Module 7: Federal Financial Disclosure Laws

Question 1

What is purpose of RESPA

Answer 1

Real Estate Settlement Procedures Act

• Help consumers become better shoppers for settlement services
• Eliminate unnecessary increases in the cost of sett services due to kickbacks/referral fees

Question 2

What four sections of RESPA impact/guide the mortgage industry in protecting borrowers?

Answer 2

1. Section 6 - 15 day prior/post notice before change in loan servicers. 60 day window for payments to old servicer forwarded to new.
2. Section 8 - Prohibit kickbacks, fee-split, unearned fees.
3. Section 9 - Seller cannot require use of a particular title company
4. Section 10 - Identifies amount that can be charged to maintain escrow accounts.

Question 3

What is the role of a Mortgage Servicer

Answer 3

Company that:

1. Collects mortgage payments
2. Pays taxes, insurance, and other items
3. Notifies borrower of late payments.
4. Works with homeowner if trouble making payments.

Question 4

Define AfBA

Answer 4

Affiliated Business Arrangements:
- Situation where person in position to refer settlement services has relationship (affiliate or direct) with said settlement service and refers or influences the selection of that provider

Question 5

Define Seller-Required Title Insurance

Answer 5

Section 9 of RESPA prohibits seller from requiring home buyer to use a particular title insurance company as condition of sale.

Question 6

What are Limits on Escrow Accounts

Answer 6

Section 10 of RESPA

• limits amount a lender may require a borrower to put into an escrow account.
• 1/12th of the total of all disbursements payable during the year
• Cushion cannot exceed 1/6 of total disbursements for the year.
• Excess of $50 or more must be returned if borrower is not delinquent.

Question 7

When must disclosures be provided to the borrower after completing an application?

Answer 7

• Within 3 business days of completed application

- Includes the loan estimate

Question 8

What are the required TILA disclosures?

Answer 8

• Within 3 Business days, provide a list of homeownership counseling orgs.
• Must confirm counseling is received before making a negative amortizing loan.

Question 9

What are RESPA and TILA disclosures that are required before settlement/closing of loan?

Answer 9

1. AfBA disclosure given prior to the time of referral.
2. Closing Disclosure
   
   • Preliminary delivered within 3 business days prior to loan consummation.
   • Final shows actual finalized loan terms delivered within 3 days prior to loan consummation.
3. Initial Escrow Statement

Question 10

What are RESPA required disclosures after settlement.

Answer 10

1. Annual Escrow Statement - Once a year
2. Servicing Transfer Statement - 15 days before effective date of servicing transfer.. Payments within 60 days of transfer are valid.

Question 11

What does the borrower need to receive before a fee is collected?

Answer 11

• Within 3 Business Days of receipt of complete application*
  1. Loan Estimate
  2. List of HUD approved Housing Counselors
  3. Home Loan Toolkit

Question 12

List the 6 components of a complete application necessary for a credit decision:

Answer 12

1. Name of borrower
2. SSN
3. Gross Monthly Income
4. Loan amount sought
5. Address of subject property
6. Estimate of property value

Question 13

Define Tolerance Limits

Answer 13

• Regulated by TILA
• Charges that can change by any amount
• Charges for third-party services subject to 10% cumulative tolerance

Question 14

Who administers TILA

Answer 14

CFPB

Question 15

Defined by the Mortgage Disclosure Improvement Act, what are the waiting periods for initial disclosure, earliest consummation, and any corrected APR

Answer 15

3/7/3