Notes from Class - Day 3
Property flipping?
- usually involves an appraiser and a group of people who buy and resell to each other at inflated prices and ultimately to another poor person. Chunking - think property flipping
What APR variance can a fixed rate loan and an ARM have on a CD?
.125% (up or down) on fixed rate loans and .25% on ARMS
What is the purpose of RESPA?
> Educate borrowers on costs associated with loan (provide Loan Estimate, GFE) > Eliminates kickbacks and referral fee's (section 8) > Establishes rules for escrow (Section 10) > Servicing/Transfer Disclosures (section 6) > Seller settlement service demands (section 9)
Which items can change in an LE?
> Escrow deposits > Daily Interest > Homeowners Insurance > 3rd party charges where the lender allows borrower to shop for their own services
What does a CIP consist of?
> Name > Date of Birth > Address > Identification number (social or passport number or alien id card ) >terrorist list checking is done thru OFAC
If you create a high cost mortgage you must comply with the following rules:
>3 days prior to close you must send a written High Cost Mortgage Disclosure >Homeownership Counseling is required prior to making the loan from a HUD approved counselor. >No Balloon payment loans, Negative am, Prepayment Penalties, Acceleration clauses (unless a borrower commits fraud or is in default) Paying a contractor directly from funds and of course, lenders are prohibited from encouraging a borrower to default.
What is the fine for the US Patriot Act and how long are you required to keep the records?
>Failure to comply is a $1m fine >Keep your records for 5 years Patriot Act - 5yrs - 5 sides of the pentagon
What is the 3/7/3 rule?
Give the CE within 3 business days after application and only collect the cost of a credit report in 1st three days >must wait 7 days from application to close >the Loan Estimate has very specific tolerance requirements -if anything changes that is considered to be a "Qualified Change of Circumstance (COC)" lenders are allowed to issue another form but must wait 3 days to close.
When does the CE need to be provided to the borrower?
Within 3 business days of application for all mortgages EXCEPTION: HELOC's, HECM, and Chattel (mobile home) Mortgages - on rented land. These DO NOT USE the LE or CD
What regulation is TILA?
Z - Tila is the GodZZZZZZZila of all laws!
You are required to know who your clients are - thru the use of ...
a CIP - Customer Identification Program
Air Loan?
a loan on a fictitious home that does not exist on the land
Companies must update and synchronize their internal Do not call records with the national registry ...
every 31 days
Loan Flipping?
giving a borrower a loan that has no net tangible benefit
A Qualified Mortgage cannot have ...
negative-amortization, interest-only, or balloon-payment features or terms that exceed 30 years. may not have points and fees that exceed the specified limits ( max points and fee's of 3%) loans under $100k have higher allowances, max DTI is 43%.
BSA - Bank Secrecy Act amended to include....
the USA Patriot Act Also includes AML (Anti Money Laundering)
Ethics refers to
the actions we take and the decisions we make that reflect that system of beliefs.
FCRA - Fair Credit Reporting Act - Reg V
"Vanity Fair"" Very Fair Credit Reporting Act" This law has significant responsibilities for Consumer Reporting Agencies and lesser for those who are not. This law requires creditors to provide accurate credit information to the CRAs . The CRA's have ultimate responsibility for protecting a borrower's credit information. This law gives you permission to pull a consumer's report - you must have a "permissible purpose" (ex: application or employment)
What is the fine for RESPA - Real Estate Settlement Procedures Act?
$10K
Dodd Frank- Refinancing situations (5) EXEMPTION.—With respect to loans made, guaranteed, or insured by Federal departments or agencies identified in subsection (b)(3)(B)(ii), such departments or agencies may exempt refinancing under a streamlined refinancing from income verification requirement as long as the following conditions are met:
''(A) The consumer is not 30 days or more past due on the prior existing residential mortgage loan. ''(B) The refinancing does not increase the principal balance outstanding on the prior existing residential mortgage loan, except to the extent of fees and charges allowed by the department or agency making, guaranteeing, or insuring the refinancing. ''(C) Total points and fees (as defined in section 103(aa)(4), other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator) payable in connection with the refinancing do not exceed 3 percent of the total new loan amount. ''(D) The interest rate on the refinanced loan is lower than the interest rate of the original loan, unless the borrower is refinancing from an adjustable rate to a fixed rate loan, under guidelines that the department or agency shall establish for loans they make, guarantee, or issue. ''(E) The refinancing is subject to a payment schedule that will fully amortize the refinancing in accordance with the regulations prescribed by the department or agency making, guaranteeing, or insuring the refinancing. ''(F) The terms of the refinancing do not result in a balloon payment, as defined in subsection (b)(2)(A)(ii). ''(G) Both the residential mortgage loan being refinanced and the refinancing satisfy all requirements of the department or agency making, guaranteeing, or insuring the refinancing.
