NMLS Questions and Answers Latest Updated 2022 Graded A

NMLS Questions and Answers Latest Updated 2022 Graded A Document Content and Description Below NMLS Questions and Answers Latest Updated 2022 Graded A Acceleration Clause Allows lenders to demand payment in full if the borrower defaults on the loan (can be construed as predatory lendin g) Alienation Clause (Due on Sale Clause) Says you must repay your mortgage if you sell your home to a new owner (loan is not assumable) Appraiser Independance Requirements replaced HVCC home valuation code of conduct Due on Demand Clause (Considered a predatory practice) The lender can demand repayment of the loan in full at anytime for any reason HOEPA Home Ownership and Equity Protection Act (Reg Z Sec 32) Amends TILA Nonrecourse Agreement Loan agreement under which the collateral securing a loan is the unltimate source of repayment, and the lender cannot hold the borrower personably liable in the event of default. Lender can seize (and sell) the collateral but cannot seize non-pledged asset or property. ReConveyance Method in which a lein is removed from a property when payment is made in full. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Purpose is to promote the financial stability of US by improving accountability and transparency in the financial system. Created the Consumer Financial Protection Bureau. Changed MLO compensation rulesHousing and Economic Recovery Act (HERA) of 2008 Signed by GW Bush. Est. national minimum standards for mortgage training, including prelicensing and annual continuing education. Also, under the SAFE Act, all MLO's must beither state-licensed or federally registered. SAFE Act - Secure and Fair Enforcement for Mortgage Licensing Act: part of HERA of 2008 Requires all states to implement a MLO licensing process that meets standards through the Nationwide Mortgage Lending System & Registry (NMLS) In CA that compliance act is called SB - 36. SAFE Act Objectives *Provide uniform license applications and reporting requirements *Provide licensing database *Improve flow of info to and between regulators *Provide increased accountability and tracking of MLO's *Streamline the licensing process *Enhance consumer protection and support anti-fraud measures *Provide consumers info about MLO's *Require MLO's to act in "the best interest of the client" *Facilitate responsible behavior in the subprime mkt *Facilitate the collection and disbursement of consumer complaints NMLS Started in 2004 by the Conference of State Bank Supervisors (CSBS) and the American Assoc. of Residential Mortgage Regulators (AARMR) They wrote model legislation reviewed by HUD for states to follow Mortgage Loan Originator Definition Someone who for compensation or gain or expectation thereof: takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan Independent Contractor May not engage in residential mortgage loan activities as a loan processor or underwriter unless state licensedUnique Identifier *Required by the SAFE Act for all state licensed MLO's or federally registered MLO's employed by a depository institution regulated by a federal banking agency or regulated by the Farm Credit Admin. *Required on all mktg materials, applications, required disclosures & business cards FINRA Financial Industry Regulatory Authority Built and maintains the online NMLS system RESPA (X) Real Estate Settlement Procedures Act 0f 1974 *Enforced by HUD *Intended to help consumers become better shoppers for settlement services and eliminate unnecessary increases in the costs of certain settlement services MLO License Not Required *Purely administrative or clerical tasks for a licensee *Only performing real estate brokerage work *Time share credit work *Loan processor or underwriter who does not represent to the public that they perform MLO work Federal Banking Agencies The Board of Gov.'s of the Fed. Reserve System, Comptroller of the Currency, Dir. of the Office of Thrift Supervision, National Credit Union Administration and the FDIC. Depository Institution Any bank or savings assoc. including credit union Non-Traditional Mortgage Product Any mortgage product other than a 30 yr fixed rate Residential Mortgage Loan Any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling or residential real estate upon which a dwelling is constructed or is intended to be constructed a dwellingMLO Licensing Requirements * Submit to a background check *Provide personal history *Provide authorization for a credit report *Never had MLO license revoked *No conviction or pled nolo contendere for a felony during past 7 yrs preceeding date of application *No fraud, breach of trust, or money laundering ever *A pardon is not a conviction MLO personal financial responsibility No: *Current outstanding judgments *Current outstanding tax liens *Foreclosures in the past 3 years *Pattern of seriously delinquent accounts in past 3 yrs MLO pre-licensing education Federal Law & regulation (3 hours) Ethics (3 hours) Nontraditional mortgage products (2 hours) Electives (12 hours) MLO Exam Federal Mortgage related laws 35% General Mortgage knowledge 25% MLO activities 25% Ethics 15% Fail 3 times then must wait 6 months MLO License renewal requirements Federal Law & regulation (3 hours) Ethics (2 hours) Nontraditional mortgage products (2 hours) Electives (1 hours)MLO Compensation Rules Dodd-Frank Compensation Changes: *Compensation can't be based different cause it is a different kind of loan *Comp. can't be based on loan terms such as interest rate, apr or LTV *Can't get comp. directly from consumer and another source on the same loan *no pricing concessions *no "point banks" *MLO can't be penalized for GFE violations *Can't base comp on terms of previous transaction Safe Harbor Loan If the consumer is presented with loan options for each type loan, including: *Lowest interest rate *Lowest total for origination *Lowest interest rate without certain risky features The MLO: *Obtains options