1
Q
ARM
A
Adjustable Rate Mortgage
5 parts of ARM loan are Program Caps Margin Index Fully indexed rate
2
Q
ATR
A
Ability to repay
1 current or reasonably expected income or assets
2 current employment status
3 Monthly mortgage payments for the loan
4 monthly payments on any simultaneous loan secured for the property
5 monthly property and insurance, HOA, ground rent
6 borrowers’ debts, alimony, child support
7 monthly DTI or residual income
8 credit history
must verify
3
Q
APR
A
Annual Percentage Rate
4
Q
BSA
A
BANK SECRECY ACT 1970
money laundering
identify borrower
terrorism watch list
SAR- suspicious activity report
submitted to FinCEN within 30 days
5
Q
CFPB
A
Consumer Fraud Protection Bureau
federal regulatory authority
Primary enforcer and supervisor of the mortgage industry.
6
Q
CLTV
A
Combined Loan to Value
7
Q
COE
A
Certificate of Eligibility
8
Q
COFI
A
Cost of Funds Index
9
Q
DTI
A
Debt to Income
Amount owed ÷ gross income = DTI
10
Q
LTV
A
Loan to Value
Amount borrowed ÷ Appraisal amount/purchase price (lowest)t= LTV
Includes
Housing, PITI, Flood
HOA dues
11
Q
NMLS
A
Nationwide Muliti-state Licensing System (&Registry)
Does not approve license application
It is only a database
12
Q
SAFE
A
Secure And Fair Enforcement Act for Mortgage Licensing Act of 2008
The Model Law gives each state a template to use to create its own SAFE Act
the federal law that regulates the licensing process and responsibilities of MLO
13
Q
Federal Reserve
A
- Created in 1913
- Established a Federal Charter for banks that permitted them to make real estate loans
14
Q
Federal Home Loan Bank Act
A
- created in 1932
- allowed Federal Home Loan Banks to lend money to finance mortgages
15
Q
BankingAct of 1933
A
- Assisted in creating the FDIC (Federal Deposit Insurance Corporation)
- insure deposits & protect consumers against bank default
16
Q
FHA
A
Federal Housing Act 1934
- helped the housing industry recover from the Great Depression
- FHA mortgages are guaranteed by the Federal Government and offered by banks/lenders
17
Q
ECOA
A
Equal Credit Opportunity Act
*EBOA Regulation B
- Illegal for any lender to discriminate against an applicant based on race, religion, national origin,sex etc.
- also prevents
redlining
Reverse redlining
Overt discrimination
Disparate treatment
Disparate impact
Comparative Evidence
-Borrower receives a copy of appraisal 3 business days before closing
Adverse action- 30 days to tell borrower that they do not qualify.
- enforced by the CFPB (Consumer Fraud Protection Bureau)
18
Q
FACRA / FACTA 1970
Reg V
Key words
A
Fair Credit Reporting Act / Fair and Accurate Credit Transactions Act
- FACRAV Regulation V
- Federal law that regulates how consumer credit reporting agencies use consumer information
Credit reporting Permission / access Accuracy, Dispute, Delete, How long items report (7yr, 10yr) Safeguard free report if denied ID theft, Public Assistance, Unemployed Adverse Action 30 days (credit only) Risk Based Pricing Disclosure (LLPA)
19
Q
FHLMC
A
Federal Home Loan Mortgage Corporation
aka (Freddie Mac)
- “Conforming” mortgage
- a Corporation authorized by congress in 1970 to provide a secondary market for residential mortgages
20
Q
FinCEN
A
Financial Crimes Enforcement Network
SAR goes to them
21
Q
FNMA
A
Federal National Mortgage Association
*aka Fannie Mae
“Conforming” mortgage
Government sponsored entity created in 1968 by congress to increase access to mortgages
22
Q
GLBA 1999
A
Graham-Leach Bliley Act
- P each Regulation P
- Leach Peach non-public personal
-Protects non-public personal information
key words
Privacy -Safeguard, OPT-OUT, Pretexting
23
Q
GNMA
A
Government National Mortgage Association
aka *Ginnie Mae
Government National Mortgage Association is a federal corporation that guarantees principal and interest payments on mortgage-backed securities issued by approved lenders.
