Loan Officer – NMLS Questions and Answers Graded A+

Loan Officer – NMLS Questions and Answers Graded A+ Document Content and Description Below Loan Officer – NMLS Questions and Answers Graded A+ ECOA - REG B Equal Credit Opportunities Act If App for Cedit is Denied based on Appraisal, Borrower has 90 days to request a copy then Le nder has 30 days to deliver HMDA - REG C Home Mortgage Disclosure Act Found in: Section 10 of 10-03 Loan App Government Monitoring Section Eliminates / Identifies Possible Discrimination RESPA - REG X Real Estate Settlement Procedures Act TIL/TILA - REG Z Truth in Lending Act (2015) Deals with: (Of Consumer Loans) Credit APR Advertising HPA Homeowners Protection Act Deals With: PMI - Private Mortgage Insurance - Protects Lender, NOT borrowerConventional Loans NOT MIP NOT Government Loans 20% Down SAFE SECURE and Fair Enforcement Act Created by HERA* HERA Housing and Economic Recovery Act Law that created the SAFE Act* TILA - REG Z requires lenders... To disclose the COMPLETE COST OF CREDIT to consumer loan applicants. Tell the WHOLE STORY of the loan. 3-Day Right of Recission ESTABLISHED BY TILA - REG Z - Creditor must return any money collected related to the loan within 20 CALENDAY DAYS - Consumers may rescind the credit transaction UNTIL MIDNIGHT OF THE THIRD BUSINESS DAY. - Borrowers must receive TWO COPIES of a Notice of Right to Rescind. Cooling Off Period 3 Days to change your mind (TILA) TILA Disclosures must be Kept for... 2 YearsEXCEPTIONS: Loan Estimate - 3 YRS Closing Discolures - 5 YRS TILA Disclosures Loan Estimate Disclosure Closing Disclosure CHARM Booklet (Consumer Handbook on Adjustable Rate Mortgages) APR Annual Percentage Rate Another Phrase for APR... Effective Rate Another Term for Interest Rate... Note Rate or Nominal Rate Penalties for violating TILA $5,000 per day for SINGLE Violation $25,000 per day for reckless violation $1,000,000 per day for KNOWINGLY violating TRID RESPA Real Estate Settlement Procedures Act RESPA Definition Passed in 1974 to provide consumer protection for loans on RESIDENTIAL PROPERTIES (1-4 Units) Enacted so consumers can obtain info on costs of closing so that they can shop for settlement services. Limits Escrow depositsRESPA Allows Borrowers... ... to receive pertinent and timely DISCLOSURES regarding the nature and cost of SETTLEMENT SERVICE cost. RESPA Purpose To help consumers become better shoppers for settlement services and to eliminate unnecessary increases in the costs of due to KICKBACKS and places limitation on the use of RESERVE accounts. 4 Important Sections of RESPA Section 6 - 8 - 9 - 10. RESPA Section 6 Protects homeowners against Mortgage Servicing Abuse. RESPA Section 8 Prohibits Kickbacks, Fee-Splitting, and unearned fees. RESPA Section 9 States a seller cannot require the use of particular title company. RESPA Section 10 Identifies amounts that can be charged to maintain escrow accounts Settlement Services Include - Origination of a Federally related Mortgage Loan - Mortgage Broker Services - Services related to the origination , processing, or federal mortgage loan funding - Title services Settlement Services NOT Included - Building / Remodeling Contractors - Service and Repair Contractors - Moving Companies - Landscaper - Home Improvement or Design Companies Department of Hosing and Urban Development Acronym HUDRESPA applicable Loans Made with funds insured by the federal government (e.g., FHA loans) Made with collateral insured by the federal government (e.g., flood insurance) Made with funds from a lender regulated by the federal government or that has deposits insured by the federal government (e.g., depository institutions regulated by the FDIC or NCUA) Intended for sale to Fannie Mae or Freddie Mac Made by a creditor regulated under the Truth-in-Lending Act, or Made by a mortgage broker and assigned to a creditor Loans RESPA does NOT apply to - Business - Commercial - Agricultural - Construction - Vacant Land - Secondary Market - Loan Conversions Borrower Credit or Yield Spread Premium (YSP) the borrower credit is a fee paid to the borrower by the lender when a loan is originated at a higher interest rate than the lowest rate for which the borrower qualifies. Fee-splitting and kickbacks: RESPA nor Regulation X define "fee-splitting" or "kickbacks," but the terms are generally understood to refer to paying or accepting unearned fees