North Caroline Module 1

a mortgage origination support registration is required for any person (individual or entity) to

engage in contract processing and underwriting

a licensee must maintain a segregated (blank) for any funds that come into the licensee's possession but that are not the licensee's property and the he or she is not entitled to retain

escrow fund or trust account

the escrow fund or trust account must be held on deposit in a

federally insured financial institution

The Notice of Amortization help borrowers understand the impact of

high interest rates and payment schedules on their ability to reduce the principal balance of a home loan.

definition of a mortgage servicer need a license to service loans in NC

in the expectation of compensation or gain, a mortgage servicer is in the business of receiving scheduled periodic payments from a borrower pursuant to the terms of a mortgage loan and making payments of principal, interest, and other payments, as required. These activities include the handling and distribution of amounts held in escrow

a transitional mortgage loan originator is an

individual who is authorized to act as a mortgage loan originator subject to to a transitional mortgage license

Exclusive mortgage broker is defined as an

individual who is licensed as a loan originator and acts as a mortgage broker solely for the licensed mortgage lender, licensed mortgage broker, or exempt mortgage broker

"Material facts" consists of

information that is provided to the Commissioner by a licensee or applicant regarding the person's identity, contact information, or business operations that a reasonable person knows or should know would influence a decision to grant, suspend, condition, limit, review, or revoke a license or to take disciplinary action

a transitional mortgage license allows a loan originator to work in North Carolina as long as

license in another state

a qualifying individual is a person who

meets licensing requirements and has three years if experience in residential mortgage lending who agrees to be primarily responsible for the operations of a licensed mortgage lender, broker, or servicer

The Annual Report also requires that licensees reconcile their bank accounts (blank)

monthly

Registered loan originators do not need a (blank) to originate loans but are required to work for an (blank)

mortgage loan originator license established depository institution

licensee must notify the Commissioner of Banks 30 days in advance of a change in the

name under which the licensee operates

further, the lender must also offer the borrower a comparable loan that does (blank), with the good faith belief that the borrower may qualify

not include a prepayment penalty provision

The Branch Form is the application for

obtaining a branch license for additional locations of licensed entities

4. Certain lenders (those that are affiliates or subsidiaries operating in the same office of as a licensee under the North Carolina Consumer Finance Act) may charge interest: 2

of up to 15% with the exact rate a calculated each month by the Commissioner of Banks

upon discovery of a security breach, the licensee is required to give a copy of the report to affected borrowers and the Commissioner. The Commissioner must receive a copy within (blank) business day

one business day

Contract Rates on Home Loans Secured by First Mortgage or First Deed of Trust lenders making home loans that are not high-cost home loans can negotiate the terms of interest rates and payment fees with

only a few limitations regarding lending terms and fees

1. if the principal amount of the loan is secured by a first mortgage or first deed of trust is $10,000 or more

"the parties may contract for the payment of interest as agreed upon by the parties"

prepayment penalties for first mortgages or deeds of trust that serves as a borrowers principal residence are not permitted for home loans in which the principal amount of the loan is (blank) or less, the borrower is a natural person, and the debt is incurred for family or household purposes

$150,000

Surety bond requirements for mortgage brokers: 2

1. $125,000 if the broker originates in NC an excess of $10 million but less than $50 million in a 12-month period ending December 31st 2. $250,000 if $50 million or more

nonrefundable filing fees: 3

1. $250 for applicants employing or contracting with fewer than five individuals engaged solely as processors or underwriters 2. $1000 for same if between 5 and 30 individuals 3. $2000 for more than 30

The three forms for obtaining a license

1. Company form 2. Branch form 3. Individual form

The North Carolina Commissioner of Banks (NCCOB) is also responsible for enforcing: 2

1. North Carolina Anti-Predatory Lending Law and, 2. the Mortgage Licensing Act

4. Include in their initial and renewal applications a report that includes the range of costs and fees charged to borrowers for loan servicing activities, as well as: 5

1. a statement of the number of loans that they are servicing 2. a description of the types and characteristics of the loans they have in the state 3. the number of loans that they are servicing that are in default, with an indication of whether the loans are 30, 60, or 90 days past due 4. a description of their loss mitigation activities, including information of any agreements made to help borrowers to avoid foreclosures 5. information on any foreclosures that they have initiated in North Carolina