Government lending program
24
Q
GSE
A
Government Sponsored Enterprise
Financial services corporation created by Congress
Fannie & Freddie
25
HELOC
Home Equity Line of Credit
- The lender agrees to lend a maximum amount within the agreed loan term
- Collateral is the borrower's equity in his/her house
26
HMDA 1975
| Reg C
Home Mortgage Disclosure Act
*CHMDA Regulation C
1- gather data to serve the housing needs of the community
2- assist in distributing public investments
3- identify discriminatory lending practices
redlining and reverse redlining, Blockbusting, Disparate Treatment/Impact
27
HOA
Home Owners Association
28
HOEPA
Home Ownership & Equity Protection Act
*section 32 of Reg Z (TILA)
-Regulates high-cost home loans aka Predatory Lending
Disclosure to consumer at least three business days prior to consumation
HOEPA also restricts risky loan features for high cost mortgages including, balloon payments, prepayment penalties, due on demand features
29
HOPA or HPA
Homeowners Protection Act
*HOPA-PMI
-Regulates the cancellation of PMI (Private Mortgage Insurance)
PMI 80% down before closing
or
Loan balance reaches 78% paid
30
HPML
High Priced Mortgage Loan
| *section 35 of Reg Z
31
HUD
US Dept. Of Housing and Urban Development
HUD is the primary Housing and Lending regulatory authority
32
IRRRL
Interest Rate Reduction Refinance Loan
VA Refinance only
.5% cost
33
MARS
Mortgage Assistance Relief Services
* Reg O
prohibits unfair and deceptive acts or practices with respect to mortgage-loan or foreclosure-relief services.
34
PITI
Principal
Interest
Taxes
Insurance
-4 main components of monthly mortgage payment
35
PMI
Privated Mortgage Insurance
Required when 20% or less down payment made
or
any conventional Conforming loan over 80% LTV
- can be put into you monthly mortgage payment or calculated into your rate
36
QM
Qualified Mortgage
A type of loan that requires the lender to make sure that the borrower can repay the loan
37
SAR
Suspicious Activity Report
Report required when Suspicion of money laundering or fraud.
Report filed with FinCEN as per BSA (Bank Secrecy Act) within 30 days
38
SISA
Stated Income Stated Assets
Stated- no verification
39
TILA
Truth In Lending Act 1968
*reg Z tila zilla
Applicant receives within 3 days of filing application
The Truth in Lending Act (TILA) protects you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans
40
TRID
TILA- RESPA Integrated Disclosure rule
LE (Loan Estimate) and CD (Closing Disclosure)
replaces GFE, TIL, HUD-1
2015
41
UFMIP
Upfront Mortgage Insurance Premium
Mortgage Insurance premium paid in lump sum upfront on an FHA loan
42
VOE
Verification of employment
43
MLO
Mortgage Loan Originator
An individual who for compensation or gain or expectation of
- Takes a residential mortgages loan application
- Offers or negotiates terms of a residential mortgage loan
- must be licensed and sponsored by licensed mortgage lender/broker
- can only be sponsored by one company and not as an independent contractor
- Must have NMLS #
44
Loan processor or underwriter
- Collection and distribution and analysis of information common for processing or underwriting of a residential mortgage loan
- communicating with consumer to obtain information for the processing and underwriting of a loan
They are not required to be licensed
45
Mortgage broker
A firm that brings borrowers and lenders together
| Can take applications and process loans
46
Mortgage lender
An entity that provides funds for a mortgage
47
Mortgage Servicer
Performs servicing functions including collecting mortgage payments, paying investor, collecting and paying the borrowers taxes and insurance and manages escrow accounts
48
Mortgage Loan life cycle
3 stages
First stage- borrower decides to obtain mortgage
Second stage- borrower goes to lender/ broker & originates loan
Third stage- loan goes to secondary market like FannieMae or FreddiMac
49
Regulatory Authority
Power to
- investigate
- impose penalties
- provide supervision
Or a combination of all three.
