©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Mortgage educators California 20hr MLO
course notes Study Set
Property taxes are superior to all other taxes meaning.... - Answer✔they are paid first
Federal Reserve System (1913) - Answer✔It is the central banking system of the United States.
It was created in 1913 with the enactment of the Federal Reserve Act, largely in response to a
series of financial panics, particularly a severe panic in 1907; This was the first step to creating
the mortgage industry lending
Federal Home Loan Bank Act (1932) - Answer✔Gave Federal Home Loan Banks authority to
lend money to thrifts, S&Ls, credit unions, savings banks to finance home mortgages in their
neighborhoods
Banking Act (1933) - Answer✔The law that established the Federal Deposit Insurance
Corporation (FDIC) to insure bank deposits. It also prohibited commercial banks from selling
insurance or acting as investment banks. Ensures deposits and protects consumers against bank
default.
Department Of Housing And Urban Development (HUD) (1965) - Answer✔Provides financial
incentives to renovate and build within certain urban areas, improves the nations communities
and enforces fair housing laws
Community Reinvestment Act (CRA) (1977) - Answer✔A congressional act that encourages
mortgage originators to actively lend in their communities and that requires financial institutions
to evaluate the "fairness" of their lending practices. Analyzes banks success or failure in reaching
out to lending communities it serves.
What year did FNMA (Federal National Mortgage Association) become a GSE (Government
Sponsored Entity)? - Answer✔1968
Government National Mortgage Association (GNMA) - Answer✔Commonly known as "Ginnie
Mae," this agency of HUD operates in the secondary mortgage market. It is involved with special
government financing programs. Created in 1968
FNMA (Fannie Mae) - Answer✔Federal National Mortgage Association, a major secondary
money market player. It is privately owned, but Federally regulated.
FHLMC (Federal Home Loan Mortgage Corporation) - Answer✔The Federal Home Loan
Mortgage Corporation, commonly known as Freddie Mac. The company buys mortgages from
lending institutions, pools them with other loans and then sells shares to investors; an
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
independent stock company which creates a secondary market in conventional residential loans
and in FHA and VA loans by purchasing mortgages. Works hand in hand with FNMA
When did the housing bubble peak? - Answer✔July 2006
Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) *aka The Dodd-Frank
Act* - Answer✔Put in place many of the regulations we have in the mortgage industry today
What created the CFPB (Consumer Financial Protection Bureau)? - Answer✔The Dodd-Frank
Act
Consumer Financial Protection Bureau (CFPB) - Answer✔A U.S. government agency that helps
protect consumers by regulating financial products and services, like
mortgages, credit cards, banks, credit unions and student loans. Proposes new regulations,
supervises the mortgage industry and enforces federal law to avoid another recession incident.
NMLS - Answer✔Nationwide Mortgage Licensing System and Registry
Mortgage Loan Originator (MLO) - Answer✔Real estate licensee who conducts mortgage loan
origination activities and is required to register annually on the Nationwide Mortgage Licensing
System & Registry (NMLS). Individual who receives compensation or gain for taking residential
mortgage loan applications or offers and negotiates terms of a residential mortgage loan.
True or False: The Great Recession was caused, in large part, by predatory lending practices? -
Answer✔True
Two Types of MLO's - Answer✔Licensed MLOs and Registered MLOs
Conference of State Bank Supervisors (CSBS) - Answer✔A national organization of state bank
supervisors who are charged with ensuring that state banking institutions adhere to certain
standards. The organization played a major role in the formation of the NMLS-R and in the
drafting of the model licensing law. Also helped develop the American Association Of
Residential Mortgage Regulators
Does the NMLS issue licenses? - Answer✔NO. It is merely a database that keeps track of all
services provided and information.
What do processors and underwriters do ? - Answer✔These unlicensed positions help MLOs
perform data entry to complete or start the loan process for the client.
Loan Processor - Answer✔One who is responsible for verifying information contained in a
prospective borrower's loan file and for coordinating aspects of the loan process to make it go
smoothly in order. Application, Document, Employment, Verification Then is sent to the
underwriter who approves or denies.
Underwriter - Answer✔A person who evaluates and classifies risks to accept or reject them on
behalf of the insurer. Either Approves or Denies.