Application Fees: 3

1. broker, lender and servicer = $1,250 2. exclusive mortgage broker = $300 3. originator or transitional loan originator = $125

Mortgage lenders are, among other things, allowed to

1. close mortgage loans, advance, offer to advance, or make a commitment to advance funds under a mortgage loan for compensation or gain 2. licensed lenders may also broker mortgage loans by accepting, soliciting, or offering to accept or solicit applications for residential mortgage loans 3. furthermore, lenders are allowed to negotiate terms or conditions, issue mortgage loan commitments or interest rate guarantee agreements, or engage in table funding 4. service loans without needing to obtain a separate servicer license 5. mortgage lender license applicants may request authorization to conduct reverse mortgage activity during the initial lender application or afterward, with the approval of the Commissioner; a separate reverse mortgage license is not required

For mortgage loan originators, financial responsibility can be determined if the applicant: 3

1. has a credit score from any of the three major credit rating agencies (Experian, TransUnion, or Equifax) of 600 or greater 2. has demonstrated a history of satisfying debt obligations 3. does not have any foreclosure or delinquent accounts (in excess of 90 days) within the past 3 years

In addition, federal law states that a mortgage loan may only include a prepayment penalty if the loan:

1. has a fixed interest rate 2. meets criteria for a qualified mortgage 3. is not higher-priced 3. does not include a prepayment penalty that is in effect after the first three years of the loan term

a transitional mortgage loan originator license applicant must: 4

1. have an active license in another state or US territory, or be a registered originator 2. have a valid unique identifier, registration, and fingerprints on file with NMLS 3. Have been employed for a period of at least two years as a mortgage loan originator 4. have a certification of employment with a mortgage lender or broker that is licensed under law

Limitations on the interest rate for home loans that are not high-cost home loans 1-4

1. if the principal amount of the loan is secured by a first mortgage or first deed of trust is $10,000 or more "the parties may contract for the payment of interest as agreed upon by the parties" 2. if the loan is for less than $10,000 and is made by a lender that is regulated as a bank, credit union, or savings and loan association, or made by a lender approved by a federal agency

6. Provide delinquent and defaulting borrowers with: 2

1. information on the nature and extent of the delinquency or default 2. negotiations to resolve or work out the delinquency or default

NMLS processing fees: 3

1. lender, broker, and servicer = $1,388 which includes the $100 NMLS processing fee 2. branch office applications = $320 which includes $20 NMLS processing fee 3. $206.25 for mortgage loan originators, which includes $30 NMLS processing fee, $15 credit report fee, and $36.25 criminal background fee

Minimum net worth requirements for mortgage lenders, servicers, and brokers

1. lenders must meet a net worth requirement of at least $100,000, including evidence of liquidity of $1,000,000, which may include $1,000,000 warehouse line of credit or other evidence of funding capacity 2. servicers must meet a net worth requirement of a least $100,000, but this amount cannot include money held in an escrow account for others 3. mortgage brokers must have a net worth of $25,000 including evidence of liquidity of $10,000

The Mortgage Licensing Act allows the Commissioner of Banks to waive the surety bond requirement for licensees in the following circumstances: 6

1. licensee has held a license for at least 3 years 2. the licensee can show that it has a net worth that is at least four times the requisite bond amount and certifies that it will maintain that net worth 3. the licensee certifies it will obtain a surety bond if its net worth falls below the requirement 4. the licensee shows a satisfactory history of responding to investigations and examinations by the Commissioner of Banks 5. The licensee shows a satisfactory history of resolving complaints from consumers 6. the Commissioner has no reason to believe that the licensee will be unable to respond to complaints, investigations, examinations, and fulfill financial obligations under the law

***Fees that Lenders Can Charge in Addition to Interest unless they are subject to the fee limitations imposed by the Anti-Predatory Lending Law, lenders can charge the following fees at or before closing when making a home loan: 8