State regulator
Federal regulator
Example is the CFPB (Consumer Fraud Protection Bureau)
50
Needs to become a licensed MLO
| Pre Licensing education
```
20 hours of education must include:
3 hrs - Federal law
3 hrs- Ethics
2 hrs- non traditional
12hrs- elective or state related
```
51
In case of Pre- Licensing educational expiration...
You must retake 20 hours of prelicensure education to be eligible for a license if they,
- Fail to acquire a valid state license or federal registration as an MLO within 3 years from the date of taking the 20 hours
- Fail to acquire a valid state license or federal registration as an MLO within 3 years from the last state of licensure or registration as an MLO
- Are licensed in a state where the 20 hour course has to be retaken if the MLO has not taken it in the last 3 year
52
To become a licensed MLO You must pass the national test with
A 75% or higher on the test.
The test contains a 120 questions 5 of which are not counted for a total of 115 graded questions
Applicants can take the test 3 consecutive times.
Each attempt must be 30 days apart.
If the applicant fails 3 consecutive times,
they must wait 6 months before they can retake the test
If an MLO Leaves the business for more than 5 years they must retake the exam.
53
MU4
Application for licensing
Needs 10 years of residential and employment history
Credit report
Fingerprints
Any administrative, civil, or criminal findings by any governmental jurisdiction
54
CRA
Community Reinvestment Act
Reach out to the community it serves (re-invest)
55
After 2008 market meltdown, the government created......
Dodd-Frank Wall Street Reform Act of 2010
Created a new regulator... CFPB (Consumer Fraud Protection Bureau
56
License renewal every year by
Dec 31st
57
Yearly Continuing Education
8 hours a year
58
Mortgage test covers
1 Federal law & regulation
2 Ethics
3 Fraud, consumer protection, fair lending, non-traditional mortgages
4 State law and regulation
59
Issuance of insurance
Surety bond- insurance policy, protects borrower
Net worth - assets
State fund - recovery fund held by state
60
Temporary Authority- Licensing in multiple states
Allows MLO to operate in another state while license is being processed
61
Continuing education requires.....
8 hours minimum
3 hrs Federal law & regs
2 hrs Ethics
including instruction on fraud,consumer protection and fair lending issues
2 hrs non traditional loans
1 hrs elective or state specific
- CE only counts in year taken
- can't take same course in successive years
62
Any MU4 changes
You have 30 days to update your info.
| Violation if not
63
6 parts of mortgage application
P property address
E estimated property value
N name of borrower
S SSN
I income
L loan amount requested
64
2 types of mortgages
Fixed
Adjustable
65
ARM interest rate adjustment caps
First adjustment - allow rate to increase or decrease
Subsequent - specific percentage
Lifetime - limits number of total upward adjustment
Example
First adjustment + lifetime cap = lifetime max interest rate
66
Margin/cost + Index = fully indexed rate
1.25 margin + .50 = 1.75 full indexed rate
67
CSBS
Conference of state bank supervisors
68
AARMR
American Association of Residential Mortgage Regulators
created the NMLS
69
Construction loan
Usually higher interest rates
Loan can be converted to a conventional mortgage loan
70
Bridge loan
Temporary financing against equity of the borrowers present home to make a down payment on a new home or start building a new home.
