The Loan Process

Question 1

What are the two types of mortgage fraud?

Answer 1

Profit and Property

Question 2

What is fraud for profit?

Answer 2

Criminal scheme for netting large sums of money; usually involves multiple people

Question 3

What is fraud for property?

Answer 3

Misrepresentation of income or down payment info in order to obtain property

Question 4

What are flip sales?

Answer 4

House is bought and immediately resold at a much higher price

Question 5

What is equity skimming?

Answer 5

Landlord collects rent for a property but doesn’t pay mortgage; already recouped initial investment by time lender is aware

Question 6

What is a Straw Buyer?

Answer 6

Individual is paid to purchase property for someone who is ineligible

Question 7

What is contract kiting?

Answer 7

2 sales contracts are drawn up for different amount, the higher of which goes to the lender

Question 8

What is churning?

Answer 8

Several people purchase homes in same neighborhood and then sell them to each other to inflate the price

Question 9

What is a builder bailout?

Answer 9

Builders need to sell inventory to pay off a construction loan, sells to straw buyer

Question 10

What the impact of fraud on the mortgage industry?

Answer 10

$30 bil in losses per year; average loss per loan is 50%

Question 11

What are the consequences of mortgage fraud?

Answer 11

Loss of professional licensing, fines and financial restitution, seizure of property, prison sentences

Question 12

Equal Credit Opportunity Act (ECOA)

Answer 12

Regulation B; To promote availability of credit to all creditworthy applicants without discrimination

Question 13

Fair Housing Act

Answer 13

Prevents discrimination

Question 14

Home Mortgage Disclosure Act (HMDA)

Answer 14

Regulation C; provides data for determining if lenders are serving the housing needs of their communities

Question 15

Truth in Lending Act (TILA)

Answer 15

Regulation Z; Provides uniform disclosures so borrowers can make informed decisions about loans (Loan Estimate); also gives borrowers right to cancel credit transactions involving a lien on their principal dwelling

Question 16

Fair Credit Reporting Act (FCRA)

Answer 16

Requires procedures for providing info that is fair regarding confidentiality, accuracy, and relevancy

Question 17

Flood Disaster Protection Act (FDPA)

Answer 17

Makes borrowers aware if they are in flood zone

Question 18

Community Reinvestment Act (CRA)

Answer 18

Regulation BB; Assists depository institutions in meeting credit needs of the community

Question 19

Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)

Answer 19

Sets minimum standards for licensing and registration of mortgage officers

Question 20

Nationwide Mortgage Licensing System and Registry

Answer 20

NMLS, all mortgage loan officers should be registered here

Question 21

What are the two types of disclosures?

Answer 21

General on federal level; state specific

Question 22

What is a commitment letter?

Answer 22

Indicates loan has been approved and lists conditions for approval to be valid

Question 23

What does an Automated Underwriting System do?

Answer 23

Evaluates mortgage risk consistently and objectively to eliminate potential discrimination

Question 24

What are the loan statuses from DU?

Answer 24

Approve/Eligible; Approve/Ineligible; Refer/Eligible; Refer with Caution/Ineligible; Out of Scope

Question 25

What are the loan statuses for LPA?

Answer 25

Accept; Caution; Refer

Question 26

What are four outcomes of underwriting?

Answer 26

Clear Approval; Approval with Conditions; Suspense Letter; Denial

Question 27

When will the majority of conditions be met?

Answer 27

At closing

Question 28

Who should the borrower be able to contact?

Answer 28

Loan Officer, Processor, and Assistant (if applicable)

Question 29

How many days can the borrower review the closing disclosure?

Answer 29

3 days before closing

Question 30

What does the closing disclosure do?

Answer 30

Provides the final loan terms and projected payments, closing costs, other costs, summary of the transaction, and other disclosures