1. loan application, origination, commitment, and interest lock fees 2. fees to administer a construction/permanent loan, including inspection fees and loan conversion fees 3. discount points, if the points are paid for a bona fide reduction of the interest rate or time-price differential 4. Assumption fees, not to exceed $400 if the mortgage contains a due on sale clause of $125 if the mortgage does not contain a due on sales clause 5. appraisal fees 6. fees for settlement services 7. additional fees payable to the lender that do not exceed one fourth of 1% or $150, which ever is greater 8. Late fees for payments that are past due for 15 days or more, although the law provides that late fees cannot exceed 4% of the amount of the prepayment past dues

North Carolina offers a number of license types for mortgage professionals hoping to conduct business in the state Persons required to be licensed in North Carolina:

1. mortgage lenders 2. mortgage brokers 3. exclusive mortgage brokers 4. mortgage origination support registrants 5. mortgage servicers 6. mortgage loan originators, and 7. transitional mortgage loan originators

although the law does not expressly state that mortgage brokers are agents of the borrowers, it creates duties that require brokers to function as the agent of the borrowers In North Carolina, the law requires mortgage brokers to: 10

1. safeguard and account for any money handled for the borrower 2. follow the borrower's reasonable and lawful instructions 3. Act with reasonable skill, care, and diligence 4. make "reasonable efforts" to secure a loan that is "reasonably advantageous" to the borrower considering all the circumstances including rates, fees, and repayment terms 5. make a timely and clear disclosure to the borrower of any material information that is likely to influence the borrower's decision, including a disclosure of the broker's total compensation "from any and all sources" 6. provide information to multiple lenders about the terms of other loans that the borrower is securing form different lenders at the same time 7. ensure that all similarly situated loan applicants are offered the same services on an equal basis 8. ensure that all advertising materials are designed to make consumers aware that the mortgage broker does not engage in discriminatory practices 9. represent the borrowers interest*** 10. uphold a duty of loyalty to the borrower, which requires each broker to never compromise a borrower's rights or interests in favor or another, including the rights and interests of the broker

Revisions to the Mortgage Licensing Act that the General Assembly made in 2009 have created special requirements and duties for mortgage servicers. Many of these requirements reflect concerns having to do with higher rates of delinquency and foreclosures that have arisen In NC, the law requires that mortgage servicers: 6

1. safeguard and account for any money handled for the borrower 2. follow the borrower's reasonable and lawful instructions 3. Act with reasonable skill, care, and diligence 4. Include in their initial and renewal applications a report that includes the range of costs and fees charged to borrowers for loan servicing activities, as well as: 5. Provide borrowers with: 6. provide delinquent and defaulting borrowers with:

North Carolina also seeks to ensure "professionalism through experience" which can be demonstrated through (blank) years of experience in residential mortgage lending for these types of individuals:

1. sole proprietors 2. qualifying individuals for a mortgage lender, broker, or servicer 3. branch managers 4. at least one principal officer for each corporation, LLC, partnership etc.

The Individual Form is also used when a loan originator wishes to: 3

1. terminate a relationship with an employer or sponsor, 2. surrender or cancel a license, 3. or amend an existing license or registration

Limitations on Late Fees North Carolina law permits the collection of late fees that conform to all of the following rules:

1. the fee does not exceed 4% of the amount past due 2. the payment is past due by 15 days or more (if the loan is one in which interest is paid in advance, this is expended to 30 days or more past due) 3. the fee is imposed more than once on the same payment 4. the loan does not call for repayment of the entire balance a single payment rather than in installments, and 5. the borrower is notified within 45 days after the payment was due, that the fee was imposed

The Notice if Amortization applies to all mortgage loans meeting the following three criteria: 3

1. the is a "home loan" which is defined in Chapter 24 as a loan (except for open-end credit plans) secured by a first mortgage or deed of trust on a property where one or more single-family dwellings exist or will exist 2. Home loans of less than $300,000 3. Home loans for personal family, or household purposes

Surety bond requirements for mortgage lenders: 3

1. the minimum surety bond requirement for mortgage lenders if $150,000 However, the surety bond requirement is subject to change as follows 2. $250,000 if the lender originates in NC in excess of $10 million but less than $50 million within a 12 month period ending December 31st 3. $500,000 if $50 million or more within a 12-month period ending December 31st