Typically interest only
71
Balloon mortgages
These loans generally have P&I payments before the Ballon comes due
Inherently risky but still exist
Minimum term 5 yrs
72
Graduated Payment mortgage GPM
Low initial monthly payment that increases overall specified time
Uses negative amortization
Good choice for young professionals (Doctor or Lawyer)
Example of a GMP, 2/1 Buydown
73
Maximum down-payment for Sellers to contribute
```
Investment 2%
Conventional 3%
VA 4%
FHA 6%
USDA 6%
```
74
Bankruptcy
Ch. 7 - liquidates all debt
Ch. 11 - reorganizes all debt
Usually businesses
Ch. 13 - adjustments of debt
For individuals w/reg income for payback to collectors
75
ARM & CAPS
ARM. 5/1
5-how long rate stays same
1- after initial term, how often it can adjust
CAPS. 3/2/8
3‐ How much it can first adjust
2- subsequent adjust
8- max CAP
76
2/1 Buydown
2% reduction in rate yr 1
1%reduction in rate yr 2
Regular rate yr 3
77
Disparate treatment
Occurs when one protected group is treated differently from another similarly situated group
Overt evidence- openly discriminates
Comparative evidence- protected class applicant is treated less favorably than others. Often not intentional (though it could be)
78
Disparate impact
Facially neutral policy or practice applied equally to all applicants. Adversely impacted protected groups unintentionally
79
Conventional mortgage requirements
Min down payment 3%
Max DTI 28-36%
PMI - Required over 80 %
Bankruptcy- Ch. 13 1 yr from discharge
Ch. 7 4 yrs (2 yr w/extenuating. circumstances)
Foreclosure - 2 yrs
LTV - 85% max
Seller concessions - 3%
80
FHA mortgage requirements
Min down-payment- 3.5%
Max DTI - 31-43%
Mortgage Insurance- REQUIRED
UFMI - REQUIRED
Bankruptcy - Ch 13. 1 yr
Ch 7. 2 yr
Foreclosure - 3 yrs
LTV - 85% MAX
Seller concessions ‐ 6%
81
UFMIP
Upfront mortgage insurance premium is 1.75% of base loan amount
82
MMI
Monthly mortgage insurance stays on:
11 yrs. for all loans under 90% LTV
Loan term for all loans greater then 90% LTV
83
RESPA
REAL ESTATE SETTLEMENT PROCEDURES ACT 1974
RESPAX...... regulation X
seeks to reduce unnecessarily high settlement costs by requiring disclosures to homebuyers and sellers, and by prohibiting abusive practices in the real estate settlement process. All borrowers must be given information about real estate transactions, settlement services, and relevant consumer protection laws, as well as the possibility of mortgage servicing being transferred. Borrowers are entitled to initial and annual escrow account statements, as well as itemized statements of actual settlement costs.
RESPA section 8 outlaws kickbacks, referral fees, and unearned fees, prohibits sellers from requiring borrowers to purchase title insurance from specific companies, and does not allow loan servicers to require excessively large escrow accounts.
84
GPM
Graduated Payment Mortgage
Lower payments at the beginning of the loan which then increase gradually
Lower payments could result in negative amortization
May be good for young higher paid professionals Dr., lawyer
85
Dodd Frank 2010
created CFPB
Consumer Fraud Protection Bureau
supervise the mortgage industry
86
Mortgage Lender
entity that provides funds for a mortgage
They take the loan from the application through closing
87
Mortgage Broker
takes loan applications and processes loans
puts borrowers in contact with lenders
88
Mortgage Servicer
```
performs servicing functions including
collecting mortgage payments
paying investor
collection and paying the borrowers taxes and insurance
manage escrow accounts
```
89
Secondary Mortgage Market
mortgage loans and mortgage backed securities are bought and sold
FNMA Fannie Mae GSE
FHLMC Freddy Mac GSE
GNMA Ginnie Mae Gov owned entity only purchases FHA, VA, USDA
90
Mortgage loan life cycle
1 borrower decides to obtain a mortgage loan
2 borrower goes to a lender/broker to obtain a loan
3 secondary market, allows lender to replenish their cash by selling the loan to an investor like Fannie or Freddie
91
regulatory authority
power to
investigate
impose penalties
provide supervision or a combination of all three
92
state regulatory authority
supervision and enforcement of state laws regarding the mortgage industry
93
CFPB federal regulatory authority
governments primary enforcer and supervisor of the mortgage industry
94
20 hour pre licensing education must include
3 hrs federal law
3 hrs ethics
2 hrs non-traditional
12 hrs elective and/or state licensing
95
Surety bond
If an MLO or an entity harms a borrower and that borrower sues them and wins, that borrower will be paid out by that surety bond.
