MLO

Ability to Repay

-Doesn't apply to home equity lines, reverse, time shares, construction, or vacant land. DOES apply to investment properties -Requires lenders to look at credit history, current or expected income, employment status, projected monthly pmts for primary or jr loans on home, projected property tax and insurance, current debt obligations, DTI, and debt stated by borrower not on credit report which must be included in DTI. Must also consider any info borrower volunteers about employment, such as retiring, dropping to part time etc. -Must keep record for three years as borrowers may sue in this time frame if they can't make pmts. After that time it's only legally relevant in a foreclosure defense

Mortgage Acts and Practices (MAP) Reg N.

-illegal to misrepresent a loan in an ad, including interest rate, apr, pmts, fees, taxes and ins, ancillary products like credit insurance or credit disability insurance, prepay penalties, variability of terms, # of pmts, actions that constitute a default, effectiveness of debt consol, gov endorsement, abilities to obtain mortgage or preapproval, right of consumer to reside in property (reverse mort) availability of counseling services -Copies of commercial communications and supporting docs must be kept for 2 yrs

Fair Credit Reporting Act (FCRA)

1970 Federal law giving consumers the right to view and correct their credit information. Enforced by federal trade commission -Regulates actions of CRAs ( Credit Reporting Agencies). CRAs can't hold on to negative info for too long, but can hold bankruptcies for 10 yrs and tax liens for 7 from when they were paid -Regulates actions of creditors requiring accurate and complete info -Allows creditors, insurers, employers, and other businesses to use info in report to evaluate apps. Employers only have access if employee or applicant allows it -Borrowers entitled to free credit report if the lender takes adverse action and if they ask for it within 60 days of receiving notice. The notice gives name, address, and ph# of bureau used

Home Mortgage Disclosure Act (HMDA) Regulation C

1975 -Requires that mortgage lenders report variety of demographic info about borrowers - Allows for identification of underfunded communities be identified that might benefit from alternative forms of lending -Does not have a "quota" for any mortgage loans made in a geographic location -Allows the public to monitor the lender and uncover possible discrimination HELPS OUT MORE THAN JUST THE PEOPLE YOU SEE (C) WITH HUMMERS (HMDA)

Homeowners Protection Act

1998 States that a borrower with good payment history will have PMI canceled when he or she has built up equity equal to 20% of purchase price or appraised value. Does not apply to Loans with MIP. Lender MUST cancel at 78% based on orig value of home as long as not in default. Lender must send annual notice of rights under HPA and borrower must be made aware at closing of procedure for canceling PMI

Dodd-Frank Wall Street Reform and Consumer Protection Act

2010 -Created CFPB, Financial Stability Oversight Council, Orderly Liquidation Authority and the Federal Insurance Office -Applies to residential 1-4 units -Refinancing a higher priced mortgage may not result in a higher balance, balloon pmts, or neg am -Appraiser Independence Requirements (AIR): +Appraiser's clients is the lender, no one connected to the loan staff may order an appraisal, copy of appraisal must be provided to borrower at least 3 days prior to close unless waived by them

Pre-licensing education requirements

3 hours fed law 3 hours ethics (fraud, consumer protections, fair lending) 2 hours lending standards for nontraditional mortgages 12 hours discretionary Score 75% on test. If you don't maintain license for 5 yrs must retake test

High Priced Mortgage Loan (HPML)

APR above APO: 1st lien: 1.5%, 2.5% for jumbo 2nd: 3.5% When APR above a certain threshold for primary res, lenders must have an appraisal done, which must be sent to consumer promptly or within at least 3 bz days before closing, whichever is earlier Additional appraisal needed for flipped homes, as in homes resold within 90 days with seller paying min 10% price increase, or resells within past 91-180 days with 20% inc. Must be done by diff appraiser at no cost to applicant Refi of HPML may not result in higher balance or neg am QMs exempt from this rule

Four Essential of Contracts

Competent Parties: Signers must be mentally sound and of legal age Mutual Agreement: both parties agree on all terms of the contract Legal Object: seller must have the legal right to transfer ownership of the property Consideration: money, valuables, or good intentions to proceed with the deal Bilateral Contract (purchase agreement): signed by both parties and binding on both Unilateral (purchase option): signed by two parties but is only binding on the party offering the option

Federal Insurance Office

Created under Dodd-Frank Act Collects non-health insurance data. Recommend changes to streamline state regulatory process; new products. Represents U.S. insurance industry abroad.

Pre-texting

Creating an invented scenario (the pretext) to convince someone to divulge information. GLB Act protects against this.