from creditors regularly worked with *Believes in good faith the consumer qualifies MLO Compensation Defined *Salary, commission, bonuses, awards or prizes *Payments from loan proceeds are considered payments directly from consumer. *Yield spread premium (YSP) according to RESPA is not considered payment from the borrower *Transactions are described as all closed-end consumer loans secured by 1 to 4 unit residential dwelling, closed end mortgages or reverse mortgages. MLO Compensation not allowed *Any comp. that is based on loan terms or conditions such as interest rate, APR, loan-to-value LTV *Comp. received directly from the consumer and any other source for the same loan MLO Comp can be based on these triggers *Overall loan volume *Long-term loan performance*Hourly basis *Existing/new customer *Flat fee *Pull-through rate ie. quality of loan files *Legitimate business expenses *Long-term loan performance *Different arrangement for each MLO RESPA - Transactions Covered *Loans secured with a mortgage placed on 1 to 4 family residential property *Includes most purchase loans, assumptions, refinances, property improvement loans and equity lines of credit *Amended in 1994 to include subordinate lien loans RESPA - Transactions not Covered *All cash sale *Sale where the individual seller takes back the mortgage *Rental property transaction *Property of 25 acres or more *Vacant or unimproved property (unless a dwelling will be constructed or moved on within 2 yrs. RESPA Provisions Prohibit *Prohibits giving or accepting a fee, kickback or anything of value in exchange for referrals of settlement service business involving a federally-related mortgage loan. *Prohibits fee-splitting and receiving unearned fees or a percentage of any charge made for services not done *Prohibits "required use" of specific settlement service providers, except in cases where a lender refers a borrower to an attorney, credit reporting agency, or real estate appraiser to represent the lende's interest in the transaction. RESPA things of value *Monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties,credits representing monies that may be paid in future, opportunity to participate in a moneymaking program, retained or increased earnings, free or special rates or lease or rental payments based on the amount of business referred, trips and payments of another person's expenses or reduction in credit against an existing obligation. RESPA Provisions Allows *Allows things of minimal value used for promo purposes such as pens, mementos, coffee cups, hats, etc. *Allows legitimate discounts on services to consumers if a combination of settlement services is offered at a total price lower than the sum of the individual settlement services, as long as: **the use of any such combo is optional to the buyer **the lower price is not made up by higher costs elsewhere in the settlement process RESPA Penalties Criminal and civil penalties include: *fines up to $10,000 *Imprisonment up to 1 year *Liability of up to 3 times the amount of the charge RESPA Section 9 Title Insurance Rules *Prohibits seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale *Buyers can sue for 3 times charges for the title insur. RESPA Section 10 Escrow Account Limits *Limits amount lender can require borrower to put into escrow for purposes of paying taxes, hazard insur. and other charges related to the property to more than 1/12th (1 mos.) of the total of all due payable during the year, plus amount to pay for any shortage in acct. *Allows a cushion not to exceed 1/6th or 2 mos. due for a year *Requires the lender to perform escrow analysis 1/year and notify borrower of shortages and return excess of $50 or more, if borrower is not delinquent. *Does not require lender to impose an escrow acct, but: *Mortgage w/ mortgage insur. must have escrow acct *"Higher Priced" loan must have escrow acct.RESPA Affiliated Business Arrangements AfBA A situation where a person in a position to refer settlement services - or an associate of that person, has an affiliated relationship or interest of MORE than 1% in a provider of settlement services. RESPA Completed Application Definition Six items: *Borrower's name *Borrower's monthly income *Borrower's SSN to obtain a credit report *Property address *Estimate of value of the property *Loan amount RESPA Required Disclosures Within 3 Days of Completed Application *HUD Settlement Cost Booklet - contains consumer info regarding various real estate settlement services *Good Faith Estimate (GFE) of Settlement Costs - provides an estimate of each charge the buyer is likely to pay at settlement *Mortgage Servicing Disclosure Statement - discloses to the borrower whether the lender intends to servicer the loan or transfer servicing to another lender and provides info about complaint resolution *If the lender turns down the loan within 3 days, MLO doesn't have to provide the documents RESPA Required Disclosures Before Settlement Occurs *AfBA Disclosure - requires a settlement service provider to give an AfBA disclosure to the consumer at or prior to the time of referral to another provider with whom the referring party has ownership or interest. must describe the relationship and give the borrower an estimate of the second provider's charges *HUD-1 Settlement Statement: a standard form that clearly show all charges imposed on borrowers and sellers in connection with the settlement; *Borrower's may request HUD-1 1 business day before the actual settlement.RESPA Required Disclosures at Settlement *HUD-1 Settlement statement- shows the actual settlement costs for both buyer and seller *Initial Escrow Stmt: Itemizes the estimated taxes, insurance premiums, and other charges anticipated to be paid from escrow acct. in first 12 mos., including any cushion though usually given at settlement, the lender has 45 days from settlement to deliver RESPA Required Disclosures after Settlement *Annual Escrow Statement - required fro