What cannot change in an LE?
( Lender and broker fee's) > Origination charges, processing fees > Points (after the loan is locked) > If lender selects 3rd party services and does not allow the borrower to shop for them
USA PATRIOT ACT purpose?
- used to stop the use of money laundering for terrorist funding > Opened up communication between financial institutions to stop this from happening. Enforced by FinCEN part of the Treasury Dept. - Financial Crimes Enforcement Network
When must lenders supply to the borrowers an interest rate adjustment notice for each adjustment after the first time interest rate adjusts?
(2/3 Months) Normal adjustments after initial must be disclosed 60 - 120 days out
What can change by 10% max in an LE?
(3rd Party Fee's) > Required services the lender allows the borrower to shop for where borrower selects from a list. Ex Appraiser if they want to shop for lower fee > Title services (lenders and owners policy) > recording Fee's
When must lenders supply to borrowers an initial interest rate adjustment notice the first time the interest rate adjusts?
(7/8 Months) Between 210 days and 240 days before the first payment at the new rate is due and ongoing interest rate adjustment notices must be provided to a consumer.
What 6 items make it an application under the TILA/RESPA?
(ALIENS) 1. Address 2. Loan Amount 3. Income 4. Estimated Value 5. Name 6. Social Security number to obtain credit report
Lenders must disclose the worst rate and payment a borrower will see on an ARM in the ... (a) first 5 years (b) lifetime of the loan (c) first 3 years (d) first 15 years
(a) first 5 years
Straw Buyer?
- This is a person who is used as a cover to hide the true identity of the buyer.
FTC (Federal Trade Commission)
- created, maintains and monitors compliance with the Red Flags
Packing?
- placing unrelated and unwanted insurance in the loan and causing the borrower to pay for it from proceeds (i.e accidental death)
Steering?
- pushing a client into a transaction that makes more sense for your wallet than the clients long term interest - they probably qualify for a better deal.v
What are the 3 levels of mortgage?
1 Qualified Mortgage 2 High Cost 3 Higher Priced
When is HUD Home Ownership Counseling Required?
1. HECM 2. 1st time Home Buyer with potential for Negative Amortization 3. High Cost Loan
Exemptions for TCPA in a business relationship?
1.) 90- day exception after an application is taken 2.) 18 months from a transaction Consumer gives written agreement to allow you to call or a business relationship is established is also okay.
What Disclosures are required for Variable or Adjustable Rate Loans at Origination?
1.) CHARM Booklet - Consumer Handbook on Adjustable Rate Mortgages (Every ARM gets a CHARM) 2.) Program disclosure for whatever ARM they show interest in accepting
Regulation Z Advertising Rules (4)
1.) Only advertise the terms available in the credit plan being offered 2.) The ad must state the APR (if triggers are used) 3.) If the APR can increase - you must state this in the ad "may increase or subject to change" 4.) A note rate can be in the ad but NOT MORE CONSPICUOUS than the APR
What are the reasons your loan becomes High Cost?
1.) Points and Fee's Trigger (excluding Mortgage Insurance)- if the total points and fee's, not including bonafide 3rd party fees (i.e. appraisal, credit, inspections) are 5% on loans of $20k or more and 8% or $1,000, whichever is less on loans under $20k. 2.) APR Trigger - if your APR is 6.5% over the APOR - "Average Prime Offer Rate" for comparable 1st mortgages and 8.5% over APOR on 2nds or 1st liens under $50k
In a REFI, what is the max APR variance?
1/8
How long is the LE good for?
10 Days
Telemarketers must keep records for ...