Mandatory Arbitration

Creditors may not include mandatory arbitration clauses or waivers of the consumer's right to file a lawsuit alleging federal violations. Applies to HELOCs on prime res and all res mort loans except vacant land and timeshares

Credit Insurance Financing

Creditors prohibited from financing any fee or premium for credit ins with HELOCs on prime res and res mort except vacant land and timeshares Credit ins is a policy that suspends or cancels mort pmts under consumer finance altering circumstances like health or employment issues

Lien Position

Date and time of recording establish position of the lie, not date and time doc was signed. Lien priority usually as follows: 1. Gov Expense of Sale 2. Delinquent Prop taxes 3. Special Assessment of Liens 4. fed estate tax lien 5. 1st mort 6. 2nd mort 7. 3rd mort -Insert however many junior morts 8. IRS Tax Liens and other creditors

Foreclosure

Enforcement of a lien. Lender can choose not to take legal action if mort is in default, which is known as a forbearance Lis Pendens: (Latin for litigation pending) is a notice which is filed when lender files a foreclosure lawsuit; know as a Notice of Default. Notice is recorded and becomes part of the county tax record where property is located. In equitable theory states, foreclosures are quickly completed outside of court(unless homeowner objects and files a lawsuit) since homeowner doesn't have full legal title

Orderly Liquidation Authority

FDIC has the power to replace management of failing companies and oversee liquidation of assets to avoid past issues with bankruptcy/bailouts of "too big to fail"

State Law and Regulation Definitions

Federal Banking Agencies: Federal Reserve System Board of governors, NCUA, Comptroller of the Currency and Fed Dep Insurance Corp Immediate Family Member: spouse, paretns, stepp, child, stepchild, sibling, stepsibling, grandparent, grandchild, and adopted members Individual: natural person Person: natural person, LLC, association, company, corporation and partnership LO: Doesn't include real estate licensee, or individuals who only perform clerical and admin duties or who only do timeshares. Negotiates terms with a lender and takes residential apps for compensation Clerical and admin duties: tasks that include collecting, analyzing, and distributing data for processing and underwriting. Communication is fine with borrower as long as it isn't counseling or to negotiate Residential mortgage loan: dwelling secured by mortgage or deed of trust. Vacant land included.

Fee Tolerances

GFE/HUD-1 differences with 0 tolerance: 30 days to refund LE/CD: 60 days

HOEPA

Home ownership protection act. Amendment to TILA. addresses deceptive practices. rules for these loans are contained in section 32 of reg z for high rate/high fee loans.

Default

If borrower fails to keep the home in good repair, or pay prop taxes, or pay hazard ins, they could be in default and have home auctioned

State Investigations

If matters arise that warrant further investigations, each state has broad powers to gather info, including: -subpoena witnesses and docs -Documents must be produced on or before dates of summons -Record may be requested from any licensee or person regulated by the safe act -Can interview: officers, principals, MLOs, employees, independent contractors, agents, customers of licensee, individual of person subject to this act concerning their business -Additional authorities can issue cease and desists, enforce penalties and fines and order termination of an official or employee

Incomplete App

If there's not enough info to make a decision, borrower can be notified orally or by notice of incompleteness. Notice must be in writing, sent within 30 days, explain what info needed, provide reasonable deadline, and state app will terminate if info not provided

LO Rules for HUD-approved Counselors

If they receive or expect to receive comp from creditors for recommending certain products or lenders, they are considered LOs Those the provide gen explanations of loan types and assist in apps are not, even if they receive a SET fee, regardless of loan amount, from creditor or LO as long as they have an agreement with gov agency

LO Record Keeping

LO orgs must keep records of pmts from a creditor and pmts to individual LOs for 3 yrs. Files must contain a copy of the comp agreements

HPML Escrow MUST BE MAINTAINED for:

Lender must require and maintain escrow acc on 1st lien, closed end, HPML on prim res for 5 yrs unless paid off early, or if they allow per borrower request if LTV at 80% from original purchase price, and borrower current Small creditors in rural or underserved areas may be exempt Hazard ins escrows not req for communities with master ins policy (condos)

Additional QM issues

Lower APR Loans: law allows 'safeharbor' for lower APR qualified mortgages; lender is released from ATR liability for these Higher APR: borrower can win ATR lawsuits if they find themselves unable to make pmt and can prove they didn't have sufficient funds at the time the loan closed Small Creditor Exception: Less than 2 bill in assets and less than 500 closed-end, 1st lien res mortgages in previous year . They have special qm guidelines, including balloons ok in rural or underserved areas. Lose qm status if loan sold within 3 yrs Implementation timeframes: effective 1/10/14, however some Fan/Fred and gov loans have temp max 7 yr extension to implement these qm standards. Underwritten like previously discussed, but don't have to meet 43% dti

Basic Terms

Mortgagor: borrower (GIVES repayment) Mortgagee: lender (RECEIVES promise to repay) Grantor: homeowner Grantee: new owner (RECEIVER of new deed) Assignor: transfers contracts rights Assignee: receives contract rights GIVER words end with OR, RECEIVER words end with EE

