Copyright 2013 – Carey Green - 1...Credit), reverse mortgages, time shares involving a lien,...

Copyright 2013 – Carey Green - 1

Mortgage Law Study Charts

These charts are intended for use as a study-aid, not as compliance documents or official policies of any kind.

Copyright 2013 – Carey Green

www.passthesafeexam.com

Sections marked in BLUE are things I saw on my test in one form or another.

You will likely have a different experience than mine, so I suggest you NOT rely

too heavily on the sections I've marked... but I thought you'd like to know!


http://www.passthesafeexam.com/

S.A.F.E. ACT – Secure and Fair Enforcement Mortgage Licensing Act

ASSOCIATED LAWS PURPOSE OF THE LAW DOES & DOES NOT DO COMMENTS ENFORCING AUTHORITY

The S.A.F.E. Act is a very primary part of the Housing and Economic Recovery Act

(HERA) of 7/30/2008

Section 1502:

1. Increases uniformity of Mortgage Originator

Licensing Nationwide.

2. Reduces the regulatory burden for multi-state

lenders.

3. Raises standards to enhance consumer

protections.

4. Enables tracking of Mortgage Loan Originators

across state lines, which reduces fraud

1. Requires all Mortgage Loan Originators to be

registered with NMLS and to obtain a permanent, unique I.D. (called their “unique

identifier”)

2. All Mortgage Loan Originators not working for a

depository institution must also be licensed by their

state.

1. S.A.F.E. Created the NMLS – Nationwide

Mortgage Licensing System. (sometimes called the

NMLS&R).

2. Defines procedures, requirements, education,

testing, and new standards for MLO registration and

licensing.

3. States were required to pass laws containing elements of S.A.F.E.

Currently: CFPB (Consumer Financial

Protection Bureau

Legacy Regulator: HUD (Housing and Urban

Development)


NMLS – Nationwide Mortgage Licensing System & Registry (also called NMLS&R)


S.A.F.E. Act 1. Provides comprehensive licensing & supervisory

database of MLOs.

2. Streamlines the licensing process.

3. Provides increased accountability and tracking of MLOs and provides for

consumers to have access to MLO history.

4. Enhances consumer protections & supports anti-

fraud measures.

5. Requires MLOs to act in the best interest of the

consumer.

6. Encourages responsible lending through education and exam requirements.

1. Creates licensing standards

2. Will not allow licensing of anyone with a revoked

license.

3. No felonies allowed w/in past 7 years.

4. Requires financial responsibility & character.

5. Pre-licensing education is required (20 hour min.)

6. Must pass written tests with at least 75% score.

7. Must meet surety bond requirements.

8. Requires 8 hrs. of continuing education

annually. (3 hrs. Fed. Law, 2 hrs. ethics, 2 hrs. non-

traditional products, 1 hr. elective)

1. Processors must be supervised by a state

licensed MLO, or must be licensed as MLO themselves.

2. Education must be done in a live classroom, live

classroom equivalent, or instructor-led online (not allowed in some states).

3. Retesting is required after 5 years of MLO inactivity.

Current: CFPB (Consumer Financial Protection Bureau)


Development)


RESPA – Real Estate Settlement and Procedures Act (also known as Regulation X)


None 1. Encourages home ownership by lowering and

controlling costs.

2. Creates early disclosures so consumers can be better

shoppers for mortgages.

3. Eliminates kickbacks (Section 8A) and referral

fees (Section 8B).

4. Limits escrow amounts to taxes and insurance.

5. Limits Escrow cushions to $50 above 1/6th of the annual cost of taxes and insurance.

Lenders can only collect 1/12th of total cost of taxes and insurance each month.

6. Allows consumers to shop for title services.

7. Covers all “Federally related” real estate

transactions.

1. Covers 1st & 2nd mortgages and related transactions on

principal residences of 1 to 4 family units.

2. Includes purchase, refinance, lender approved

assumptions, home improvements, HELOCs

(Home Equity Line of Credit), reverse mortgages, time shares involving a lien,

Manufactured Homes attached to property,

construction loans used to purchase a lot.

3. Does not include cash sales, seller held mortgages, rental or business property, construction loans without

permanent financing, or homes with greater than 25

acres attached.

Disclosures required:

AT APPLICATION:1. GFE (Good Faith Estimate) or

w/in 3 business days, and no charges can be assessed at

application other than the cost of a credit report.

2. Servicing disclosure statement.

3. HUD special info booklet.

4. Affiliated Business Arrangement disclosure (ABA) when applicable.

AT CLOSING:5. HUD-1. Can be requested 1 business day before closing.

AFTER CLOSING:1. Initial escrow stmt. (at close or

w'in 45 days).

2. Annual escrow stmt.

3. Transfer servicing disclosure (15 days before transfer)

VIOLATIONS:1. $10,000 or 1 yr. In prison.