When do processors and underwriters have to be licensed? - Answer✔when they are independent
contractors
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Independent Contractor - Answer✔One who works for, and receives payment from, an employer
but whose working conditions and methods are not controlled by the employer. An independent
contractor is not an employee but may be an agent. (Not under direct supervision of a licensed
entity)
Who classifies as entities or companies? - Answer✔Brokers and Lenders
Brokers - Answer✔independent firms or individuals whose principal function is to bring buyers
and sellers together to make sales. Brokers give the info to underwriters for closure of the loan
but do not fund it.
Lenders - Answer✔Banks, individuals, companies, car companies. Anyone who allows
individuals to borrow money. Lenders fund their own loans.
What are the two sections loans get broken down into when negotiating rates? -
Answer✔"Service Rights" and "Mortgage"
mortgage - Answer✔a specific type of loan that is used to buy real estate. Lenders typically sell
mortgage loans to the secondary market
Servicing Rights - Answer✔Rights retained by a lender selling a loan in which the lender
continues to collect interest payments from the borrower and monitors the borrower's compliance
with loan terms on behalf of the purchaser of the loan. (service the loan, collect payments, pay
insurance, pay taxes)
Secondary Market - Answer✔the market in which previously issued securities are traded among
investors. Where mortgage loans and Mortgage Backed Securities (MBS) are bought and sold
Mortgage Backed Securities (MBS) - Answer✔a type of asset-backed security that is secured by
a mortgage or collection of mortgages (mortgage is collateral)
Big Players in the Secondary Market - Answer✔FNMA/FHLMC/GNMA (Fannie Mae/Freddie
Mac/Ginnie Mae)
What does FNMA & FHLMC provide to the market? - Answer✔liquidity by buying mortgages
and only purchasing conventional loans
What does GNMA provide to the market? - Answer✔liquidity by purchasing government loans
because it is a government owned entity
Mortgage Loan Life Cycle - Answer✔Obtain a loan, Primary Market, Secondary Market
Regulatory Authority - Answer✔A public authority or government agency responsible for
exercising autonomous authority over some area of human activity in a regulatory or supervisory
capacity. Can investigate, impose penalties, and supervise
What is the CFPB - Answer✔"Consumer Financial Protection Bureau" - responsible for
protecting consumers from predatory financial companies, like what happened with the 2008
Housing Bubble. The Federal Regulator Primary Enforcer of the Mortgage Industry
3|Page
Mortgage educators California 20hr MLO
course notes Study Set
Property taxes are superior to all other taxes meaning.... - Answer✔they are paid first
Federal Reserve System (1913) - Answer✔It is the central banking system of the United States.
It was created in 1913 with the enactment of the Federal Reserve Act, largely in response to a
series of financial panics, particularly a severe panic in 1907; This was the first step to creating
the mortgage industry lending
Federal Home Loan Bank Act (1932) - Answer✔Gave Federal Home Loan Banks authority to
lend money to thrifts, S&Ls, credit unions, savings banks to finance home mortgages in their
neighborhoods
Banking Act (1933) - Answer✔The law that established the Federal Deposit Insurance
Corporation (FDIC) to insure bank deposits. It also prohibited commercial banks from selling
insurance or acting as investment banks. Ensures deposits and protects consumers against bank
default.
Department Of Housing And Urban Development (HUD) (1965) - Answer✔Provides financial
incentives to renovate and build within certain urban areas, improves the nations communities
and enforces fair housing laws
Community Reinvestment Act (CRA) (1977) - Answer✔A congressional act that encourages
mortgage originators to actively lend in their communities and that requires financial institutions
to evaluate the "fairness" of their lending practices. Analyzes banks success or failure in reaching
out to lending communities it serves.
What year did FNMA (Federal National Mortgage Association) become a GSE (Government
Sponsored Entity)? - Answer✔1968
Government National Mortgage Association (GNMA) - Answer✔Commonly known as "Ginnie
Mae," this agency of HUD operates in the secondary mortgage market. It is involved with special
government financing programs. Created in 1968
FNMA (Fannie Mae) - Answer✔Federal National Mortgage Association, a major secondary
money market player. It is privately owned, but Federally regulated.