LO Compensation Rule

No loan originator shall receive any payment that is based on term of the loan Creditors (including seller financiers) are considered LOs only when using table-funding(occurs when lender uses borrowed money from an investor to fund a loan, and after closing mortgage and note are immediately assigned to that investor) LO Orgs can receive comp for selling additional products like title ins, LOs cannot. LOs may cut their comp if unforeseen circumstances increase customer's settlement charges after GFE inssued. Ex: issues causing closing delay lead to interest rate lock expiration, LO can contribute part of their fee for a new lock

TILA/Reg Z

Part of 1968 Consumer Protection Act Residential (1-4 units) coverage only, residential mort lenders must retain TILA Disc for 3 yrs after consummation. -For personal, family, or household purposes. Purchase or renovation of a rental property, or the purchase of property in which the borrower does not intend to reside, is considered to be a business purpose. Covers Disclose of charges, CHARM booklet, Right of Rescission

Defeasance Clause

Prevents lender from foreclosing unless in default. Aksi requires lender to provide a recordable Satisfaction of Mortgage notice to mortgagor within 60 days of closing

exculpatory clause

Prevents lender from requesting a deficiency judgment against the borrower when the foreclosure proceeds are not sufficient to pay off the loan balance. Borrower has no personal liability to repay the note (non-recourse loan). More common in commercial than res

U.S. Department of Housing and Urban Development (HUD)

Primary agency tasked with creating and managing programs to provide quality affordable housing, prevent housing discriminations, and help build communities. Oversees FHA (Fed Housing Admin)

Ability to Repay and Qualified Mortgages

Prior to the ATR/QM rule, Regulation Z, which implements the Truth in Lending Act (TILA), prohibited a creditor from making a higher-priced mortgage loan without regard to the borrower's ability to repay the loan. Unlike some other mortgage rules, the ATR/QM rule is not limited to first liens or to loans on primary residences. -Before 2007 many borrowers obtained loans without proof of income in no-doc or stated income loan using just credit score

RESPA Section 8

Prohibits kickbacks, fee-splitting, and unearned fees allows referral fees between two real estate companies as the only exception penalities include reimbursement to plaintiff equal to 3x actual cost of service, 10k fine and/or 1 yr jail 2 loan originators can receive pmt only if each completes 5 distinct duties. HUD defines 14, so it's a red flag if there are three LOs

PMM

Purchase money mortgage -Loan used for the purchase of a home and not a refi, home improvement, or HELOC. Deed given to borrower at closing, and makes pmts to the seller

ECOA Equal Credit Opportunity Act Regulation B

Purpose of the law is to keep lenders and brokers from discriminatory practices and to ensure that all applicants have equal rights of opportunity when being considered for a loan. Regulated by CFPB Prohibited Factors: -Don't ask about spouse unless in community prop state or they are are part of the trans or applicant relies on alimony of child sup for qualifying income -No questions on future family planning -Don't required qualified applicant to have cosigner CAN ask about immigration status and perm residency, credit history, and income Failure to comply can be 10k in individual and the lesser of 500k or 1% of creditor's worth

OPEN ENDED LOAN DISCLOSURES

REVERSE MORTGAGE: INITIAL TILA DISCLOSURE WITH APR, GOOD FAITH ESTIMATE OF CLOSING COSTS, HUD-1 SETTLEMENT STATEMENT, AND FINAL TILA DISCLOSURE EQUITY LINE OF CREDIT, MANUFACTURED HOUSING NOT SECURED BY REALESTATE, AND SOME HOMEBUYER ASSISTANCE LOANS: TILA DISCLOSURE ONLY

CSBS/AARMR Authority

SAFE act allows states to opt-ut of managing transtion to new system and overseeing licensing and discipline, in these cases CSBS/AARmr provide oversight. They also take control if a state fails to maintain required standards

High Cost Home Loan

Section 32/HOEPA loan, enforced by CFPB Covered Loans: purchase money mort, 2nd mort, refis Exempt: reverse, FHA, VA , USDA, investment prop, construction Thresholds: 1st lien: 6.5% higher than prime offer rate 2nd lien: 8.5% higher Total fees and point payable by consumer at or before closing exceed 5% of total loan amt Restrictions: no prepay penalties -No balloon unless bridge term (12 mo OR LESS) -No neg amort -No refi into another high cost within a year unless it is good for the consumer -No increase in interest rate upon default -Cannot accelerate the loan (call it due) after default -Borrower must have documented ATR prior to funding -Must receive homeownership counseling from HUD-appr counselor -Late fees may not exceed 4% of past-due pmt