2 years (scripts, advertising, call records) NOTE Regarding texting: If you are on the Do not call list Telemarketing Texts are ILLEGAL If You Did Not Give Your Prior Consent IN WRITING* to Receive the Text. Per the consumer.ftc.gov
Timelines for document retention:
2yrs - TCPA 5yrs - RESPA ( 5 letters)/PAPAT Act (Pentagon)/ Closing disclosure 25mo - ECOA 2nd letter of alpha is B and 5th letter is E 3yrs - ATR / LAR (HMDA Reg C)/ TILA (Loan estimate form and MLO Compensation)
LAR - Loan Application Registry
3 letters 3 years Report has to be turned in by March 1st every year Lenders are required to publish a notice to borrowers at their branches to advise the public that Government Monitoring information is collected.
In cases where a mortgage broker is originating the loan the mortgage broker may provide the Loan Estimate on behalf of the creditor and would be responsible for maintaining proof of compliance for how many years?
3 years
Document retention for ATR/QM Rules is ...
3 years after the loan is closed.
If a client wants be placed on your internal Do Not Call List - how long do you have to comply with their request?
30 days - Keep it up to date
What does ABA stand for?
Affiliated Business Arrangement
What documents are associated with RESPA?
All borrowers who apply for a federally related mortgage must be given a written list of 10 HUD approved homeownership counseling organizations in their area within 3 business days of application. There is no requirement for the borrower to take counseling however to obtain their loan.
What is the definition of a business day for Closings (Rescission Period)?
Any day except Sunday and Federal Holidays (if mail isn't running it doesn't count)
Dodd Frank Law was put in place to change other laws. It repealed HVCC (Home Valuation Code of Conduct) and imposed what law?
Appraisal Independence.
What does AMC stand for?
Appraisal Management Company (AMC)
What is an advertisement?
As provided for in the TILA, an "advertisement" is anything that is produced with the intent to sell a credit plan.
When must the borrower receive the CD?
Borrower (including sellers in a purchase) must be provided the form 3 days prior to close (in person - considered received the day provided, if mailed it's considered received after 3 days from date placed in mail)
What items can affect the APR?
Broker/Lender Fee's
Who is a creditor?
Businesses who regularly extend credit to consumers for personal or family use where installment payments are made with finance charges must comply with TILA. Regularly extends credit means - more than 5 mortgage loans in a year
Every licensee must implement best practices to manage loan product risk on a continuous basis as published by the ...
CSBS and AARMR and NACCA simply known as the Guidance.
At Closing TRID requires a ...
Closing Disclosure (CD) RESPA Law - HUD 1 Settlement Statement TILA Law - Truth -in- Lending Disclosure
Telemarketing Rules / TCPA - Telephone Consumer Protection Act
Do Not Call Registry: Consumers have the opportunity to place themselves on this list to stop telemarketing calls from non-exempt entities. Exempt entities are politicians, survey takers, charity $41,484 fine for calling someone who is on the list
What is the MLO Compensation Rule?
Dodd Frank also changed the way MLO's get paid, referred to as the MLO Compensation Rule >No MLO can receive compensation that is based on the terms of the loan (rate, type) except the amount of the loan. MLO's can only be paid on size of loan > No MLO can be paid by both the client and another source (i.e. lender paying ysp) for originating the loan. They can be paid by either but not by both. Must maintain proof of compliance of compensation for 3 years.
Ex of Nonqualified loan program
FICOs Starting at 620 Higher DTI offering - up to 50% 0x30 housing history since the credit event with a minimum of 0x30x12 required Reduced seasoning on derogatory credit waiting periods - only 12 months Owner Occupied, Fixed Rate Mortgages Only Loan amounts to $1.5M
What are Trigger Terms?
Features of a credit plan that draw consumers to the loan. Any mention of a number in your (rate, payment, term, cost of credit) would require your disclosure of the APR and other costs of loan YOU must disclose the APR any time you use a Trigger Term as well as the other costs/terms of the loan
Where do you submit a SAR?
FinCEN
GLB Fines and penalties?
Financial Institution -$100,000 Individual $10,000 UP to 5 years in Prison
Only __________ rate loans may have a prepayment penalty that cannot exceed 3yrs or 2% - penalty max is 2% for 1st 2 years and 1% for 3rd year. If you offer a loan with PPP you must also offer a loan without. When calculating ATR (Ability to Repay) on an ARM loan lenders must use the fully indexed rate or introductory rate whichever is higher.