Development)


TILA – Truth In Lending Act (Also known as Regulation Z)


Is included in the Consumer Credit Protection Act

(CCPA) of 1968.

1. To promote the informed use of credit by requiring

early disclosure of the “costs of credit” as defined by

Regulation Z.

1. Requires the Truth In Lending disclosure (TIL) be given w/in 3 business days of applications and not less than 7 business days before

closing. It must show:

a. The finance charge as a dollar amount.

b. The APR as a percentage of the net loan amount.

PROHIBITED ACTS:

1. Creditors cannot in any way influence appraisers.

2. Servicers cannot delay crediting consumer payments

and cannot “pyramid” late fees.

1. Covers all credit transactions and requires a 3

business day “right to rescind” on refinances of

primary residences.

2. Requires the APR to be conspicuous on all

advertising.

3. Requires clear and accurate information in all

advertising, and no misuse of the term “fixed rate”. Must offer terms that are actually

available.

4. Redisclosure is required when APR is off by 1/8.


Legacy Regulator: Federal Reserve Board


The Mortgage Disclosure Improvement Act (MDIA – TILA section 35)


TILA (this act is section 35 OF TILA)

Sets a new rate threshold that defines a subprime loan and offers additional consumer protections by restricting

certain practices on higher priced mortgages (HPM).

1. Prohibits lenders relying on the value of the property

without regard for the borrower's ability to repay.

2. Prohibits lenders relying on income and assets of the

borrower without verification (full doc. Only)

3. Prohibits prepayment penalties (PPP) on any loans longer than 24 months, or on

loans where the payment changes in the first 4 years.

4. Prohibits first mortgages without escrow accounts.

1. The new threshold index is called the “Average Prime

Offered Rate (APOR).




The U.S. Patriot Act


None 1. To require financial institutions to begin a

customer identification program (CIP) to:

a. Collect identifying information from applicants

b. Verify customers are who they say they are

c. Maintain records of verification

d. Determine if applicants appear of the terrorist watch

list.

The Office of Foreign Assets Control (OFAC) maintains a

Specially Designated Nationals and Blocked

Entities list (SDN). Financial institutions are prohibited

from dealing with SDNs and are obligated to block and freeze payments and report such blocking to the OFAC.

This legislation was introduced one week after

the 9/11 attacks. It introduced changes to the

wire tap, money laundering, immigration and electronic

communication rules.

Current: Office of Foreign Assets Control


Telemarketing Sales Rule (TSR)


None 1. To promote the privacy of the home against unwanted

solicitation by telemarketing and to restrict the practices

of direct telephone marketing businesses.

2. Added the “Do Not Call” registry, giving consumers

the right to opt-out of receiving telemarketing calls.

3. Once on the “Do Not Call” list, the consumer

remains on the list forever. This includes cell phones.

1. There are some exempt entities: charities, political

organizations and surveyors, as long as they are not

selling goods or products.

2. Violations of the TSR are considered an unfair and deceptive act and carry

monetary and civil penalties up to $16,000.

1. Companies must “scrub” their databases no less than every 31 calendar days and establish internal company

do-no-call lists.

2. Allows companies to recontact “established

customers” up to 18 months after their last business

transaction.

3. Allows companies to recontact consumers that

respond to mail campaigns for up to 90 days after the

initial contact..


Legacy Regulator: Federal Trade Commission and

Federal Communications Commission.


National Flood Insurance Act (NFIA)


None 1. To require borrowers to purchase flood insurance when a home is deemed

(typically through appraisal) to be in a flood plain.

2. National flood insurance is available for any property

whose local government participates in flood

management through NFIA.

1. Requires lenders to determine if the property

improvements are in a “special flood hazard area.” This process is called “flood certification,” which checks

the property in question against FEMA flood maps that show areas subject to

100-year floods.

1. Lenders MUST require borrowers in flood zones to purchase flood insurance.

.

Current: FEMA


Homeowner Protection Act (HPA)


None 1. Provides for termination of PMI (Private Mortgage Insurance) and applies to

conventional loans (not VA, FHA, or USDA).

1. Cancels PMI automatically when the

mortgage balance is paid down to 78% of the original

value.

2. Can be canceled by request: the lender must

consider canceling PMI for a borrower whose balance is

80% of original value (borrower must be current on their payments and have no

other home loans).

3 Disclosure Requirements

1. With initial escrow statement

2. With each annual escrow statement.

3. Upon cancellation, disclosing that PMI has been

canceled..




Homeowner and Equity Protection Act (HOEPA)


HOEPA is a 1994 amendment to Regulations Z

(TILA), Section 32 (High Cost Loans)

To establish lending prohibitions and require

additional disclosures for certain “high cost” loans.

