ch 16 mortgage loans

the requirement to report annual and quarterly loan activities to the California DRE

Threshold Reporting

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

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.

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.

The EQUAL CREDIT OPPORTUNITY ACT

Rescission Clause

informs a purchaser of his/her rescission rights as provided by state law.

What is the true purpose of Truth in Lending Law?

Disclosure

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

ECOA

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.

The Housing Financial Discrimination Act

prohibits financial institutions from engaging in discriminatory loan practices (redlining).

on first trust deed loans UNDER $30,000.00, and on junior trust deed loans UNDER $20,000.00, copies of the appraisal report

regulations also require that the broker provides to BOTH the buyer and seller,

ARTICLE 7:The charges made to a borrower cannot exceed 5% of the loan or $390.00,

to a maximum of $700.00.

"hard money loans"

$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.

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.

A Real Property Securities Dealer

Annual Percentage Rate (A.P.R.

An expression of the relationship of the total finance charge to the total amount to be financed.

broker must NOT accept funds UNLESS the funds are meant to be for a specific loan transaction.

Licensees are prohibited from pooling funds:

who keeps these forms on file

The Mortgage Loan Broker

In California, anyone who wishes to sell real estate investment type security must FIRST obtain

a Commissioner's Permit

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.

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 form that clearly and completely states ALL the information and charges associated with a particular loan.

The Mortgage Disclosure Statement

who Present this statement to the prospective borrower within 3 days of receipt of a completed written loan application OR before the borrower is obligated to take the loan, whichever is earlier.

The Mortgage Loan Broker

who has the borrower sign the statement before the borrower becomes obligated to complete the loan.

The Mortgage Loan Broker

WHEN all loan brokers to give all borrowers the Mortgage Disclosure Statement BEFORE the borrower becomes obligated for the loan. this is

The Mortgage Loan Broker Law

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.

What is included in the APR?

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

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.

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.

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.

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.

endorsement requires

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

real estate licensee is considered a

a creditor

A California licensed broker is permitted to act in this capacity if he first receives

an RPSD endorsement on his broker license.

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.

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.

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.

a creditor

f the licensee routinely assists sellers in determining whether a proposed buyer in a land contract or purchase-money mortgage is creditworthy.