FHLMC (Federal Home Loan Mortgage Corporation) - Answer✔The Federal Home Loan
Mortgage Corporation, commonly known as Freddie Mac. The company buys mortgages from
lending institutions, pools them with other loans and then sells shares to investors; an
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
independent stock company which creates a secondary market in conventional residential loans
and in FHA and VA loans by purchasing mortgages. Works hand in hand with FNMA
When did the housing bubble peak? - Answer✔July 2006
Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) *aka The Dodd-Frank
Act* - Answer✔Put in place many of the regulations we have in the mortgage industry today
What created the CFPB (Consumer Financial Protection Bureau)? - Answer✔The Dodd-Frank
Act
Consumer Financial Protection Bureau (CFPB) - Answer✔A U.S. government agency that helps
protect consumers by regulating financial products and services, like
mortgages, credit cards, banks, credit unions and student loans. Proposes new regulations,
supervises the mortgage industry and enforces federal law to avoid another recession incident.
NMLS - Answer✔Nationwide Mortgage Licensing System and Registry
Mortgage Loan Originator (MLO) - Answer✔Real estate licensee who conducts mortgage loan
origination activities and is required to register annually on the Nationwide Mortgage Licensing
System & Registry (NMLS). Individual who receives compensation or gain for taking residential
mortgage loan applications or offers and negotiates terms of a residential mortgage loan.
True or False: The Great Recession was caused, in large part, by predatory lending practices? -
Answer✔True
Two Types of MLO's - Answer✔Licensed MLOs and Registered MLOs
Conference of State Bank Supervisors (CSBS) - Answer✔A national organization of state bank
supervisors who are charged with ensuring that state banking institutions adhere to certain
standards. The organization played a major role in the formation of the NMLS-R and in the
drafting of the model licensing law. Also helped develop the American Association Of
Residential Mortgage Regulators
Does the NMLS issue licenses? - Answer✔NO. It is merely a database that keeps track of all
services provided and information.
What do processors and underwriters do ? - Answer✔These unlicensed positions help MLOs
perform data entry to complete or start the loan process for the client.
Loan Processor - Answer✔One who is responsible for verifying information contained in a
prospective borrower's loan file and for coordinating aspects of the loan process to make it go
smoothly in order. Application, Document, Employment, Verification Then is sent to the
underwriter who approves or denies.
Underwriter - Answer✔A person who evaluates and classifies risks to accept or reject them on
behalf of the insurer. Either Approves or Denies.
When do processors and underwriters have to be licensed? - Answer✔when they are independent
contractors
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Independent Contractor - Answer✔One who works for, and receives payment from, an employer
but whose working conditions and methods are not controlled by the employer. An independent
contractor is not an employee but may be an agent. (Not under direct supervision of a licensed
entity)
Who classifies as entities or companies? - Answer✔Brokers and Lenders
Brokers - Answer✔independent firms or individuals whose principal function is to bring buyers
and sellers together to make sales. Brokers give the info to underwriters for closure of the loan
but do not fund it.
Lenders - Answer✔Banks, individuals, companies, car companies. Anyone who allows
individuals to borrow money. Lenders fund their own loans.
What are the two sections loans get broken down into when negotiating rates? -
Answer✔"Service Rights" and "Mortgage"
mortgage - Answer✔a specific type of loan that is used to buy real estate. Lenders typically sell
mortgage loans to the secondary market
Servicing Rights - Answer✔Rights retained by a lender selling a loan in which the lender
continues to collect interest payments from the borrower and monitors the borrower's compliance
with loan terms on behalf of the purchaser of the loan. (service the loan, collect payments, pay
insurance, pay taxes)
Secondary Market - Answer✔the market in which previously issued securities are traded among
investors. Where mortgage loans and Mortgage Backed Securities (MBS) are bought and sold
Mortgage Backed Securities (MBS) - Answer✔a type of asset-backed security that is secured by
a mortgage or collection of mortgages (mortgage is collateral)
Big Players in the Secondary Market - Answer✔FNMA/FHLMC/GNMA (Fannie Mae/Freddie
Mac/Ginnie Mae)
What does FNMA & FHLMC provide to the market? - Answer✔liquidity by buying mortgages
and only purchasing conventional loans
What does GNMA provide to the market? - Answer✔liquidity by purchasing government loans
because it is a government owned entity
Mortgage Loan Life Cycle - Answer✔Obtain a loan, Primary Market, Secondary Market
Regulatory Authority - Answer✔A public authority or government agency responsible for
exercising autonomous authority over some area of human activity in a regulatory or supervisory
capacity. Can investigate, impose penalties, and supervise
What is the CFPB - Answer✔"Consumer Financial Protection Bureau" - responsible for
protecting consumers from predatory financial companies, like what happened with the 2008
Housing Bubble. The Federal Regulator Primary Enforcer of the Mortgage Industry
3|Page