employer surety bond cover MLO
96
Net worth
show net worth and maintain that net worth throughout their time as a licensee
97
State fund
State fund pays borrowers who are harmed by an MLO or an entity
98
Issuance of a license
Applicant can not have
- ever had their license revoked in another state
- been convicted of or pled guilty or no contest to any felony in the past 7 years
- or crime involving an act of fraud, dishonesty, breach of trust, or money laundering
- a non-financial felony, the applicant would be eligible after 7 yrs from date of the conviction
- applicant must demonstrate financial responsibility, character, and general fitness that commands the confidence of the community
- completed their CE requirements
- passed the National test Componant UST
- Net worth, surety bond or state fund requirement-
99
applicant must not have
Foreclosure in the past 3 yrs
or a pattern of seriously delingquent accounts within the past 3 yrs
100
Temporary Authority
The SAFE act permits temporary authority which allows for an MLO, licensed in another state, to operate in a new state while the license application is processed
can end 120 days after the application submission if the application is incomplete
101
MLO is required to renew their license by
December 31st
102
License maintenance
continue to meet the minimum standards, financial responsability, clean criminal background
satisfy CE requirements
Pay all fees
103
Continuing Education CE
MLO's must complete at least 8 hours of CE
3 hrs federal law
2 hrs ethics
2 hrs non-traditional
1 hr elective or state-specific
CE only counts in the year it was taken
MLO cannot take the same CE course in successive years
104
Reinstatement
some states allow for reinstatement, which must be completed by March 31st
if you are going through reinstatement, you cannot act as an MLO, as your license is technically expired
105
MU4 changes
you have 30 days to update it or you could be inviolation
106
Prohibited conduct
defraud
mislead
unfair or deceptive practice
obtain property by fraud or misrepresentation
soliciting best efforts
unlicensed activity
failing to make disclosures
make false or deceptive statements or representation
bait and switch
Lie on MU4 form
threat any person to influence the independent judgment of the person in connection with a residential mortgage loan
collect or charge any prohibited fee
truthfully account for monies.....like collectin money for an appraisal and pay your car payment
107
Closing Disclosure (CD) must be kept for
5 years after consummation for compliance with TRID
108
SAFE Act violation is
$25,000 per violation
109
SAFE
Safe and Fair Enforcement for Mortgage Licensing Act 2008
key words
NMLS;
MLO licensing vs registered
$25k fine
110
Dodd- Frank 2010
key words
CFPB, regulation, oversight, enforcement
ATR
QM
TRID
111
Real Estate Settlement Procedures Act 1974
RESPA
Reg X
key words
Escrows
Referrals/kickbacks (Sec8)
Servicing
Fees charged (>$) no padding
Disclosures
(Transfer of servicing
AfBA
Homeownership counseling)
$10k/ 1 yr
Section 6 regulates the servicing of mortgage loans
Section 8 prohibits referral fees and kickbacks
Section 9 prohibits requiring the pruchase of settlemnt services as a condition for sale of a property
Section 10 regulates the Escrowing of property tax and insurance
Requires Disclosures- Tranfer of servicing(now with LE/CD, Escrow(now w/CD)
AfBA
112
Loan Originator Compensation Rule 2014
LO Comp
TILA Reg Z
key words
Bonus
Anti-Steering Disclosure
Lender paid vs Borrower paid
Not paid = terms, rate, loan type, features, profitability
OK paid + volume, units, salary, performance
113
TILA - RESPA Intergrated Disclosure Rule 2015
TRID
key words
```
6 elements of an application
LE, CD
Changed Circumstance - Zero/ 10%/ No
LE- 3 business days after application
7-day waiting period
Saturday rule business day definition
3 day mailbox rule
intent to proceed
CD - 3 days prior to consummation
business day definition
```
114
Qualified Mortgage
QM
Ability to Repay
ATR
TILA Reg Z 2014
ATR; Income/Assets, Employment, Debts, PITIA, Credit, DTI, Balloon QM, General QM, Safe Harbor and Rebuttal Presumption
