MLO SAFE TEST (MICHIGAN) STUDY GUIDE
Dodd-Frank - Answer -- Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010
- Changed oversight & capitalization of financial institutions, added licensing an
education standards, and limited riskier products in the marketplace
- Established the CFPB
- Defined and specifically outlawed UDAAPs
CFPB - Answer -- Consumer Financial Protection Bureau
- The Bureau
- Oversees and enforces Dodd-Frank specifically to protect consumers from UDAAPs
UDAAPs - Answer -- Unfair, Deceptive, or Abusive Acts or Practices
- Unfair: Activities that cause injury (financial harm) to consumer
- Deceptive: Activities where the MLO intends (or does) lie to or mislead the consumer
- Abusive: Activities where the MLO takes advantage of their position to confuse the
consumer
MLO - Answer -- Mortgage Loan Originator
- Takes residential mortgage loan applications, offers or negotiates rates or terms for
compensation or gain
Mortgage Broker - Answer -- Loan originators who work independently of lenders
- Originate mortgages then shops for a lender
- Matchmaker between customer and lender
Lender - Answer -- A person or company that makes loans for real estate
Processor - Answer -- Works for a MLO and provides clerical functions collecting
documents and verifying information
- Not licensed, not allowed to negotiate rates and terms
Underwriter - Answer -- Works for a MLO and reviews loan applications to determine
risk to the lender
- Not licensed, not allowed to negotiate rates and terms
Appraiser - Answer -- Independent of the MLO
- Provides service of determining the property value
Title Agent - Answer -- Independent of the MLO
- Researches ownership (title) on the property
- Offers title insurance
,- Also called abstractors
Real Estate Agent - Answer -- Independent party
- Works on behalf of either buyer or seller in a purchase transaction
Investor - Answer -- Person or organization that puts money in to financial
arrangements with the expectation of making a profit
Regulator - Answer -- Person or institution that supervises or controls a financial
system in order to guarantee fair and efficient markets and promote financial stability
Consumer - Answer -- Individual who may obtain financial services
- Shopping (no commitments)
Customer - Answer -- Individual in an ongoing process or relationship with a financial
services provider (also called Client by Rocket Pro)
- Legal term
4 Cs - Answer -- Credit
- Capacity
- Cash
- Collateral
Credit - Answer -- Ability to keep up with payments
- Financial character
- Account and payment history and credit score
- Requires permissible purpose to pull credit report
Capacity - Answer -- Ability to repay loan
- Income vs debt obligations (monthly bills obligated to pay)
- Debt to Income (DTI)
Cash - Answer -- Liquid assets available to cover shortfalls
- Ability to come to closing for downpayment and closing costs
Collateral - Answer -- The property value pledged as security for the loan
- Loan to Value (LTV)
Pre-Applications - Answer -- Borrower (customer) considers shopping for a mortgage
(may seek out reccomendations)
- MLO advertises
Application - Answer -- Credit verified (credit report pulled for a real & valid reason:
requires permissible purpose)
- Application collected (ALIENS)
- MLO matches borrower with product (tangible net benefit)
, - Loan Estimate (LE) shared
- In order to proceed, customer gives Intent to Proceed
Processing - Answer -- MLO collects supporting documentation from customer
- Paystubs
- W-2s
- IRS Tax Transcript 4506-C
- Bank Statements
- Investment Portfolio
- Other Assets
Underwriting - Answer -- Capacity
- Ability to pay for mortgage in addition to other debts
- DTI and employment verified
- Cash
- Able to bring down paymnet and closing costs to the table
- Bank accounts verified
- Collateral
- Value verified (appraisal)
- Title work (ownership)
- Final Underwriting
- Additional credit pull, underwriter ultimately approves or denies loan
Closing - Answer -- MLO delivers Closing Disclosure (CD)
- Documents signed by lender, borrower, and seller (purchase)
- Documents recorded by closing agent
Ownership - Answer -- Servicing begins (collection of payment)
Amortization - Answer -- Payments that reduce the principal balance and pay all the
current monthly interest due on the loan
PITI - Answer -- Principal, Interest, Taxes, Insurance
Negative Amortization - Answer -- Occurs when the loan payment is not sufficient to
cover the interest cost and results in the unpaid interest being added to the original
balance, causing the loan amount to increase.