Fixed
2 types of fraud ?
Fraud for profit - think insider Fraud for housing - think consumer
What loans is a Hud 1 provided with?
HELOCS/ Reverse Mortgages / Chattel Mortgages
What is a HUD 1 also called and when it is provided?
HUD -1 also called the Uniform Settlement Statement - provided to applicable borrowers (as listed under GFE ) 1 day prior to close.
Dodd Frank updated TILA requiring lenders to obtain proof borrowers have completed ____________________ if they are a first-time borrower who is accepting a negative amortization loan.
HUD approved homeownership counseling
What is HOEPA?
Homeownership Equity Protection Act aka Section 32 which deals with High Cost Mortgages. - This law tells you how much is to much - "I HOEPA you can afford this loan"
What is the difference between GFE and HUD 1 is GFE is estimated cost to close, HUD 1 is actual cost at closing?
Hud-1 - Used in purchase, shows buyer and seller- only loan this would be used on is HECM but not likely relevant. Hud-1A- Used in Refinance, shows borrower only ex HELOC
What are the violations for ECOA?
Individual actions $10,000 Class Action $500,000 or 1% of servicers net worth whichever is less
What is Dodd Frank, July 21, 2010?
It was put in place to promote financial stability and end abusive practices in Financial Services (it's the robin hood of all laws)
FACTA amended the FCRA Fair and Accurate Credit Transactions Act purpose?
Its purpose is to curb identity theft, improve customer dispute resolution, improve accuracy of consumer records.
TILA requires us to keep the LE and the CD for how long?
LE - 3 pages - 3yrs CD - 5 pages - 5 years
What is the ECOA Valuations rule?
Lenders have 3 days from application to notify a borrower of their right to a copy of their appraisal and lenders must provide promptly upon completion or at least 3 days prior to close whichever is earlier. Borrowers can waive the timing requirement and accept the appraisal at closing. If the loan does not close, and they signed a waiver you have 30 days to provide the applicant with a copy.
At Origination TRID requires a ...
Loan Estimate (LE) RESPA Law - Providing the GFE (Good Faith Estimate) TILA Law - Truth -in- Lending Disclosure
MLO's are prohibited from:
Mischaracterizing the value, trying to influence, coercing an appraiser and/threatening to withhold payment is prohibited. When a loan is originated and an appraisal is required the order goes to 3rd party appraisal management company then to appraiser. Big wall in between the MLO and appraiser.
Acceleration definition
Mortgage acceleration is the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement. ... In addition, acceleration may refer to a clause in a mortgage note (See Acceleration clause) that allows the mortgage holder to declare the entire debt of a defaulted mortgagor due and payable. > Lending without verifying the borrower's income and the ability to repay is prohibited as well.
What does OFAC stand for?
Office of Foreign Assets Control "OFAC! My client's a terrorist!"
What does PFC stand for and what does it included?
PFC - Prepaid Finance Charge (Lender/ Broker Fee's)
What is does POC stand for?
Paid outside of closing (3rd party fee's)
An Associate is defined as a:_______________________ in a position to refer business. They are not under this rule.
Parent, Spouse, or Child
FTC- Federal Trade Commission- Has regulatory authority over Advertising in TILA - What are the penalties for noncompliance?
Penalties: IF you willfully give false info or consistently understate your APR or fail to comply with TILA - fine is $5,000 prison for 1 yr. or both per incident Plus actual damages $500k for class action suits or 1% of net worth of servicer, whichever is less
What makes a prepayment penalty a high cost loan?
Prepayment Penalty of longer than 3 years or more than 2% of the loan amount
Gramm Leach Bliley Act - GLB?
Privacy Laws - Also known as the Financial Services Modernization Act Not letting companies "Leach" your private information Purpose: Put restrictions on Financial Institutions use of borrowers "nonpublic personal information" and requires certain disclosure before sharing or selling. The notice as to whether or not you share or sell their NPI must be given upfront at application. - If you don't share/sell - give them a short form notice that states this info. If a company decided to share info at a later date after initial disclosure was that you don't share, you must send a revised notice and give them an opportunity to opt out. - If you do share or sell to NPI, the client gets a long form notice with the opportunity to "opt out"
What is Section 8 of RESPA?
