lOMoARcPSD|64492663
MLO Exam Prep: Federal Mortgage-Related
Laws
STUDY SHEET
Top Takeaways
You can expect to see roughly 28 questions about federal mortgage-related laws on your licensing exam.
Real Estate Settlement Procedures Act (RESPA), 12 Code of Federal Regulations (CFR) Part 1024
(Regulation X)
RESPA origins and purpose; definition of "mortgage broker"
RESPA is a federal law that protects consumers from paying excessively high costs in mortgage transactions.
The Consumer Financial Protection Bureau (CFPB) enforces the terms of RESPA, which requires that
consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost
of settlement services or limit consumer choice.
Mortgage brokers include any "person (other than an employee of a lender) that renders origination services
and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage
loan…"
Applicable loan types
RESPA regulations apply to loans granted on one- to four-family residential properties, including loans for assumptions,
refinances, home improvements, and home equity lines of credit (HELOCs).
RESPA prohibitions, limitations, & exemptions
RESPA prohibits any person from receiving a fee or kickback in return for referring consumers to a specific settlement
service provider.
Loans exempt from RESPA include:
Commercial or business loans
Vacant land
Land tracts of 25 acres or larger, with a residence or without one
Certain kinds of loan assumptions
Construction-only loans
Loans to the government
Settlement Services
RESPA prohibits anyone from accepting a fee, kickback, or any other item of value in exchange for referring
consumers to a settlement service provider related to a mortgage loan transaction.
Service providers can't make verbal or written agreements or understandings with real estate professionals,
MLOs, or any other party in a loan transaction as a way to receive referrals for new business.
A kickback is anything of value, regardless of amount, that an individual or company provides to a professional
in exchange for referring business.
Settlement services include any services provided in connection with a prospective or actual settlement. This
can include loan origination, mortgage brokerage, title services, and many more.
According to RESPA, a referral is given in any situation in which a person influences another person's decision
about which settlement service provider to use for a transaction. This could be a verbal or written action
directed at a consumer. Referrals also include situations in which a person who's paying for settlement service
is required to use a specific settlement service provider in order to have access to a particular service or
property. RESPA uses the term "required use" to describe this type of referral.
Offering packages, rebates, or discounts in order to make a service provider more appealing to a consumer isn't
considered required use so long as the discounts truly save the consumer money and aren't made up by higher
costs somewhere else. Violators of RESPA are subject to criminal and civil penalties of as much as $10,000 in fines, as
, lOMoARcPSD|64492663
well as civil lawsuits that may hold the violator responsible for as much as three times the amount of the kickback and
as long as one year in prison.
Downloaded by Doctor Wise ()
MLO Exam Prep: Federal Mortgage-Related
Laws
STUDY SHEET
Top Takeaways
You can expect to see roughly 28 questions about federal mortgage-related laws on your licensing exam.
Real Estate Settlement Procedures Act (RESPA), 12 Code of Federal Regulations (CFR) Part 1024
(Regulation X)
RESPA origins and purpose; definition of "mortgage broker"
RESPA is a federal law that protects consumers from paying excessively high costs in mortgage transactions.
The Consumer Financial Protection Bureau (CFPB) enforces the terms of RESPA, which requires that
consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost
of settlement services or limit consumer choice.
Mortgage brokers include any "person (other than an employee of a lender) that renders origination services
and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage
loan…"
Applicable loan types
RESPA regulations apply to loans granted on one- to four-family residential properties, including loans for assumptions,
refinances, home improvements, and home equity lines of credit (HELOCs).
RESPA prohibitions, limitations, & exemptions
RESPA prohibits any person from receiving a fee or kickback in return for referring consumers to a specific settlement
service provider.
Loans exempt from RESPA include:
Commercial or business loans
Vacant land
Land tracts of 25 acres or larger, with a residence or without one
Certain kinds of loan assumptions
Construction-only loans
Loans to the government
Settlement Services
RESPA prohibits anyone from accepting a fee, kickback, or any other item of value in exchange for referring
consumers to a settlement service provider related to a mortgage loan transaction.
Service providers can't make verbal or written agreements or understandings with real estate professionals,
MLOs, or any other party in a loan transaction as a way to receive referrals for new business.
A kickback is anything of value, regardless of amount, that an individual or company provides to a professional
in exchange for referring business.
Settlement services include any services provided in connection with a prospective or actual settlement. This
can include loan origination, mortgage brokerage, title services, and many more.
According to RESPA, a referral is given in any situation in which a person influences another person's decision
about which settlement service provider to use for a transaction. This could be a verbal or written action
directed at a consumer. Referrals also include situations in which a person who's paying for settlement service
is required to use a specific settlement service provider in order to have access to a particular service or
property. RESPA uses the term "required use" to describe this type of referral.
Offering packages, rebates, or discounts in order to make a service provider more appealing to a consumer isn't
considered required use so long as the discounts truly save the consumer money and aren't made up by higher
costs somewhere else. Violators of RESPA are subject to criminal and civil penalties of as much as $10,000 in fines, as
, lOMoARcPSD|64492663
well as civil lawsuits that may hold the violator responsible for as much as three times the amount of the kickback and
as long as one year in prison.
Downloaded by Doctor Wise ()