Sham affiliated business arrangement a partnership or joint venture created between settlement service providers for the illegal purpose of splitting fees under the guise of a bona fide affiliated business arrangement.Disclosures under RESPA Borrowers Need Loan Estimate, Closing Disclosure, special information booklet, affiliated business arrangement disclosure, disclosures related to mortgage servicing and escrow accounts, and, in certain transactions, the Good Faith Estimate and HUD-1 Settlement Statement. Special Info Booklet Due Date 3 Days after Load App is received or prepared. Special Info Booklet Name Your Home Loan Toolkit: A Step-by-Step Guide WHEN: Affiliated Business Arrangement Disclosure AT THE TIME OF MAKING THE REFERRAL. Regulation X prevents loan servicers from overcharging for escrow payments by: Requiring an annual escrow account analysis Limiting the cushion that a borrower must maintain to cover unanticipated disbursements to one sixth of the estimated total annual disbursements Requiring the refund of any surpluses greater than or equal to $50 within 30 days after completion of the escrow account analysis that reveals a surplus TILA-RESPA Integrated Disclosure (TRID) Rule established the required use of the Loan Estimate and Closing Disclosure for many mortgage loan transactions.GOOD FAITH ESTIMATE (GFE) Needs to be provided for... reverse mortgage, HELOC, or mortgage secured by a dwelling that is not attached to land. 3 Days after receiving app. Reg X Defines an Applicant's submission of a loan as a submission of: Name Monthly income Social Security Number Address of the home that will secure the loan Estimated value of the home that will secure the loan Loan amount Other information deemed necessary by the loan originator There is a 10% tolerance for differences between the total amount of actual and estimated charges permitted for: Lender-required settlement services performed by a provider chosen by the lender Lender-required services and title and insurance services if the loan applicant uses a provider recommended by the lender Recording fees Prohibited Practices under ECOA - REG B Refuse to consider public assistance as income Assume a woman of childbearing age will stop working to raise children Refuse to consider income from a pension, annuity, or retirement benefit Refuse to consider regular alimony or child support (although borrowers are not required to disclose alimony and child support unless it is used as qualifying income) TILA - Reg Z - 3 Important Terms Application Business DayConsummation Application Definition (TERM - TILA - REG Z) the submission of a consumer's financial information for the purposes of obtaining an extension of credit Business Day Definition (TERM - TILA - REG Z) any day on which the creditor's offices are open to the public for carrying out substantially all business functions. This is the definition that applies to deadlines for providing the Loan Estimate. REG Z Finance Charge Definition the cost of credit as a dollar amount REG Z APR Definition Regulation Z defines the APR as a measure of the cost of credit, expressed as a yearly rate APC Calculation Definition for close-end loans a measure of the cost of credit, expressed as a yearly rate, that relates to the amount and timing of value received by the consumer to the amount and timing of payments made" APR Calculation Definition for OPEN-END Loans... hall be computed by multiplying each periodic rate by the number of periods in a year" Accuracy Tolerance for Reg Z Closed-End Mortgages 1/8 of 1% above or below the Estimated APR. 1/4 of 1% if it is an "irregular loan" TILA - REG Z - ARm Disclosures - Loan Costs - Lending Terms - Risk Warnings of Adjustable Interest Rates - Advance notice of rate chageARM require More or Less Disclosure than Standard Fixed Rate Mortgage Loans... MORE Help the consumer plan for the adjustments. Rate-Change Disclosure Window (ARM) At least 60, but no more than 120 days before the change in interest rate. Why use an ARM Product? Lower initial rate - hopefully sell property before payments increase. Periodic Rate Calculation Multiply each period rate by the # of periods in a year Rescission Definition (TILA - Z) Rescission is a legal remedy that voids a contract between two parties, restoring each to the position held prior to the transaction. TILA - REG Z - 2 Rescission Provisions Three-business-day