Prohibited Kickbacks and unearned fee's Prohibits anyone from giving or accepting anything of value for the referral of a mortgage loan or settlement services. > No paying for referrals > Up charging on 3rd party service (sharing in the appraisal's fee) is also a violation
What does Section 9 do?
Prohibits home sellers from requiring home buyers to purchase their settlement services from a particular company either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.
What is the purpose of 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. The ECOA is NOT a guarantee that someone who falls into a protected class will be given a loan - they still must qualify! Page 163 Lenders are prohibited from basing any decision on the following protected classes: age race religion sex marital status color national origin If they receive public assisted income If they have exercised any rights previously under this law Disparate treatment occurs when a creditor treats an applicant differently based on a prohibited basis such as race or national origin.
What does Section 10 do?
RESPA - Escrow Accounts > Lenders are allowed to collect 2 months cushion - making the maximum number of months collectable for escrow 14 months > Within 45 days of closing the servicer must provide an initial escrow account statement. > Lenders must review the borrower's escrow account annually return any overage of $50 or more and must submit to borrower within 30 days of completion of review. > Lenders who collect escrow are prohibited from commingling funds - they must be placed in an account separate from the general business account.
Red Flag?
Red Flag - a suspicious activity, potential pattern or practice or a danger to a borrower's credit information being used for identity theft. This law expanded the definition of "creditor" to not just include Financial Institutions but anyone who offers a service that is paid for later (utility, cell phone) Every company is required to have a written Red Flags Plan in place and each company plan will vary depending on the size/scope/ complexity of the organization.
What is Redlining?
Redlining is 'Failing to lend' to certain geographic areas or segments of the population.
Can an LE be revised?
Reissue of a Loan Estimate is only for a Qualified Change of Circumstance (COC) (this includes borrowers saying one thing and once documented, the information is incorrect such as income, etc. If a revision is necessary, it must be provided within 3 days of receiving new info and documentation supporting the revision must be kept for 3 years.
What is Risk Layering?
Relaxing more than one of the traditional UW Standards - (No income verification and not escrowing for taxes and insurance doing a stated value, no documentation, high LTV
If a loan closed on Tuesday and has a required rescission, when would the loan fund?
SATURDAY
What is the 15/15/60 Rule?
Section 6 of RESPA - Servicing / Transfer Disclosure Statement Purpose of disclosure: This form discloses to the borrower whether or not the lender/broker taking the application intends to service the loan or sell or assign it to someone else. > Initial form - 3 days from application > Subsequent form is required if a loan is sold after it closes - Current servicer has 15 days prior to selling the loan to a new servicer. Called the Goodbye Letter - The New services has 15 days after the loan is sold or within 15 days from their purchase. Called the Hello Letter > When a loan is sold/transferred the new lender cannot report the borrower late or charge late fees in the first 60 days. > When a borrower sends a qualified written request for info to their servicer - Lender has 5 days to acknowledge they have they have received the request - 30-45 days to correct the error or justify
What must be provided under RESPA?
Special Information Booklet > Provide to Purchase applicants only > Must provide at application but no later than 3 business days of application (unless denied within the 3 days), if a borrower is using a mortgage broker the broker must provide the booklet (entitled 'Your Home Loan Toolkit') This booklet is maintained and updated by the CFPB.
Under the _______ rule, lenders are required to establish and maintain an escrow account for borrowers who accept a first lien higher priced mortgage loan for a minimum of 5 years. (or until loan is paid off) After 5 years the borrower requests it to be canceled, however LTV must be under 80% of the ORIGINAL Value and the borrower cannot be delinquent. > Must have appraisal and interior inspection >Appraisals are required and must be provided to borrowers 3 days prior to close • 2nd appraisal if the new higher priced mortgage is to purchase a home within 180 days of the purchase from a person who paid a lower price and you cannot charge the applicant. • 3 days prior to close a copy of both appraisals must be given to the borrower
TILA HPM escrow rule
What does TRID stand for?
TILA and RESPA's Integrated Disclosures - "Know before you Owe"
What does TILA do?
TILA is part of the Federal Consumer Protection Act and lays out disclosure requirements, advertising requirements as well as rights of rescission and penalties for violation.
