Course Overview - Chapter 1

Question 1

Title

Answer 1

Ownership

Question 2

Deed

Answer 2

A document that shows who owns the property

Question 3

UST

Answer 3

SAFE Uniform Standard Test

Question 4

Traditional Mortgage

Answer 4

A 30-year fixed rate loan

Question 5

FDIC

Answer 5

Federal Deposit Insurance Corporation

Created to protect borrower deposits

Question 6

Federal Housing Administration (FHA)

Answer 6

Created to reassure lenders in cases of borrower mortgage defaults. Emphasized a 20-year mortgage which led to the advent of the 30-year product.

Question 7

Gramm-Leach-Bliley Financial Services Modernization Act

Answer 7

[1999] Allowed investors to actively participate in the funding of mortgages thus providing lenders with additional funds and making mortgages more available

Question 8

Mortgage Backed Securities (MBS)

Answer 8

A product of packaged mortgages into investment instruments.

The deregulation of the 1990’s allowed for more elaborate forms of the MBS to be available in the market

Question 9

Sub-Prime Mortgage

Answer 9

Made it possible for previously unqualified borrowers to purchase homes. These sub-prime loans came with higher fees and interest rates for the borrower, which in turn meant higher profits for lenders and loan originators.

Question 10

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Answer 10

This Act was created to address economic concerns in many financial markets, including the mortgage industry, by improving regulations within certain consumer protection laws. These regulations apply to financial institutions, appraisers, and financial and investment advisors.

Changed the oversight and capitalization of financial institutions, added licensing and education standards for mortgage professionals, and limited the availability of riskier products in the marketplace.

The Act also established the Consumer Financial Protection Bureau (CFPB) in order to consolidate the federal regulatory authority for those protections.

In addition, the Dodd-Frank Wall Street Reform Act defined and specifically outlawed UDAAPs.

Question 11

Consumer Financial Protection Bureau (CFPB)

Answer 11

The CFPB, otherwise known as the Bureau, oversees and enforces the regulations of the Dodd-Frank Act, with its sole purpose being to protect consumers from deceptive and unethical financial practices. Dodd-Frank removed a wide variety of agencies overseeing consumer protections and consolidated the oversight of those protections under CFPB control.

Question 12

UDAAP

Answer 12

Unfair, Deceptive or Abusive Acts or Practices

Unfair: Defined
Unfair acts or practices are activities that can cause injury (usually financial harm) to the consumer.

Deceptive: Defined
Deceptive acts or practices are behaviors in which the mortgage loan originator deceives the consumer - or at least plans to deceive the consumer.

Abusive: Defined
Abusive activities involve conduct in which the mortgage loan originator takes advantage of their position in the transaction to confuse the consumer.

Question 13

Loan Originators

Answer 13

A mortgage loan originator takes a residential mortgage loan application and offers or negotiates rates and terms of a residential mortgage loan for compensation or gain.

Question 14

Processor

Answer 14

A processor works for a mortgage loan originator and provides clerical functions such as collecting documents or verifying information with borrowers.

Question 15

Underwriter

Answer 15

The underwriter works for the mortgage loan originator

Question 16

Appraiser

Answer 16

The appraiser works independently of the mortgage loan originator and provides the service of determining a property’s value.

Question 17

Title Agent

Answer 17

The title agent works independently of the mortgage loan originator, is chosen by the borrower, and typically paid a fee as part of the mortgage transaction’s closing costs. Title agents research the ownership (title is another word for ownership) associated with the property upon which the loan is made.

The title agent also offers forms of title insurance, which protects the lender or borrower in case of future claims against title.

Question 18

Consumer or Customer?

Answer 18

Customer
A customer is someone who is in an ongoing process or relationship with a financial services provider.

Consumer
A consumer is an individual who may obtain financial services (they’re shopping).