rescission period - Cooling off after loan closing, gives the borrower the chance to think about it and go back on the load ( change their mind) Three-Year-Rescission Period - If not receive notice of 3-Day rescission period - If TILA - Z Disclosures are not provided. Language for Rate&Payment Advertising required by TILA-Z On an ad, it must include: ""with equal prominence and in close proximity to the advertised rates or payments" Not involved in calculating APR Escrow Fees is not invlolved in calculating...Act HOEPA is under... TILA - REG Z HOEPA protects borrowers from... High-Cost Mortgage Rates Provisions of HOEPA are enforced by... CFPB Sections of TILA-Z that HOEPA is in... 31,32,34 High-Cost Mortgages are mortgages that... Is secured by the borrower's principal dwelling, and Meets at least one of the following thresholds: A first-lien mortgage is a high cost mortgage if its APR is.... 6.5 percentage points above the average prime offer rate for a comparable transaction A SUBORDINATE-LIEN mortgage is a high cost mortgage if its APR is.... 8.5 Percentage points different than average Transactions EXEMPT from HOEPA... Reverse mortgage loans Bridge loans used to finance the initial construction of a dwelling Loans originated by a housing finance agency and for which the agency is the creditor Loans originated by the USDA (RHS loans) Higher Prices Mortgage Loans ACRONYM HPML Who Publishes average prime offer rates on the internet The Federal Financial Institutions Examination Council (FFIEC)Charges that may Vary from estimated fees (TILA-Z) - Prepaid Interest - Property Insurance Premiums - Amounts in Escrow Accounts - Charges to 3rd Party Service Providers chosen by CONSUMER - Revised Loan Estimate When the initial rate isnt locked, and it is subsequently locked, a revised version of the disclosure that lists any changes must be provided. Other Circumstances for Revised Loan Estimates - Changed Circumstances - Consumer-requested revisions - Delays caused by the consumer - Delays due to construction loans Shopping Settlement Services Requirements - On the LE, the CREDITOR must identify services for which the consumer may shop - Creditor must provide a list of these options CFPB Acronym Consumer Financial Protection Bureau Loan Estimate Page ONE contents Date Issued Sale Price Purpose - Using one of the following terms: Purchase, Refinance, Construction, Home Equity Loan Product- Terms: Fixed Rate - Adjustable Rate - Step Rate Loan Type (Conventional, FHA, VA, other) Loan Estimate - Projected Payments Table Only for adjustable rate mortgages Section on page 1 of Loan Estimate where it outlines how rate change will impact payments. Page 2 of Loan Estimate outlines... Closing Costs Estimated Closing Costs are... Sum of LOAN COSTS + OTHER COSTS Loan Costs Table... Itemizes all loan costs associated with the transaction Loan Cost Table 4 Subheadings: - Origination Charges - Services you CANT shop for - Services you CAN shop for - Total Loan Costs. Page 2 OTHER COSTS section's 6 subheadings are... - Taxes & Gov Fees - Prepaids - Initial Escrow Payment at Closing - Other - Total Other Costs - Total Closing costs Calc. Cash to Close Table Page 2 Contents - Total Closing Costs - Closing Costs Financed (Stated as a Negative #) - Down Payment/Funds From Borrower- Deposit (Negative #) - Funds for Borrower - Seller Credits (Negative #) - Adjustments and Other CRedits (Negative #) - Estimated Cash to Close Other Tables Included on Page 2 if it's an ARM AP Table AIR Table Page Three of Loan Estimate Identifies parties involved. HOEPA was enacted as a part of... TILA Close-end Loans with rates that exceed the average prime offer rate, but are not high enough to trigger protections under HOEPA, are known as.... Higher-Priced Mortgage Loans The Mandatory waiting period between issuance of disclosures and consummation may be waived if... The CONSUMER requests a waiver due to a Bona Fide Financial Emergency PMI (Private Mortgage Insurance) may be required for Loans.... Wilh down payment less than 20% and the loan-to-value ratio is high. PMI is calculated as.... A percentage of the total amount of a loan HPA was passed in... 1998 HPA was passed to... facilitate cancellation of the PMI Generally PMI is cancelled when... Loan Balance reaches 80% of ORIGINAL home valueHPA applies to... Residential Mortgages on Single-Family Homes used as the