There are lenders that pay the MLO different bps for refi vs. purchase, self-sourced vs. leads given. how does that apply to dodd-frank and only paid on the loan amount?
That has to do with the calculation of the income earned - NOT THE SOURCE of the Income - I may choose to pay .75 on a self-generated lead and only .50 on an in house generated lead. STILL - who is paying the fee - is it the Borrower with Origination Charges or is the Lender through Premium Pricing
Dodd- Frank created the CFPB - Consumer Financial Protection Bureau - What does the CFPB regulate?
The CFPB regulates "covered persons" who engage in offering or providing "consumer financial services or products"
The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of ...
The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you get public assistance. Creditors may ask you for most of this information in certain situations, but they may not use it when deciding whether to give you credit or when setting the terms of your credit. They are never allowed to ask your religion. Everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing, must follow the provisions of the ECOA. Public assisted income - if the income is not enough or the borrower will not have continuity of the income or does not meet the qualifying ratios, the borrower can be turned down just like any other borrower. As a reminder, it is never okay to ask of a woman's childbearing capabilities or whether or not there are intentions to have additional children. Lenders and Brokers are prohibited from doing any of the following based on the protected class: > discouraging a borrower from applying > refusing a loan to someone who qualifies > lending with different terms than someone with the same credit/income criteria > closing an account >Appraisers/Lenders are prohibited from discrimination in home valuation based on a prohibited factor. Consumers who feel a lender has discriminated in an application may file complaint with the FTC
What items do not affect the APR?
Think 3rd Party - credit, appraisal, inspections
What is the purpose of TILA?
This federal law requires creditors to disclose certain key terms and costs of the transaction so clients can be a better shopper of loan products.
Where does APOR come from?
Took big 5 banks in US, Bank of America, Chase, average rate on loans 1st, 2nds and Jumbos and that is what is reported as the APOR Federal Reserve Board publishes monthly the APOR which is an average of prime rates given to borrowers from the largest institutions that provide mortgage financing. Banks report their APOR's to FHFA
When can you waive a right to rescission?
Waiving a right of rescission has to be hand written by borrower and explain a bona fide financial emergency.
What is Reverse Redlining?
a predatory term that refers to someone 'targeting' an underserved group Every year lenders are required to report their loan activity - in this report they must give the disposition of each and every loan application taken. Don't forget - VISUAL Observation in face to face if the borrower chooses not to furnish Gov't Monitoring Answers
Which of the following are covered by Dodd -Frank (CFPB) a. Providing check cashing, check collection, or check guarantee services b. Providing appraisal of real or personal property c. consumer debt and servicing loans d. Buying payment instruments
a. Providing check cashing, check collection, or check guarantee services
Higher-Priced Mortgage Loans must have an Escrow account except when? a.) It's a construction loan b.) It's a FHA loan c.) If the down payment exceeds a certain amount d.) A 2nd Appraisal is completed
a.) It's a construction loan
When is it okay to ask someone their religion? a.) Never b.) Never, unless you are a non profit c.) Always, unless it is used to deny credit d.) Always
a.) Never
Which of the following is not considered when evaluating the Ability to Repay? a.) Property Value b.) Alimony c.) Child Support d.) Part time income
a.) Property Value
Morality is
an overall system of beliefs or values which help us decide right and wrong, good and bad.
Prescreened credit offers
are allowed under FCRA. Lenders have to request specific criteria from the CRA's and then offer a pre-approved credit offer based on those standards. > Consumers can opt out of getting offers for up 5 years by going to www.optoutprescreen.com > when the opt out period ends the consumer must be given a chance to extend the period for another 5 yrs.