Material borrower information consists of: 5

1. the total compensation the mortgage broker expects to receive from all sources in connection with each loan option 2. the terms of each loan option presented to the borrower 3. the anticipated monthly payment, including property taxes and insurance, for each loan option presented to the borrower 4. if the loan contains a variable-rate feature or other terms that could result in a change to the monthly payments over the life of the loan, the circumstances upon which the terms of payment may change and impact those changes may have on the borrower's monthly payments and, 5. any affiliate relationships that may exist between the mortgage parties

Making a residential mortgage loan is defined as: 2

1. to advance, offer, or make a commitment of advance funds or, 2. to fund a residential mortgage loan

The Banking Rules under the North Carolina Administrative Code specify that the licensee must notify the Commissioner within (blank) business days of receipt of notice of any claim against the surety bond. The bond must require the bonding company to: 2

10 business days 1. notify the Commissioner within 10 days of any claim or payment of the bond 2. Pay, within 30 days, any amount the Commissioner orders the bonding company to pay upon determination by the Commissioner that the licensee failed to faithfully perform obligations

After a change of location of books or records, a notice is due to the Commissioner no later than (blank) days

10 days

A control person is also a director, general partner, or executive officer that has a (blank)% or more interest in the business

10%

Advertisements A licensee must record samples of each advertisement for (blank) months

12 months

any change to the identity of the branch manager or qualifying individual must be disclosed to the Commissioner within (blank) days of the change

15

Notice to a Commissioner is required no later than (blank) days after the following occur: 3

15 1. a change in the location of the principal office or branch office 2. a change in the identity of a designated qualifying individual 3. a change in the identity of the branch manager

3. if the loan is for less than $10,000 and is not made by a lender that is regulated as a bank, credit union, savings and loan association, or federal agency, the interest rate is limited to (blank)% per year

16%

the prepayment penalty may not exceed (blank)% of the outstanding balance if prepaid during the first two years, or (blank)% of the outstanding balance if prepaid during the third year

2% 3%

Fees that Lenders Can Charge in Addition to Interest federal lenders may charge fees that do not exceed (blank)% on home leans that are secured by second mortgage. All other lenders are limited to (blank)%

2% for federal lenders and agencies 1% for other lenders

qualified individuals are required to have how many years of experience?

3

North Carolina Notice of Amortization with relatively few restrictions on interest rates, lenders in NC must provide borrowers within (blank) business days after receipt of the mortgage application a Notice of Amortization

3 business days

under North Carolina Law, the recordkeeping requirement for documents related to mortgage lending transactions is:

3 years

Lenders and brokers are required to report, within (blank) days, any loan purchased due to a material misstatement made in connection with the mortgage lending process after the misstatement occurs

30 days

Licensee and exempt entities must provide the Commissioner of banks and/or the NMLS (blank) days after any change that renders previously submitted information on applications or other documents inaccurate

30 days

a nontraditional mortgage product is one other than a

30-year, fixed-rate mortgage

It is important to know that the HOEPA prohibits imposing late fees on high-cost mortgage loans unless the fee is equal to no more than (blank)% of the past-due amount and the payment is late by at least (blank) days

4% 15 days

Quarterly Reports lenders and brokers are required to file a quarterly report with the Commissioner that shows the characteristics of loans originated during the quarter. Licensees must file the report electronically within (blank) days after the close of the calendar quarter

45 days

Additionally, the bond must remain in effect for a minimum of (blank) years following lapse or termination in order to satisfy any potential claims

5

however, if the registered LO held a license before, he or she may or may not have to retake the exam in North Carolina, after how many years would a licensee have to retake the exam if the licensee did not properly maintain the requirements of the license?

