Dodd-Frank Flashcards
What is the full name for Dodd Frank?
Dodd-Frank Wall Street Reform and Consumer Protection Act
What is the purpose of Dodd-Frank?
To stop abusive financial practices.
The Dodd-Frank Act is divided into 16 titles. What two titles impact mortgage lending and investing?
What are their functions?
Title X - authorized the creation of the CFPB and outlines the bureau’s regulatory and enforcement responsibilities. It was intended to create accountability and transparency.
Title XIV - specify provisions that apply directly to originators, servicers and appraisers.
TItle XIV, Subtitle A addresses MLO standards. What are the two primary things it does?
Places limitations on loan originator compensation
-and-
Defines an MLO
It subsequently prohibits steering.
What are the three things an MLO does?
- Takes a residential mortgage loan application
- Assists a consumer in obtaining or applying to obtain a mortgage loan
- Offers or negotiates terms or a mortgage
What are three (3) things that classify someone as NOT being an MLO?
When someone:
- Performs purely admin or clerical tasks
- Performs only real estate brokerage activities
- Provides mortgage financing for the sale of 3 properties or less in any 12 month period.
TItle XIV, Subtitle B addresses minimum standards for mortgages. What are the two primary things it does?
Establishes standards for determining a borrower’s ability to repay (ATR)
-and-
Establishes rules for a loan to be considered a “Qualified Mortgage”
What eight (8) underwriting factors are evaluated when determining a borrrower’s ability to repay (ATR)?
- Current or reasonably expected income or assets
- Current employment status
- Monthly mortgage payment (fully amortizing)
- Monthly payment on simultaneous loans secured by the same property
- Monthly payments for taxes and insurance
- Debts, alimony & child support obligations
- Monthly DTI ratio or residual income
- Credit history
Who overseas the CFPB?
A director who is appointed by the President, with the advice and consent of the Senate for a term of five (5) years
A loan is considered a “qualified mortgage” if it…
- Does not result in negative amortization
- Does not have a balloon payment feature
- Has verified and documented income & financial resources
- Has a fully amortizing payment that takes into account all applicable taxes & insurance
- Was underwritten based on the maximum rate permitted under the loan during the first five (5) years
- Complies with monthly DTI ratios
- Does not exceed 3% total points and fees
- Does not exceed a 30 year term
A prepayment penalty on a “qualified mortgage” cannot be greater than what? Name two…
2% of the outstanding loan balance prepaid during the first two years of the loan
-or-
1% of the outstanding loan balance prepaid during the third year of the loan
How long must creditors retain records to show compliance with ATR and QM?
For at least 3 years