FTC Red Flag Law - Answer -- Fair and Accurate Credit Transactions Act of 2003
(FACT Act) Red Flags Rule
- The Red Flags Rule requires that each "financial institution" or "creditor" implement a
written program to detect, prevent and mitigate identity theft in connection with the
opening or maintenance of "covered accounts." These include consumer accounts that
permit multiple payments or transactions
Dodd-Frank - Answer -- Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010
- Changed oversight & capitalization of financial institutions, added licensing an
education standards, and limited riskier products in the marketplace
- Established the CFPB
- Defined and specifically outlawed UDAAPs
CFPB - Answer -- Consumer Financial Protection Bureau
- The Bureau
- Oversees and enforces Dodd-Frank specifically to protect consumers from UDAAPs
UDAAPs - Answer -- Unfair, Deceptive, or Abusive Acts or Practices
- Unfair: Activities that cause injury (financial harm) to consumer
- Deceptive: Activities where the MLO intends (or does) lie to or mislead the consumer
- Abusive: Activities where the MLO takes advantage of their position to confuse the
consumer
MLO - Answer -- Mortgage Loan Originator
- Takes residential mortgage loan applications, offers or negotiates rates or terms for
compensation or gain
Mortgage Broker - Answer -- Loan originators who work independently of lenders
- Originate mortgages then shops for a lender
- Matchmaker between customer and lender
Lender - Answer -- A person or company that makes loans for real estate
Processor - Answer -- Works for a MLO and provides clerical functions collecting
documents and verifying information
- Not licensed, not allowed to negotiate rates and terms
Underwriter - Answer -- Works for a MLO and reviews loan applications to determine
risk to the lender
- Not licensed, not allowed to negotiate rates and terms
Appraiser - Answer -- Independent of the MLO
- Provides service of determining the property value
Title Agent - Answer -- Independent of the MLO
- Researches ownership (title) on the property
- Offers title insurance
,- Also called abstractors
Real Estate Agent - Answer -- Independent party
- Works on behalf of either buyer or seller in a purchase transaction
Investor - Answer -- Person or organization that puts money in to financial
arrangements with the expectation of making a profit
Regulator - Answer -- Person or institution that supervises or controls a financial
system in order to guarantee fair and efficient markets and promote financial stability
Consumer - Answer -- Individual who may obtain financial services
- Shopping (no commitments)
Customer - Answer -- Individual in an ongoing process or relationship with a financial
services provider (also called Client by Rocket Pro)
- Legal term
4 Cs - Answer -- Credit
- Capacity
- Cash
- Collateral
Credit - Answer -- Ability to keep up with payments
- Financial character
- Account and payment history and credit score
- Requires permissible purpose to pull credit report
Capacity - Answer -- Ability to repay loan
- Income vs debt obligations (monthly bills obligated to pay)
- Debt to Income (DTI)
Cash - Answer -- Liquid assets available to cover shortfalls
- Ability to come to closing for downpayment and closing costs
Collateral - Answer -- The property value pledged as security for the loan
- Loan to Value (LTV)
Pre-Applications - Answer -- Borrower (customer) considers shopping for a mortgage
(may seek out reccomendations)
- MLO advertises
Application - Answer -- Credit verified (credit report pulled for a real & valid reason:
requires permissible purpose)
- Application collected (ALIENS)
- MLO matches borrower with product (tangible net benefit)
, - Loan Estimate (LE) shared
- In order to proceed, customer gives Intent to Proceed
Processing - Answer -- MLO collects supporting documentation from customer
- Paystubs
- W-2s
- IRS Tax Transcript 4506-C
- Bank Statements
- Investment Portfolio
- Other Assets
Underwriting - Answer -- Capacity
- Ability to pay for mortgage in addition to other debts
- DTI and employment verified
- Cash
- Able to bring down paymnet and closing costs to the table
- Bank accounts verified
- Collateral
- Value verified (appraisal)
- Title work (ownership)
- Final Underwriting
- Additional credit pull, underwriter ultimately approves or denies loan
Closing - Answer -- MLO delivers Closing Disclosure (CD)
- Documents signed by lender, borrower, and seller (purchase)
- Documents recorded by closing agent
Ownership - Answer -- Servicing begins (collection of payment)
Amortization - Answer -- Payments that reduce the principal balance and pay all the
current monthly interest due on the loan
PITI - Answer -- Principal, Interest, Taxes, Insurance
Negative Amortization - Answer -- Occurs when the loan payment is not sufficient to
cover the interest cost and results in the unpaid interest being added to the original
balance, causing the loan amount to increase.
FTC Red Flag Law - Answer -- Fair and Accurate Credit Transactions Act of 2003
(FACT Act) Red Flags Rule
- The Red Flags Rule requires that each "financial institution" or "creditor" implement a
written program to detect, prevent and mitigate identity theft in connection with the
opening or maintenance of "covered accounts." These include consumer accounts that
permit multiple payments or transactions