SAFE Act

Secure and Fair Enforcement for Mortgage Licensing Act -Part of Housing and Economic Recovery Act of 2008 -Establishes minimum state licensing requirements for individuals and companies for res mortgage loan services -Conference of State Bank Supervisors (CSBS) and Association of Residential Mortgage Regulators (AAMR) created National Mortgage Licensing System and Registry (NMLSR)

Seller Financing

Seller Financiers are considered creditors if: -Extend more than 6 non-high-cost morts during preceding year OR -Extend more than 1 high cost mort in past 12 months -If they don't meet the qualifications as a creditor, they are not an LO for comp purposes, unless they engage in table funding Also not considered LOs for other LO Rules if they are a natural person or estate that: -Provide seller financing for only 1 property in 12 months -Owned property being financed -Did not construct the property as a part of normal business -Provided a loan without neg am -Provided fixed or ARM with min initial period of 5 years and reasonable rate increases (max 2% periodic inc and max 6% lifetime inc) -Provided loans that fully amortize (no balloon) -Determined ATR -Provided max 3 properties financed in the past 12 mo

RESPA section 6

Servicer complaints servicers have 5 days to ackknowledge a complaint, 45 days to resolve or explain position Servicer can add forced place ins if they believe borrower doesn't have hazard ins. must notify 45 days in advance, and send 2nd notification 30 days from the first servicers must attempt to speak to a delinquent borrower within 36 days of missed pmt and mail loss mitigation info within 45 (suggest options like refi, loan modification, short sale, and deed in lieu of title) Servicers must ack a loss mit app within 5 days and let them know if more info needed. If serviced receives one 37 days before foreclosure, borrower's situation must be evaluated for all possible options for 30 days. Borrower may appeal a situation if a complete package was received 90 days before a sched sale Can't file foreclosure until 120 days delinquent. If borrower submits complete app after 120 but before fc filed, can't proceed with fc until conditions are met, including borrower not qualifying for any mitigation and has no more appeals,m or borrower declines/doesn't honor terms of agreement

Temporary MLO

Set in 2018, for registered MLOs seeking state licensure or those doing loans in multiple states. Requires: -Being in NMLS for a year AND currently employed by state-licensed mort company in application state OR Licensed MLO for past 30 days Last until application withdrawn, state denies or accepts license app, 120 days after incomplete app submitted

Acceleration Clause (in a mortgage)

Specifies conditions under which the lender may advance the time when the entire debt which is secured by the mortgage becomes due. For example, most mortgages contain provisions that the note shall become due immediately upon the sale of the securing land without the lender's consent or upon failure of the landowner to pay an installment when due.

TRID

TILA Disclosure only needed for rev mort, equity lines, mortg secured by mobile home and dwellings not attached to land. Requires consumers are informed of all extra charges to better compare offers. Includes APR, finance charge, amount financed, total paid over life of loan. APR - interest rate + other loan financing costs, financing charges being anything that a cash transaction wouldn't have to pay. If APR incorrect more than 1/8 for fixed or 1/4 for arm, must be redisclosed and APR must be finalized at least 3 days before close

TRID

TILA-RESPA Integrated Disclosure -modified closed loan disclosure requirements the LE with the initial APR and the CD with final APR

Loan Application Register (LAR)

The form that is used for reporting data required to be collected under the Home Mortgage Disclosure Act. Includes: loan amt, purpose of home, loan type, location of property, race of borrower, ethnicity, gender, if loan was granted, if denied then why, and whether the interest rate was over a certain threshold, and the type of entity that purchased the loan if it was sold

Deeds

Written isttrument used to convey title or transfer of ownership fron grantor to grantee. To be valid, it must: -Identify seller and buyer -Include legal description of the property -Be in writing -Signed by a competent grantor and 2 witnesses. Grantee does not sign the deed. Deed is recorded to give constructive notice of change in ownership Deed restrictions may be place and control the use of an individual property. Cannot be discriminatory and are said to "run with the land", aka continue indefinitely. Restrictive convenant is a restriction that affects and entire subdivision.

MLO Licensing Requirements

fingerprinting, credit report, criminal record, preslicense education, passing test by 75% -no felony in past 7 years, no offenses related to fraud

due-on-sale provision/alientation clause

A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage. In other words, loan is not assumable

Escalation Clause

(1) in finance, permits the lender to raise the interest rate upon the occurrence of certain stipulated condition, such as homeowner deciding to use home as an investment/rental because it is riskier. This usually applies only if it's converted during the first 12 months

RESPA Section 10 Escrow Account Limits

*Limits amount lender can require borrower to put into escrow for purposes of paying taxes, hazard insur. and other charges related to the property to more than 1/12th (1 mos.) of the total of all due payable during the year, plus amount to pay for any shortage in acct. *Allows a cushion not to exceed 1/6th or 2 mos. due for a year *Requires the lender to perform escrow analysis 1/year and notify borrower of shortages and return excess of $50 or more, if borrower is not delinquent. *Does not require lender to impose an escrow acct, but: *Mortgage w/ mortgage insur. must have escrow acct *"Higher Priced" loan must have escrow acct.

