Section 16 Unit 2 Legislation Regulating Financing

Not toxic

30-year loan term Lender points of 2% of loan value Amortized payments

Lenders must provide the borrower with a disclosure statement. At what three points in time can a lender provide this statement to the borrower and still be within regulations?

At the time of the loan application One day after the loan application Three days after the loan application

Toxic

Balloon payments Lender points of 4% of loan value 40-year loan term

Loans for ______ purposes don't require TILA disclosure.

Business

Requires lenders to demonstrate they serve the community's low- to moderate-income housing needs

Community Reinvestment Act

What do lenders consider when underwriting a loan? Consider

Current income or salary Employment status Estimated mortgage payment Other mortgage payments on the property Taxes, interest, and insurance payments for this property

Prohibits lenders from discriminating based on protected class

Equal Credit Opportunity Act

What's the most common indicator of illegal property flipping?

Falsely inflated appraisal

The property is purchased, falsely appraised at a higher value, and then quickly sold.

Illegal property flipping

An appraiser secretly works with a borrower and provides a misleading appraisal report to the lender.

Inflated appraisals

Meanwhile, Brad's dad has decided it's time to buy a boat. He's found a personal loan with a rate of 5%. Brad's dad jumps on it, thinking it sounds like a good deal. Does this deal violate usury law in Washington?

No

You have a client who's selling his family's working tree farm. Does TILA apply? If you need help, we've added a new resource for you.

No That's right! A working farm is a business enterprise, and TILA doesn't cover loans for commercial purposes.

"For a good mortgage, call Mike!"

Permitted

"Get a VA-guaranteed loan here!"

Permitted

"Loans available at 5% annual percentage rate."

Permitted

Which of the following is a type of subprime loan usually offered to consumers with insufficient or marginal credit history?

Qualified mortgage with the rebuttable presumption

Requires written disclosure of estimated settlement costs to the borrower

RESPA

Red Flag

Significant sales price adjustments that are not supported by comparable market data Missing or inconsistent information in the purchase and sales agreement Buyer has a very limited credit history

The borrower's identity is concealed behind someone else's name and credit history.

Straw buyers

How long does the borrower have to rescind or cancel a new mortgage obtained for an already owned property?

The borrower has three days after loan application to rescind or cancel.

Real estate professionals handle many documents related to real estate transactions. Which one of the items listed below is one of the most important in detecting mortgage fraud?

The original sales agreement and any addenda

Requires disclosure of loan terms and costs

Truth in Lending Act

"30-year mortgages available at 5% annual percentage rate with $1,000 down."

Violation

"Loans available at 5% annual percentage rate with $0 down."

Violation Because a term other than APR was mentioned

TILA (Regulation Z) requires that lenders make certain disclosures. Which four of these disclosures does the Truth in Lending Act require lenders to make?

Annual percentage rate Total principal and interest to be paid toward the mortgage Finance charge Amount financed

When must lenders provide borrowers with a disclosure statement regarding finance charges, annual percentage rate, etc.?

At loan application or within three days after loan application

Which of the following loan transactions would be exempt from TILA disclosure requirements?

Grocery store, with personal funds used as collateral Loans for commercial purposes don't require TILA disclosure. Loans for personal purposes do, even when the collateral used is a business.

Mortgages may still, but only rarely, contain which of the following clauses?

Prepayment penalty clause

In addition to placing requirements on lenders, borrowers also have some guidelines, such as the cut-off point for borrowers to rescind or cancel a new mortgage on a residence they already own. What is this cut-off point?

Three days after the loan closing Right! Remember, this right to rescind only applies to refinancing and existing primary residence mortgages or new mortgages on an already-owned residence.

COURSE PROGRESS Course Content 70% of course content completed Time in Course 62:57:43 time spent Minimum of 50 hours, 0 minutes required Is This a Violation? Lesson Resources Washington Usury Law Standard You've reviewed this Brad is poised to make it big in the music world. He's got talent, he's got drive, and he's got a garage band. The only thing he hasn't got is money to buy the new guitar he needs. No one he knows will lend him the money, so he ends up striking a deal with a fellow one of his bandmates knows. Brad gets the money, buys his guitar, and figures he'll worry about that 18% interest rate next month, when his first payment is due. Does this deal violate Washington usury law?

You bet it does. Usury laws apply to private lenders, and that means that Brad's loan shouldn't have a rate higher than 12%.