5 years or more

borrowers are permitted to obtain one free statement every (blank) months, and the servicer may charge up to (blank) for additional statements

6 months $25

Annual Report Mortgage brokers and lenders are required to file an annual report no later than (blank) days after the end of the calendar year The report must include: 4

90 days 1. Information about the licensee's operations, including characteristics of loans that a licensee makes 2. an audited statement of financial condition that demonstrates that the licensee has met net worth requirements and evidence that the licensee meets other financial obligations 3. Evidence, by mortgage brokers, that they have continuous liquid assets of $10,000 4. Evidence, by mortgage lenders, if a warehouse line of credit of $1,000,000 or other evidence of funding capacity

it is prohibited for a person to (blank) a mortgage loan that contains a prepayment penalty if the principal amount of the loan is $150,000 or less, OR is the loan is a spread home loan

BROKER

in order to open a new branch/office in North Carolina, a (blank) must be submitted to NMLS and the new branch/office must be overseen by a (blank)

Branch Form qualified individual

The annual report is called the

Financial Condition (FC) report

Branch managers are also required to complete and submit an

Individual Form with the Branch Form

What is the regulatory agency responsible for enforcing NC law and NMLS protocol?

North Carolina Commissioner of Banks (NCCOB)

the state's licensing law is known as the

North Carolina Mortgage Licensing Act

The quarterly report is called the

Residential Mortgage Loan Activity (RMLA) report

Mortgage loan servicers also have duties pursuant to Chapter 45 of the North Carolina General Statutes (Mortgages Deeds of Trust) Under Article 10 of Chapter 45, servicers are required to provide borrowers with:

a home loan account statement within 10 business days of a borrower making a written request for information

even though loan processors are typically exempt from licensing requirements, all independent contractors must obtain

a mortgage loan originator license

a transitional mortgage license is a loan originator license that is limited to: 2

a term of no more than 120 days and is not subject to reapplication, renewal, or extension

ensuring accountability the principal office and each branch office must have (blank) that is considered a (blank)

branch manager "qualified individual"

The Company Form is the application for

business entities and sole proprietors seeking a license as a mortgage broker, lender, or servicer

a licensee must also notify the Commissioner within 15 days before

ceasing operations as a mortgage lender, broker, or servicer

table funding is the practice of

closing a loan in the name of a mortgage broker or other closing agent, and assigning the loan within one business day to the lender who provided the funds for the loan

regardless of if a licensee has maintained an active license for five years or not, the licensee is required to

complete the continuing education for the last year in which he or she held the license

In North Carolina, MLOs are importantly required to (blank) on behalf of the borrower

represent the borrower's best interests

borrowers often make the assumption that mortgage brokers are working as their agent, representing their interest throughout the course of lending transactions. There is not federal legal requirement for licensees to do this; however,

some individual states, including North Carolina, impost these standards

Financial qualifications of Mortgage Loan Originators mortgage loan originators and transactional loan originators are not required to obtain a (blank) because...

surety bond they are covered by the bond of the mortgage lender or mortgage broker that employs them

Surety bond for Mortgage Servicers

the minimum net surety bond required is $150,000

2. if the loan is for less than $10,000 and is made by a lender that is regulated as a bank, credit union, or savings and loan association, or made by a lender approved by a federal agency

the parties, once again, have the right to contract for the payment of interest

"Control" is defined as

the power to direct the management or the policies of a mortgage business.

what is the purpose of net worth requirements?

the purpose of net worth requirements is to ensure that financially sound and responsible entities and individuals are joining the mortgage profession

what is the purpose of surety bonds?

the purpose of surety bonds is to ensure that funds are available to compensate borrowers who are damaged or harmed if a licensee breaches a contract or violates the law

Even though registered mortgage loan originators are generally exempt form licensing requirements,

they are only exempt while working at specific financial institutions if they want to work as an LO at a non-exempt institution, they must become a licensed loan originator to conduct business at non-exempt institutions

Acting as a mortgage originator or a broker without a license is considered a

third-degree felony

a transitional license will allow the registered MLO to

to conduct business as a licensed MLO for a period of no more than 120 days while she awaits approval for a regular license

however, again, in the state of North Carolina, that person may apply for a (blank) in the interim

transitional license

registered MLOs already have a (blank), meaning that they are not required to obtain a new one when applying for a license

unique identifier

MLO is NC are also required to uphold a duty of loyalty to the borrower. what does this mean?

upholding the loyalty to the borrower requires that each broker never compromise a borrower's rights or interests in favor of another, including the rights and interests of the broker

If a person worked as a loan processor as a bank, does he need a license to work as an independent contractor in the same role?

yes