RESPA Section 9 Title Insurance Rules

*Prohibits seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale

SETTLEMENT DISCLOSURES

- Finalized Closing Disclosure (TILA) - Initial Escrow Statement (within 45 days of Closing) -ESTIMATES THE FIRST YEAR ESCROW PMT FOR PROP TAXES AND HOMEOWNER'S INS

Loan processors/underwriters may not...

- Offer or negotiate loan rates or terms - Counsel consumers about loan rates or terms - Represent to the public that they can perform the activities of a loan originator -They must also be licensed if they are independent contractors

RESPA

-1974 -REG X (REXPA) -PROVIDE CONSUMER PROTECTION FOR LOANS ON RESIDENTIAL PROPERTIES (1-4 UNITS) -PRIMARILY DISCLOSURE OF CLOSING COSTS AND PREVENTING KICKBACKS -USED TO BE UPHELD BY HUD, NOW CFPB AS OF 2011 -APPLIES TO FINANCED TRANSACTIONS, NOT CASH

Gramm-Leach-Bliley Act (GLBA)

-1999 -A law that requires banks and financial institutions to alert customers of their policies and practices in disclosing customer information. -Enforced by FTC -Three principal parts: Financial Privacy Rule, Pre-texting, Safeguard Rules Financial Privacy: individuals must receive privacy notices that provides opportunity to opt out of different types of info sharing. Automatically send yearly. Consumers only receive if info shared with nonaffiliated company. Must be mailed or delivered in person Pre-texting: FIs aren't allowed to obtain confidential info under false pretenses Safeguard: FIs and any institution with whom they share info must implement good procedures to protect individual's private info

Fair and Accurate Credit Transactions Act

-An amendment to the Fair Credit Reporting Act that allows consumers to request and obtain a free credit report once each year from each of the three primary consumer credit reporting companies (Equifax, Experian, and TransUnion). -Establishes national fraud alert system allowing someone to call one bureau and put free alert on all three. Initial alert good for 90 days and allows one free report during that time. If they file an ID theft report with a law enforcement agency they can request 7 yr fraud alert that allows two free credit reports from each bureau per year -Requires businesses that print cred/deb card receipt to use only print the last five of card # -Allows consumer to contact creditor that reported neg info to CRA and request an investigation. No additional neg info on that matter can be reported until that issue is resolved. -Must notify consumer that's made late or partial pmts within 30 days of reporting it to a bureau. May be printed on monthly stmt -Requires proper disposal methods for sensitive info -Red Flags Rule: Specifies 5 categories of possible ID theft that institutions must take measures to recognize, including a written plan to train employees of the warning signs and responses to them. Program must be managed by the firm's board of directors or senior managements

Deed in Lieu of Foreclosure

A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This is a way for the mortgagor to avoid foreclosure. Borrower gives property to lender, junior mortgages are still borrower's responsibility.

Exempted Licensing

-Exempt origininators include employees of a depository institution, or one regulated by the Farm Credit Admin. They must register with NMLS, are known as registered LOs -Individuals that negotiate a loan for themselves or fam members -Lawyers that negotiate as an ancillary and don't receive compensation by LO or lender -Commercial real estate LOs -Employees of non-profit housing orgs when originating for them -Individual who does not habitually act as an LO if the source of financing doesn't provide loans habitually

Do not call

-FTC and FCC Established Registry -Applies to all telemarketers, with exception for certain non profits, or with written permission -Penalty is $42530/call Exemptions: Political, Charitable, Surveys, Established bznz relationship up to 18 months after conclusion of business -After customer inquiry, business can call up to 3 months after -Telemarketers and sellers must search every 31 days Safe Harbor: companies not held liable if they have a written dnc policy, train employees, and maintain internal list of customers who requested not to be called and access the register every 31 days. Must be able to prove call made in error. -Can only call 8-9, can't not leave ph# in vm, must identify your company, leaving pre-recorded commercial msg without established relationship of permission to call -Can't offer debt relief services without giving a timeframe for results, money needed to settle debt, the consequences of missing pmts

PRE-SETTLEMENT DISCLOSURES

-HUD-1 SETTLEMENT STATEMENTS/CLOSING DISC.: NOT REQUIRED IF NO CLOSING COSTS HUD-1 ONE BZ DAY BEFORE CLOSING CD 3 BZ DAYS BEFORE -AFFILIATED BZNZ ARRANGEMENT IF LENDER HAS CONTROLLING INTEREST IN A COMPANY RECOMMENDED TO BORROWER, MUST BE GIVEN THIS. STATES RELATIONSHIP AND CHARGES FOR SECOND COMPANY

