender's knowledge.

Quiz Level 22 c) Closing Disclosure. The Closing Disclosure is the official name of the RESPA/TILA form that serves as the closing statement. It is a consolidation of the HUD-1, Good Faith Estimate, and Truth in Lending Act (TILA) disclosures.

What is the official name of the RESPA/TILA form that serves as the closing statement? a) HUD-1 Disclosure. b) TILA Disclosure. c) Closing Disclosure. d) Good Faith Estimate.

Quiz level 22 b) A seller cannot require a buyer to purchase title insurance from a specific title company unless they pay for all costs for themselves & the buyer. A seller CANNOT require a buyer to purchase title insurance from a specific title company UNLESS they pay for all costs for themselves & the buyer.

Which of the statements below is TRUE? a) A seller can require a buyer to purchase title insurance from a specific title company in order to purchase the property offered for sale. b) A seller cannot require a buyer to purchase title insurance from a specific title company unless they pay for all costs for themselves & the buyer. c) A seller can never require a specific title company to be used. d) A seller cannot require a buyer to purchase title insurance from a specific title company unless they have family ties at the title company.

Quiz Level 21 b) condo for sale: 3 bed, 2 bath, $1,200/month mortgage. A lender may not advertise terms that are not actually available to the consumer. A mortgage payment varies depending on many factors, such as down payment and interest rate.

Which of these advertisements violates the Truth in Lending Act? a) for sale: 2 bed, 1 bath, listed at $256,000. b) condo for sale: 3 bed, 2 bath, $1,200/month mortgage. c) for sale: 2 bed, 1 bath in a family neighborhood. d) for rent: 2 bed, 1 bath, $1,000/month.

Quiz Level 22 c) martial status, if applying without a co-borrower in a non-community property state. A lender can't ask a person without a co-borrower about their marital status, unless they're in a community property state. They CAN ask about race and ethnicity, but they can't use that information to disqualify the loan or change the loan terms.

Which of these can a lender NOT ask a potential borrower about? a) what their ethnicity is. b) what their race is. c) martial status, if applying without a co-borrower in a non-community property state. d) how much money they make.

Quiz Level 22 c) impose limits on how much interest a lender can charge. TILA doesn't impose limits on how much interest a lender can charge.

Which of these does TILA NOT do? a) provides consumer with rescission rights. b) requires lenders to express loan terms in easy-to understand ways. c) impose limits on how much interest a lender can charge. d) prohibits unfair or deceptive mortgage lending practices.

Quiz Level 22 c) Know Before You Owe. Know Before You Owe is a CFPB program to simplify lending forms.

Which of these is a CFPB program designed to simplify forms for borrowers? a) Try Before You Buy. b) Learn Before You Earn. c) Know Before You Owe. d) Neither Borrower Nor Lender Be.

Quiz Level 21 d) a 50-acre farm in the countryside. RESPA doesn't apply to properties larger than 25 acres.

Which of these loans would NOT be covered by RESPA? a) a single-family home in a suburban neighborhood. b) a condo in a 30-unit condo building. c) a manufactured house purchased with an FHA loan. d) a 50-acre farm in the countryside.

Quiz Level 22 b) the Consumer Financial Protection Bureau was created. Dodd-Frank created the CFPB.

Which of these was one of the provisions of the Dodd-Frank Act? a) a process was created to hold the architects of the financial crisis responsible for their reckless actions. b) the Consumer Financial Protection Bureau was created. c) banks accused of predatory lending were dissolved. d) RESPA was passed.

Quiz Level 22 b) the Loan Estimate and the Closing Disclosure. A current borrower would receive the Loan Estimate and the Closing Disclosure, thanks to TRID rules that went into effect in 2015.

Which two disclosure forms would a borrower getting a loan today receive? a) the HUD-1 and the TILA disclosure. b) the Loan Estimate and the Closing Disclosure. c) the Estimated Cost to Close the Final Cost to Close. d) the Good Faith Estimate and the RESPA disclosure.