115
Home Ownership Equity Protection Act
HOEPA
Sec 32 of TILA
Regulates High Cost Home loans
counseling required
3 tests - APR,
points and fees
prepayment penalty
116
Sec 35 of TILA Reg Z
higher-priced mortgages
| APR test
117
Equal Credit Opportunity Act 1974
Reg B
key words
```
Fair lending
discrimination (9classes)
redlining
disparate treatment/impact
Comparative Evidence
Appraisals
Notice of Adverse Action
(30 days all reasons)
```
118
Fair Housing Act 1968
key words
Fair housing,
Discrimination (7 classes)
Disparate treatment / impact
119
FACTA 2003
| Reg V
ID theft rights, score, free annual credit report
Red Flags Rule (prevent and protect ID theft)
Fraud Alert; Opt-out
Notice to Home Loan Applicant (score, range, model, factors)
Summary of Consumer's Rights
Disposal Rule; Neg Report
120
Mortgage Act and Practices 2011
MAP
Reg N
Advertising
MLO communication
2 yrs records retainment
121
Anti Money Laundering / Bank Secrecy Act 1970
| AML/BSA
money laundering
Identity
FinCEN
SAR
122
UDAAP
Unfair Deceptive Abusive Acts and Practices Rule
Dodd-Frank created
CFPB regulates it
123
Patriot Act 2001
Money Laundering & Terrorism
Identification
CIP
OFAC
124
E - Sign Act 2000
e signatures
| consent
125
Telemarketing Rule 1991
Do Not Call List 2003
18/3 mo
$42,530 fine
List- purge 31 days
126
Mortgage Assistance Relief Services 2010
MARS
Reg O
Loan modifications
foreclosure prevention
disclosures & prohibits upfront fees
127
Loan Originator Compensation 2014 is a section of TILA
Dodd - Frank Wall Street Reform Act originally mandated it
Prohibits compensation based on a proxy for a term of a transaction
no steering
no dual compensation
keep compensation records for 3 yrs
NMLS ID #'s must appear on applications
cannot be paid by both the lender and borrower. Only by one or the other
keep all closing records for 3 yrs
128
Safe Harbor means
that these types of compensation are allowed and would not be in violation of the LO Comp rule
129
Steering
steers a borrower into the loan they think is the best and could potentially harm them for the sole purpose of obtaining a higher commission
130
For an MLO to be sure they are not steering
loan options presented to the consumer
- lowest interest rate
- lowest points and fees
- lowest rate the consumer qualifies for
no risky features
prepayment penalty
negative amortization
balloon payment in first 7 years
131
LO Comp requires loan originators to provide their unique identifiers on loan documents
132
AARMR
America Association of Residential Mortgage Regulators
created NMLS
133
AML
Anti Money Laundering
134
APOR
Average Prime Offer Rate
rate used to determine whether a loan is high cost or higher priced
135
AfBA
Affiliated Business Arrangement
must be disclosed (RESPA) within 3 business days of informing the borrower of the conflict of interest
as little as 1% ownership interest
136
CAIVRS
Credit Alert Verification Reporting System
federal database on people who have delinquent federal debt
137
DU
Desktop Underwriter
Automated underwriting system used by Fannie Mae
138
HECM
Home Equity Conversion Mortgage
Reverse Mortgage
139
Homeowners Protection Act
Regulates the cancellation of PMI
140
Loan Product Advisor
| LP
Automated underwriting system for Freddie Mac
141
Mortgage-Backed Securities
| MBS
investment instruments that are bundled by Fannie, Freddie and Ginne for sale on Wall St
142
MIP
Monthly Insurance Premium
| FHA loan
143
PPP
Pre Payment Penalty
a penalty charged to a borrower if they pay their loan in full before the end of its term
144
YSP
Yield Spread Premium
Paid to broker for giving a higher interest rate on a loan in exchange for lower up front costs generally paid in origination fee, broker fees or discount points
145
4506T
form to retrieve tax returns, W-2 and 1099 transcripts that are on file with the IRS
146
For a reserve to be considered seasoned and acceptable, the funds must be on deposit in a financial institution in the borrowers name for
60 days
MEC
flashcards
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