Mortgage Assistance Relief Services Rule (MARS)

-Helps to prevent foreclosure-prevention scams. Applies to everyone who offers to negotiate loan terms with lender or servicer to prevent or delay fc, including LOs. +Fees may not be collected until written agreement from lender that the loan terms may be modified has been delivered and accepted by customer +Borrower can cancel agreement with negotiator at any time +Service agreement must state all costs; declare that negotiator is not gov affiliated or lender and inform borrower that lender may not accept change to loan or agree to a short sale +Negotiator may not advise borrower to stop making pmts unless they are informed of the consequences, including credit score impact and possible foreclosure +Negotiator can't interfere with communication between borrower and lender +Negotiator must present all lender offers and inform the borrowers no fee due until they accept an offer +Negotiator can't misrepresent services or qualifications +Public advertising must include specific disclosures using exact wording in MARS rule. Add'l negotiator disclosure must accompany all presented lender offers

FFIEC (Federal Financial Institutions Examination Council)

-Lending institutions send their LARs to them -Screens LARs for errors and publishes them online

SAFE Act Violations (25k per offense)

-Mislead or defraud -Engage in unfair or deceptive practices -Obtain property thru fraud -Make borrower sign contract to pay loan origination fee even if they don't obtain a loan -Advertise or agree to loan terms that aren't available -Engage in LO without a license -Fail disclosures -Fail to comply with state or fed law -Make false statements on loan terms -Make false statements regarding available loan terms -Make false or negligent omissions in NMLSR reports -Make any payment, threat, or promise in order to influence an appraiser or anyone else involved in loan approval process -Attempt to collect prohibited fee -Cause borrower to obtain property insurance coverage in amt exceeding the replacement cost of improvements as established by property insurer -Fail to account for third party funds -

License Renewal and CE

-Most licenses expire 12/31, background and credit report pulled each year, 8 hours CE including: 3 hrs fed law 2 hours ethics 2 hours nontrad lending 1 hour unspecified Ppl with expired license must complete CE for the last year which they were licensed

Definition of LO

-Part of TILA expanding SAFE Act -LO duties: -Take loan app -Arrange Credit transaction -Assist consumer is applying for credit -Offer/negotiate terms -Make extension of credit -Refer consumer to creditor or LO for compensation -Advertise LO services DO NOT require license to: Handle loan app without review and forwarding to loan approval personnel -Helping a borrower fill an app without discussing products -Providing general explanations to consumer queries -Arranging closing or other aspects of the process without discussing new loan terms PRoviding info unrelated to loan terms - Describing steps needed to take to obtain a loan offer without providing details related to their individual situation -Offering or negotiating loan terms solely thru a 3rd party licensed LO Volunteering without receiving or expecting to receive anything of value

PENSIL

-Property address, estimated value, name, ssn, income, loan amount - this information is considered an application and starts the requirements for LE

Bank Secrecy Act/Anti-Money laundering (BSA/AML)

-Protects the fincancial stability of the Financial Crimes Enforcement Network (FinCEN), which is part of the treasury. Requires reports: +Companies are required to develop policies, keep records, and file Currency Transaction Reports with the IRS for cash purchases exceeding 10k +Individuals bringing in or taking out 10k cash from the country must fil Report of International Transportation of Currency or Monetary Instruments. Federal offense to not +Any financial ins subject to the BSA must fil SAR if it detects sus or illegal behavior of a customer or employee, including internet breech +SAR must be filed no later than 30 calendar days from initial detection. If no suspect identified on the date of detection, they may delay another 30 to identify a suspect. Cannot exceed 60 days for any reason +SAR contents strictly confidential and cannot be disclosed even under subpoena +Individuals must submit annual Report of Foreign Bank and FInancial Accounts to the IRS naming any foreign accounts, brokerage, or fund they own

USA Patriot Act

-Requires LOs to collect photo ID as well as name, address, DoB, SSN or TIN. -FIs must also establish a customer ID program to verify identity of all account holders, maintain confidentiality of all docs, establish anti laundering policy, report sus activity, report receipt of any currency over 10k, verify names of account holders in OFAC, train employees on compliance

Safeguards Rule

-Requires all FTC-regulated institutions to take steps to protect their customer's private info -They must have steps include designing, implementing and maintaining customer safeguards. -Applies to institutions that collect info from their customers as well as those that receive from other institutions -FIs must establish and monitor their own policies and procedures and also monitor compliance efforts of their service providers