The Community Reinvestment Act

While we are on the topic of fair crediting, I'd like to briefly touch on the Community Reinvestment Act. The Community Reinvestment Act (CRA) was enacted by Congress in 1977 with the goal of encouraging depository institutions to help improve the communities in which they operate, including low- and moderate-income neighborhoods, by creating loans that meet the credit needs of growing and healthy communities. The CRA requires that each government-insured depository institution act in good faith to meet the credit needs of its entire community. In other words, to fight redlining, the CRA requires banks to make loans in the neighborhoods they operate in. The good faith of the institutions covered under the CRA is evaluated periodically by federal agencies responsible for regulating financial institutions. The CRA requires that lenders submit an annual statement that includes public comments about their attempts to help low-income communities. An institution's past performance of helping its community is taken into account in considering an institution's application for new banks, including mergers and acquisitions.

Quiz Level 21 b) it lets them compare the true cost of each loan. The APR lets borrowers compare the true cost of each loan.

Why is the APR an important tool for borrowers shopping for loans? a) it contains the monthly payment amount. b) it lets them compare the true cost of each loan. c) it allows banks to hide fees. d) it gives them the interest rate only.

The Bubble Pops

You can see where this is going, right? Home prices hit their peak in 2006. Interest rates went up, and borrowers with ARMs started to default on their loans as they could not afford the new payments. The housing market took a small dip in 2006-2007, leaving many people who bought at the top of the market with 0% down loans "underwater" — they owed more to their mortgage companies than their homes were worth. You can't refinance an underwater loan, so all of the borrowers counting on refinancing out of their bad mortgages were stuck. More and more people defaulted on their loans. Short sales and foreclosures flooded an already-weakening housing market with even more housing stock, and home prices continued to fall. Many, many homeowners — even those without subprime loans — found themselves underwater on their loans. Homeowners who borrowed against their new equity found that equity gone, and were unable to sell their homes because they, too, were now underwater. In April of 2007, New Century Financial Corp., a leading subprime mortgage lender, filed for bankruptcy. Those mortgage-backed securities became increasingly worthless as more and more homeowners defaulted on their loans. Fannie and Freddie took huge losses as even prime borrowers defaulted. In September of 2008, the stock market crashed. There were a lot of other complicated factors at play (there was a thing called a "credit default swap" that we are not going to get into here), but basically, a lack of regulation and oversight in the banking industry and mortgage industry led to a global financial collapse. Greedy investors ignored the real risks of the products they were buying and selling, and what could've been a normal boom and bust cycle in U.S. real estate ended up being a worldwide, multi-year recession. And So Dodd-Frank Was Born: In the aftermath of the economic meltdown, Congress was compelled to create more regulation and transparency in the banking, investment, and mortgage industries. This came in the form of a bill called the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank, to its friends). Some people (in the investment industry, especially) feel that Dodd-Frank went too far. Others, such as the people who lost their homes or retirement savings to unscrupulous investors, feel like it didn't go far enough. Let's take a look at what it actually did for the mortgage industry. Source: Federal Reserve History

Facts of a feather c) TRID.

administered by the CFPB a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather a) TILA.

allows certain borrowers a three-day right of rescission. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather b) Community Reinvestment Act.

an institution's performance in helping their community is taken into account when approving new banks. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather d) TRID.

combines TILA and RESPA rules for loans. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather a) TILA.

combines the requirements of TILA and RESPA. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather a) TILA.

created advertising rules for loans. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather b) Dodd-Frank.

created the CFPB. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather b) Community Reinvestment Act.

encourages banks to make loans in the low- and middle-income communities they operate in. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather

once administered by the Federal Reserve Board, now by the CFPB. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather d) Regulation Z.

once administered by the Federal Reserve Board, now by the CFPB. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather

prohibits lenders from asking certain questions when evaluating a credit application a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID. no

Facts of a feather

prohibits lenders from asking certain questions when evaluating a credit application. a) SAFE Act. b) Community Reinvestment Act. no c) ECOA. d) TRID.

Facts of a feather c) ECOA.

prohibits lenders from discriminating against protected categories. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather d) TRID

provides guidelines for updated loan disclosures, including the Loan Estimate and the Closing Disclosure. a) SAFE Act. b) Community Reinvestment Act. c) ECOA. d) TRID.

Facts of a feather c) TRID.

replaced the GFE and HUD-1 forms with the Loan Estimate (LE) and Closing Disclosure (CD) forms. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.

Facts of a feather a) TILA.

requires disclosures, including APR, for all loans. a) TILA. b) Dodd-Frank. c) TRID. d) Regulation Z.