Mortgage - Chapter 2

What is Rescission?

Ability to cancel. The three business day begins after 11:59 PM the night they sign it. It applies to owner occupied residence of 1-4 units. It could be a first lien or a subordinate financing (Must be a refinance). Anyone on the title has the right to cancel the loan. You have 3 days to send the Rescission Disclosure after closing. If the borrow rescinds, the borrower gets a full refund. They have to get the money back within 20 calendar days. If you don't send it within the 3 days, they will have 3 years to rescind

What does ATR stand for?

Ability to pay. We looked at and documented and verified that the borrower can pay the loan back. Even considering every dwelling. Looking at salary, wages, tips, commission, bonus pay, self-employment income, anything that can be documented.

What is APR?

Interest Rate + Costs = APR. It is the true cost of money and is expressed as an annual rate. It includes interest rate, mortgage insurance, loan costs. Fees are not included, such as appraisal fee, fire insurance, property tax, credit report, title insurance, etc. Just remember ACT - Appraisal, Credit, and Title are not included in the APR. Prepaid finance charges are on the APR and are usually disclosed on the closing disclosure or the settlement disclosure.

What are prohibited compensation?

Single transaction term, terms of multiple transaction term, profit sharing plans.

How long must you keep records?

3 years

What is APOR?

Average Prime Offer Rate. If APR exceed the APOR by 1.5% on the first loan or 3.5 % on the second loan then it is Section 35.

What does CABO stand for?

Commercial, Agricultural, Business, Organizational Credit

What does TILA cover?

Compare credit between lenders (APR), Right to cancel/rescission. It is to help people understand the costs and protect consumers against unscrupulous lenders.

What are the TILA branch under the Consume Credit Protection Act?

Consumer Credit Protection Act - TILA - MDIA - HOEPA

In any commerical/media, when using triggering terms, you must____________________

Disclose. If using any Trigger Terms like Down payment (% or $)(0 down is the exception), Term, Payment, or Any Finance Charge, you must complete the picture by including these pieces of info: Down Payment, Annual Percentage Rate, Term.

Who are possible loan originators?

Employee of a creditor or loan organization, creditors, producing managers, anyone who discusses the loan with customer or paperwork. They not necessarily always have a license. Taking an application, arranging credit transaction, offering credit terms, Assisting with credit application, making an extension of credit, referring to a loan originator (except receptionist), advertising that you originate loans.

What is organizational credit?

Government, Non-Profit, Charity

What is Section 32 about?

Higher Cost. This is under HOEPA.

What is Section 35 about?

Higher Price. This is under HOEPA

What is considered a business day?

It starts the day after signing. It includes all business days minus state and federal holidays. If you run your business on Sundays then Sunday would count as a business day.

Where does the Section 32 Loan apply?

Owner occupied, First Lien, Subordinate Liens, 1-4 family units. It usually applies because of an interest rate or fees. If its 6.5% or more on a first lien or 8.5% or more on a second lien ABOVE THE INTEREST RATE.

What are the exemptions on the Section 32 Loans?

Purchase, Reverse Mortgages, Home Equity Lines of Credit (HELOC), Business loans.

What are the TILA disclosures?

The TILA disclosre mut be given to the borrower within 3 business days. 1. The Initial TIL disclosure requires a 7 business day waiting period before being able to close the loan. 2. The final TIL disclosure, you must wait 3 business days if the APR changes after a re-disclosure if the APR changes more than 1/8 of 1% on a fixed transaction. This means if the APR changes by that much you must re-disclose and wait 3 business day before you can close the transaction. 3. ARM Program Disclosure. 4. CHARM Booklet. 5. Right to Rescind disclosure. 6. Section 32 and 35 (HOEPA)

What does TILA (Reg Z) stand for?

Truth in Lending Act. It is under the Consumer Credit Protection Act. It must be given to the consumer within 3 business days.