If more than one person owns a property but applying for a refinance using only 1 person's credit and income, what happens? a.) Lender will deny loan b.) It can be done but rescission will only apply to borrower c.) It can be done but right of rescission goes to all owners of the home *** d.) denied all owners must be on loan
c.) It can be done but right of rescission goes to all owners of the home
Under RESPA a referrer can receive compensation only if: a.) They own 100% of the referring company b.) when a direct referral is made to provider c.) When provider is an "associate" as defined by RESPA d.) Referrer owns less than 5% of Provider
c.) When provider is an "associate" as defined by RESPA
Each of the following statements is correct regarding High Cost (section 32) loans, EXCEPT: a. Negative amortization is prohibited b. The interest rate of the loan cannot be increased if the loan goes into default c. Balloon payments are prohibited for loans of less than five years (except for bridge loans) d. Second homes and investment properties are not exempt from HOEPA
d. Second homes and investment properties are not exempt from HOEPA
Which of the following APR's (on your loan) would trigger HOEPA if the current APOR is 4.25% on a 1st mortgage loan of $200,000? a.) 6% b.) 10.5% c.) 8% d.) 11%
d.) 11% APOR + Add the Trigger = High Cost Loan Rate 4.25 + 6.5 = 10.75%
Which of the following is NOT considered Non-Public Information? a.) borrowers credit score b.) co borrowers bank account c.) co borrowers pay stub d.) borrowers current mortgage provider
d.) borrowers current mortgage provider
Right of rescission does not come into play on: a. Purchase b. 2nd Home c. Rental d. Vacation Home e. All of the Above
e. All of the Above
What is a Higher Priced Mortgage Loan?
is a loan that has an APR that exceeds the APOR by 1.5% on a 1st mortgage 2.5% on Jumbos and 3.5 on junior mortgages (2nd mortgage) There are no additional disclosures, but you must escrow.
What is the definition of a business day for an initial disclosure?
it's any day you are open to the public substantially for business
Best Practices means ...
lawful processes, policies, and procedures used to manage risks associated with nontraditional mortgage products and adjustable -rate mortgage products.
Cash price means ...
loan amount
Nontraditional Mortgage Products/Guidance on Subprime Loans Examples of ...
nontraditional mortgage products from the subprime era, sometimes referred to as exotic loans: > Interest Only >125% LTV > NINA - No Income No Asset loan > SISA - Stated Income Stated Asset > Pay Option Arm 4 ways to pay monthly 1.) 30 yr. payment 2.) 15 yr. payment 3.) Interest Only 4.) Minimum Payment (negative amortization) Use to be called Pick a Pay loan All loans that are not qualified mortgages are considered nonqualified.
In borrower/co borrower application - who needs to be notified?
only 1 person (the primary applicant) needs to be sent an adverse action letter.
Fraud is ...
the intentional use of deceit that deprives someone of money, property or a legal right. Reporting Fraud: > HUD Inspector General on Gov't loans > FBI for all others - SARs - Suspicious Activity Reports - compiled reports on mortgage fraud
Pretexting is...
the use of false pretenses to obtain a person's personal financial info (impersonating them over the phone) Pretexting is like pretending Ex Phone scams, woman looked at house was told to send a check and they would give her keys. Using previous owners name
What is a Qualified Mortgage?
think plain vanilla 30 yr. fixed or standard fully amortized ARMS
What is the Purpose of HMDA?
to find lenders who are Redlining
New laws made by FACTA?
· Credit score disclosure - we are required under FACTA to disclose to our clients upfront in the application process what the range of available scores are and what their score was and the factors that adversely affected their score as well as the company who provided the score. · Negative Information - a borrower must be notified within 30 days of a creditor placing negative information on their credit file. This allows the consumer the ability to dispute the information in a more timely manner - lenders must resolve disputes within 30 days. · Risk Based Pricing Notices are required under FACTA - when a borrower receives a loan offer that is less favorable than most consumers get - a company must provide a Risk Based Pricing notice
The following practices are deserving of increased scrutiny due to higher than normal risk, to both the lender and to the borrower:
• Collateral-Dependent Loans • Risk Layering* • Reduced Documentation • Simultaneous Second-Lien Loans • Introductory Interest Rates • Lending to Subprime Borrowers • Non-Owner-Occupied Investor Loans The guidance is applicable to non-traditional, alternative or exotic mortgage loans, including "interest-only" mortgages and "payment-option" adjustable rate mortgages. These products allow borrowers to exchange lower payments during an initial period for higher payments during a later amortization period. Providers are advised to analyze a borrower's repayment capacity to evaluate the borrower's ability to repay the debt> Do not make decisions based on over-reliance of credit scores as a substitute for income verification in the underwriting process. Lenders should clearly disclose the risks that borrowers may assume. Lenders are encouraged to manage their risk by ensuring UW standards are prudent including borrower's ability to repay and limit risk layering.