borrower's principal dwelling. - Lenders - Loan Servicers - Insurers HPA does NOT apply to... - Gov insured FHA or VA Loans - Loans protected by PMI paid for by the Lender Cancellation Date for PMI 80% balance of Orignial home value HPA Described High-Risk Loans as... Conforming loans that Fannie Mae and Freddie Mac identify as High-Risk Loans Non-Conforming Loans that lenders identify as High-Risk Cancellation Date Cancellation of PMI when 80% of Loan-To-Value is Reached - Requested by Consumer Termination date Automatic when 78% Loan-To-Value is reached of original property value Automatic at midpoint of amortization period if borrower is current on payments Notification of Cancellation or Termination of PMI is due... Within 30 days of the cancellation or termination of PMI HERA - Housing Economic Recovery Act was signed.... July 30, 2008 HERA Goals: - Up Gov Regulation- More Assistance programs - Address problems caused by foreclosure crisis - Establish Licensing database and education standards the SAFE Act (REG G) is Title __________ of HERA TITLE V SAFE is an acronym for... Secure And Fair Enforcement for mortgage licensing act NMLS is an acronym for... Nationwide Multistate Licensing System NMLS was created by the Conference of State Bank Supervisor's (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) SAFE Act Regulation........ G HMDA acronym for... Home Mortgage Disclosure Act HMDA Purpose is to... Identify urban areas where the availability of home financing at reasonable terms is limited Metropolitan Statistical Areas (MSAs) are... Urbanized areas with a population of at least 50,000 (HMDA) In addition to originations, reportable HMDA data includes... - Loan Applications - Loan Denials - Loan Approvals - Loan Purchases HMDA Reporting Requirements do NOT apply to... - Loans secured by unimproved or vacant land- Temporary Financing - Construction / Bridge Loans - Loans less than $500 - Agricultural - Business/Commericial HMDA requires institutions to collect extensive data about each mortgage app including... - Date received - Type - Purpose & Amount - Request for Pre-Approval/Denail/or origination - Action taken on loan - Location of property - Owner/Occupant status of property - Ethnicity/race/sex/income of applicant - Entity purchasing the loan - Dif between loan APC & average prime offer if different than 1.5% - Identif. of loan that is subject to HOEPA - Indic. of whether the loan is secured by a first or subordinate lien. # of Data collection requirements that has increased since Dodd-Frank & HMDA... 12 to 48 is Demographic Data on the Loan App required? (HMDA) NOPE FCRA (REG V) Enacted in 1970 FCRA (REG V) Purpose is to... ...ensure the accuracy, fairness, and privacy of consumers' personal information that is assembled and used by consumer reporting agencies.INVESTIGATIVE Consumer Report (FCRA) Report on Character, reputation, personal characteristics, and mode of living. Obtained through INTERVIEWS (FCRA) The National Consumer Assistance Plan (NCAP) aims to... ...improve consumer experience, data accuracy, and quality. How Credit Scores are divied up - Payment History 35% - Amounts Owed - 30% - Length of Credit History - 15% - Types of Credit Used - 10% - New Credit - 10% THE BIG THREE CRA's (Credit Reporting Agencies) Equifax Experian TransUnion FACTA is (Fair and Accurate Credit Transactions Act of 2003) Additional provisions to the FCRA (Fair and Accurate Credit Transactions Act of 2003) (Fair and Accurate Credit Transactions Act of 2003) FACTA Purpose is to... ... address the problem of identity theft. To facilitate consumer's access to information retained by the CRAs, and to improve the accuracy of consumer reports. Statutory duties required by CRA's under FACTA - Providing notice of consumer rights - Issuing free credit report - Creating a Fraud Alert- Creating an Extended Fraud Alert - Active Duty Alert - Forwarding Fraud Alerts and Active Duty Alerts to other CRAs - Disclosing Credit Scores - Blocking INformation FACTA Special Disclosures - Disclosure of Credit Score - Response to consumer's request for info on fraud transactions - Rule for the proper disposal of consumer info Measures of Disposal under Disposal Rule - Burning, Pulverizing or Shredding papers - Erasing Electronically - Conductiong Due Dilligence to verify compliance with Disposal Rule by any third party that is employed to dispose of the inf