Real Estate Principals - California Mortgage Loans

The Mortgage Disclosure Statement is a form that clearly and completely states ALL

ALL the information and charges associated with a particular loan.

The REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) ensures that the buyer and seller in a residential real estate transaction involving a new first mortgage loan have knowledge of all settlement costs.

RESPA prohibits kickbacks or unearned fees paid to lender for referring customers to insurance agencies, etc.

6 of 10 What is the true purpose of Truth in Lending Law?

Disclosure

The Housing Financial Discrimination Act (Holden Act) prohibits

Financial institutions from engaging in discriminatory loan practices (redlining).

9 of 10 Sam is selling one of his rental homes. His advertisement reads: "For Sale By Owner - Owner Will Finance - No Down Payment!" What are the criteria for being considered a creditor under Truth in Lending?

A lender must lend funds 25 times a year and/or must lend the funds for at least five housing loans annually.

3 of 10 Jacinda makes collections on real estate loans. Last year, she made approximately 20 collections and collected $38,000. Must Jacinda be licensed?

Yes, if a collector makes more than ten annual collections, or collects more than $40,000, he/she must be licensed as a California real estate broker.

5 of 10 What is included in the APR?

The total finance charge to the total amount to be financed.

A Real Property Securities Dealer is anyone acting as the agent who engages in the business of selling real property securities OR

Who accepts funds to be reinvested in real property securities or to be placed in an account.

2 of 10 Lily, a licensee, has been referring her first-time home buyers to Safe Insurance Company for all of their insurance needs. The insurance company has been providing Lily with "motivation" in the form of cash to keep the referrals coming. Which law or act prohibits this type of violation?

RESPA

10 of 10 Under Article 7, what is the maximum amount that may be charged to the borrower for loan costs and expenses? Also, under Article 7, if the home is not occupied by the owner, under what circumstance is the loan exempt from a balloon payment?

The maximum amount that may be charged to the borrower for loan costs and expenses is 5% of the loan, or $390.00, to a maximum of $700.00. If the loan term is less than three years, and the home is not occupied by the owner, the loan is exempt from balloon payments.

The Mortgage Loan Broker Law requires all loan brokers to give all borrowers the Mortgage Disclosure

The borrower becomes obligated for the loan

4 of 10 Beverly, an African-American woman, has applied for a mortgage on a new home. She has a reliable job as a court reporter and has been employed for ten years. Her income is substantial enough to pay a mortgage, in her budget, and still have seventy percent of her income remaining. She has, however, been at least ninety days late on several bills one year ago. Beverly has since caught up on her credit card bills, paid them on time, and reduced their balances by half. She has just been turned down for a mortgage by her bank. Has she been discriminated against?

No. Beverly's brush with delinquency is too fresh on her record for the bank to issue a mortgage. Although she has taken the steps to correct the issues, ninety days late on several debts is substantial. She more than likely did not meet the bank's financial requirements.

A real estate licensee is considered a creditor if the licensee routinely assists sellers in determining whether

A land contract or purchase-money mortgage is creditworthy.

TRUTH IN LENDING LAW Requires lenders to disclose to buyers the true cost of obtaining credit so that the borrower can compare the costs of various lenders.

1) Annual Percentage Rate (A.P.R.): An expression of the relationship of the total finance charge to the total amount to be financed. 2) A lender must lend funds 25 times a year and/or must lend the funds for at least 5 housing loans annually. 3) Rescission Clause informs a purchaser of his/her rescission rights as provided by state law. 4) Advertising

ARTICLE 6

1) In California, anyone who wishes to sell real estate investment type security must FIRST obtain a Commissioner's Permit - cost of $100.00 and valid for one year, and it may NOT be used in advertising unless the permit is shown in FULL. Requires a $10,000.00 surety bond.

ARTICLE 5:

1) Licensees are prohibited from pooling funds: broker must NOT accept funds UNLESS the funds are meant to be for a specific loan transaction. 2) Before a broker can accept the lender's money, he must first OWN the loan OR have an unconditional written contract to buy a specific note; must also have the authorization from the prospective borrower.

1 of 10 What are the steps set forth for a real property securities dealer? Which Article do the regulations fall under?

Obtaining a Commissioner's Permit; an RPSD endorsement on a broker license; and proof of a $10,000 surety bond. The regulations fall under Article 6.

The EQUAL CREDIT OPPORTUNITY ACT is a law for lenders that prohibits them from discriminating against race, color, religion, national origin, sex, family size, handicap, marital status, age, or dependency on public assistance in the granting of credit to consumers.

1 ) ECOA indicates that a lender can base lending decisions on an individual's income, net worth, job stability, and credit rating.

ARTICLE 7: The charges made to a borrower cannot exceed 5% of the loan or $390.00, whichever is greater, to a maximum of $700.00. No charge can exceed the amount customarily charged for the same service in the community in which the services take place. ]

1) On "hard money loans" (cash) of $30,000.00 and over for first trust deed loans, and $20,000.00 and over for JUNIOR deeds of trust, the broker MAY CHARGE as much commission as the borrower will agree to pay. 2) The regulations also require that the broker provides to BOTH the buyer and seller, on first trust deed loans UNDER $30,000.00, and on junior trust deed loans UNDER $20,000.00, copies of the appraisal report. 3) Loans on owner-occupied homes that are negotiated by a broker for a term of 6 or more years may not have a balloon payment. 4) If the home is NOT occupied by the owner, then the loans are exempt from balloon payments, IF the loan term is less than 3 years. 5) Threshold Reporting is the requirement to report annual and quarterly loan activities to the California DRE, if, within the past 12 months, a broker has negotiated any combination of 10 or more loans to a subdivision OR a total of more than $1,000,000.00 in loans.

A California licensed broker is permitted to act in this capacity if he first receives an RPSD endorsement on his broker license.

This endorsement requires a broker to submit the endorsement fee of $100.00, along with the proof of a $10,000 surety bond.

The Mortgage Loan Broker (Real Estate Salesperson or Broker) in this situation must:

1) Present this statement to the prospective borrower within 3 days of receipt of a completed written loan application OR 2) before the borrower is obligated to take the loan, whichever is earlier. 3) Have the borrower sign the statement before the borrower becomes obligated to complete the loan. Keep this form on file for 3 years.

Anyone who makes more than 10 collections per year or collects more than $40,000.00 must be licensed as a California real estate broker.

Must be licensed as a California real estate broker.

7 of 10 Jim and Kim Scott have been working very hard to rebuild their credit. They are now in good financial shape to buy their first home. The couple has been working with a mortgage broker, Ted, to assist them in finding the best loan. They complete the application, are approved for a loan, complete other paperwork, and are now obligated to complete the loan. A week before they are due to close, they receive the Mortgage Disclosure Statement, outlining all of the costs and terms associated with the loan. The costs and terms are not what they had previously understood. Are they stuck with this loan?

No, the Mortgage Disclosure Statement should have been presented to them within three days of the broker's receipt of their written loan application, or before the Scotts were obligated to take the loan.

8 of 10 Deanna is thinking of taking the step from renter to homeowner. She has a very stable position as a surgical nurse and excellent credit. She doesn't, however, have a large sum of cash handy for the down payment. One Sunday morning, she notices advertising for new condos where "no down payment is required." Should she look for any other information in the ad?

Yes, she should make sure the amount or percentage of down payment is there; terms of repayment; annual percentage rate and if an increase is possible; total finance charge; and total number of payments and due dates.