POST-SETTLEMENT DISCLOSURES

-SERVICING TRANSFER STATEMENTS -REQUIRED BY RESPA, IF SERVICER CHANGES OLD MUST NOTIFTY 15 DAYS BEFORE, MUST CONTAIN NEW'S NAME, ADDRESS, TOLL-FREE PHONE # AND EFFECTIVE TRANSFER DATE -CAN'T PENALIZE BORROWER FOR NON-PMT IF THEY CONTINUED PMT TO OLD FOR 60 DAYS ANNUAL ESCROW ANALYSIS STMT -INFORM BORROWERS OF ESCROW ACCOUNT STATUS AND REFUND EXCESS OF $50 +

DISCLOSURES WITHIN 3 BUSINESS DAYS OF SIGNED LOAN APP

-SPECIAL INFO PAMPHLET EXPLAINING COMMON MORT. TERMS AND CLOSING COST (ONLY FOR PURCHASES) -GFE- ANTICIPATED CLOSING COST ON REVERSE MORT. LOAN ESTIMATE FOR OTHER LOANS -MORT. SERVICING DISCLOSURE- INFORMS BORROWER IF LENDER IS TRANSFERRING LOAN OR NOT LIST OF 10 HUD APPROVED COUNSELING AGENCIES CLOSEST TO APPLICANT'S ADDRESS

LO Compensation Safe Harbors

-Total volume of loans -Long-term performance of loans -Hourly pay -Loans made to new customers as opposed to repeat -Predetermined commission structure for every originated loan -% of closed loans -Quality of loan files with regards to accuracy and completeness submitted to processor LOs may get comp as part of company retirement or bonus plan based on profit, but must be structured carefully

Five Red Flag Categories

-Warnings from a CRA -Suspicious docs -Suspicious personal identifying info : mismatching addresses, ssns, etc for the person they're claiming to be -Suspicious use of Account -Reputable Source Notice of Possible ID Theft -Associated with the Account

Subordination Clause

A clause which permits the placing of a mortgage at a later date which takes priority over an existing mortgage.

Loan Estimate (LE)

A disclosure to inform the borrower on the cost of closing and the cost of getting a loan. This replaces the TIL and GFE on purchase and refinance transactions. - Cannot collect any payment information (other than to charge for a credit report) or documents until you send this and get an intent to proceed. - must be delivered or mailed no later than 3 bz days from app (any day office open to public), mailing/delivery must precede CD mail/delivery, must make sure revised estimate received 4 business days (mailed at least 7 prior)(bznz days in this case are any days except sunday/holiday) -delivered or mailed no later than 7 days from consummation. can be waived with request in writing for an emergency such as an impending foreclosure -Cannot revise because of errors, but can for changing costs(unlocked loan), change in property value, more than 10 days before intent to proceed, settlement delayed more than 60 days for a new construction loan if og le includes statement that estimate can be revised for this reason

Financial Stability Oversight Council

A government agency established to prevent banks from failing and otherwise threatening the stability of the U.S. economy. Can break up companies that pose a threat to stability

Consumer Financial Protection Bureau (CFPB)

A government agency within the Federal Reserve that oversees financial products and services. -Simplify consumer lending forms - Protect from predatory lending -Respond to complaints -Educate the public and employees of financial institutions Monitor and assess risk level of current practices

Blanket Mortgage

A mortgage which covers more than one piece of real estate. Often used by a developer in the financing of undeveloped lots. Contains a partial release clause.

Deficiency Judgement

A personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. Lender may request the court to allow it to file a lawsuit and make a claim on the other assets of the borrower

E-SIGN Act of 2000 (Electronic Signatures in Global and National Commerce Act)

Allows electronic records and signatures to be valid whenever a regulation requires a doc to be in writing as long as consumer has consented to its use. FIs must provide consumer with a statement explaining their rights to use and withdrawal of consent, as well as hardware and software requirements for accessing and storing records -Consumers mucst be notified if their access to docs is affected by a change in hardware or software and given new instructions for access or given option to withhold consent for electronic storage

prepayment privilege clause

Allows mortgagor to pay all or part of the loan before it's due w/o penalty

Loan Originator Rule

Amendment to TILA written by CFPB to address LO comp and expand SAFE Act. Mostly effective 1/10/2014 Rules regarding comp, qualifications, identifiers, and written policies apply to all res mort loans except vacant land, HELOC and timeshares Rules for arbitration, waiver clauses and certain credit insurance financing charges apply to all res mort loans other than vacant land and timeshares. Apply to HELOCs on prim residences

Partial Release Clause

Clause in a blanket mortgage that allows the lien to be removed from each parcel as it is sold, allowing the purchaser to have a clear title to the parcel unencumbered by the developer's lien. Developer will pay the lender a specified sum of money to release the lien each time a parcel is sold

Company Reports

Any company registered thru NMLSR must complete mortgage call report, which consists of a quarterly report of res LO activity and annual report of company's financial condition. Lenders and servicers must complete Expanded Mortgage Call Report

Property Appraisal

Borrower entitled to copy upon completion or 3 bz days before closer, whichever sooner. Consumer can waive timeframe but must receive at consummation. If waiver submitted but loan doesn't close, they are entitled to a copy no later than 30 days after creditor determines loan won't proceed

Creditor Document Retention

CD 5 yrs LE 3 yrs Escrow Cancellation and partial pmt notice 2 yrs

Qualified Mortgage (QM)

Category of loans presumed to meet ATR standards. QM Features: -Pos Am -No balloon -No interest only pmts -Max term of 30 yrs -Max DTI of 43% -Points and fees don't exceed 3% of loan amt ( unless loan less than 100k)

Adverse Action Notice

The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder. Must have: Action taken, name and address of creditor, statement of provisions of 701a of ECOA, name and address of fed agency that admins compliance for creditor Must have specific reasons for action taken or a disclosure of applicant's right to it within 30 days if stmt is requested within 60 days of creditor's notification. Only sent to primary applicant If applicant declines to give name and address over the phone, no further responsibility for the creditor for notice Borrower needs to respond to counter offer in 90 days or get adverse action Must retain app for 25 months from acceptance or denial

Equitable Right of Redemption

The right of a defaulted property owner to recover the property before its sale by paying the appropriate fees and charges, including potentially the entire loan balance.

Right of Rescission

The right, provided by the Truth in Lending Act, that gives borrowers up to three business days to cancel a loan or other credit transaction for which their home is pledged as security. Does not include first mortgage or investment property. Business days are any except sunday or holiday

Contract Assignment

The transfer of rights or property from one individual/entity to another individual/entity. Often used with pre-construction contracts when the asking price for a unit is much lower than before the developers break ground

Promissory Note and Mortgage

The two documents that must be executed in order to create an enforceable mortgage lien. Note: legal doc obligating borrower to repay loan at a state interest rate (not APR) Mortgager: secures the note, doc where individuals with ownership of the property pledge it as collateral. The mortgagor agrees to keep the home in good repair, pay prop taxes, and pay hazard ins

Closing Disclosure (CD)

This document is provide to borrowers no fewer than 3 business(any day except sunday or holiday) days prior to consummation on refinance and purchase transactions. This will include all the final cost of closing the loan. -must resend and reset days if APR changes, loan type, addition of prepay pen. Any other changes borrower has right to one bznz day before to look over before consummation -exception is timeshares consummated within 3 business days of the app. these can get disclosures at the time on consummation and LE req waived. Bznz day for CD is all but sun and holi -Sellers permitted to receive only a disclosure with their costs and credits once consummated. -if something occurs after consummation that changes CD lender has 30 calendar after becoming aware of an event that changes the pmt to a borrower or seller to deliver a revised CD

Financial Privacy Rule

This rule means a financial institution must disclose its privacy policy before they disclose information to third-parties every year, and the option to opt-out is given to consumers. -Customer receives and annual privacy notice with the opportunity to opt-out of most info sharing, sent digitally or written -Consume only entitled to notice if business shares personal info with non-affiliated companies

Liens

U.S. split about 50/50 between lien theory and title theory states Lien Theory: Borrower receives deed at closing and obtains occupancy. Mortgage secures the debt in these, borrower holds full legal and equitable title to the property, and lender has a lien on the property Title Theory: mortgagee or 3rd party keeps the deed until loan satisfied. Borrower has equitable title in which they are allowed to occupy, rent and sell propertym but security instrument may be a deed of trust instead of mortgage. Once loan is paid, Deed of Reconveyance is recorded which gives homeowner full legal title. some states, like CA, have a mix of equitable and legal types of home ownership

Escrow Closing Notice

must be provided by the creditor prior to cancelling an escrow account for any consumers who had one established by the creditor There are select EXEMPTIONS to the rule that do not require the disclosure: 1. The Creditor is required to provide this notification to the borrower when the consumer requests cancellation. The servicer must ensure the borrower receives the Escrow Closing Notice NO LATER THAN 3 business days (sunday and holi only excep) before the consumers escrow/impound account is closed. 2. If the Escrow is closed for any other reason, the creditor is required to provide the notice within 30 business days of cancelling the Consumer's escrow account. If the Escrow Closing Notice is not delivered to the consumer in person, the consumer is considered to have received the disclosure 3 business days after it is delivered electronically or placed in the mail Must disclose account closing date, reason for closure, that consumer must pay tax and ins on their own poss in lump sum, cost for closure, consequence of not paying ins/taxes, # to call for status of acc and whether it can remain open

Open-End Clause

permits future additional advances from the same lender without rewriting the mortgage (applies to HELOC)

do not fax

● Managed by FCC ● FINE: $4,500 per offense ● must get written permission to fax unless public info