Prohibitions:

1. Cannot make the loan without regard for ability to repay.

2. No negative amortization

3. No default interest rates.

4. No due on sale clause.

5. No balloons on loans less than 5 years in term.

6. No repayments that consolidate more than 2 payments.

7. No documenting a closed-end high cost loan as an open-end loan.

8. No prepayment penalties on loans that adjust in the first 4 years

or on any loans longer than 24 months.

9. No refinancing a HOEPA loan with another HOEPA loan within

12 months unless it is in the borrower's best interest.

On these “high cost” loans the lender must provide an additional 3 business day

“cooling off” period (right of rescission) and send a

disclosure stating:

1. Loan need not be completed and that the

borrower has 3 business days to terminate the transaction.

2. Warning that borrower could lose their home and

any money put into it.

3. The APR, the regular payment (including balloon),

and the loan amount including credit insurance

premiums.

4. For variable rate loans, that the rate and monthly

payment might increase and state maximum monthly

payment possible.

1. Covers all closed-end transactions (does not cover

HELOCs, reverse mortgages)

2. 3 high-end cost thresholds:

a. 1st lien where APR exceeds comparable US

Treasury by greater than 8% above APR.

b. 2nd lien where APR exceeds comparable US Treasury by greater than

10% above APR.c. Total points and fees

exceed the larger of $579 or 8% of total loan amount.

3. Penalties: All statuary and actual damages, court costs,

and attorney fees. If the rescission is not delivered in

a timely manner, it might allow the consumer to

rescind the loan for up to 3 years.




Fair Credit Reporting Act (FCRA)


Fair and Accurate Credit Transactions Act (FACTA) of 2003 amends this act.

To ensure that a consumer's credit records are:

1. Kept confidential.

2. Are accurate.

Establishes procedures for the correction of erroneous

or inaccurate credit information within 30

calendar days of a consumer requesting an investigation

of the accuracy of their personal credit file.

1. As amended by FACTA it requires the proper disposal

of consumer credit information.

2. Provides free credit reports if:

a. A company takes adverse action.

b. The person is unemployed and plans to job hunt in 60

days.c. The person is on welfare.d. The report is inaccurate.

3. States that borrowers have a rite to:

a. Dispute inaccuracies.b. Be notified what credit information is being used

against them.c. Know what is in their

credit file.d. Receive a free credit

report when denied credit.e. Negative pay history and

public records must be removed after 7 years.

f. Bankruptcy info. Must be removed after 10 years.

1. If adverse action is taken because of credit

information, a notice of adverse action is required to all applicants within 30 days.

2. Such notice is not required if the reason for adverse action was NOT credit-

related.

.


Legacy Regulator: Federal Trade Commission


Fair and Accurate Credit Transactions Act (FACTA)


This act is a 2003 amendment to the Fair Credit

Reporting Act (FCRA).

To update and amend FCRA in order to:

1. Enhance the ability of consumers to combat

identity theft.

2. Give consumers control regarding marketing

solicitations they receive.

3. Increase the accuracy of consumer reports.

4. Allows consumers to apply a “credit freeze” when

their security is breached.

1. Added the red-flags rule requiring financial

institutions (lenders) to develop and implement a

written ID theft prevention program to detect, prevent,

and mitigate ID theft. Requirements are:

a. To identify specific “red flags” relevant to operationsb. Detect red flags as they

occur.c. Respond appropriately w hen red flags are detected.

2. Implements rules regarding discrepancy in

consumer's address.

Users of credit reports must:

1. Provide a disclosure (“Notice to the Home Loan

Applicant”) to each borrower including the consumer's

credit score, the reason codes and to make available to the

consumer all information received from the Credit

Reporting Agency.

2. Establish reasonable measures to protect against

unauthorized access to credit file information.

3. Properly dispose of consumer credit information by burning, pulverizing, or cross shredding documents.

4. Institute policies to verify a consumer's identity when

encountering a “fraud alert” on a consumer report.

5. Expands the definition of “adverse action” to include

denying credit, insurance, and employment promotion.


Legacy Regulator: Federal Trade Commission.


Home Mortgage Disclosure Act (HMDA) or Regulation C


None 1. To help determine if lenders are serving

community housing needs, assist in identifying patterns

of lending discrimination and enforce anti-

discrimination practices.

2. Specifically, seeking to discover any discrimination on the basis of sex, ethnicity,

or income.

Applies to home purchases, home improvement loans,

and refinance loans.

This is a data-collection statute requiring mortgage lenders and depositories to

collect and report loan application characteristics to the Board if the number of

purchase money loan applications is over 100

annually..


Legacy Regulator: Federal Reserve Board.


Gramm – Leach – Bliley Act (GLBA)


Part of the Financial Modernization Act.

The primary purposes of GLBA are:

1. To prevent ID theft.

2. To protect consumer's financial information held by

financial institutions.

This statute applies to all mortgage lenders, mortgage brokers, finance companies, and other settlement service

providers that collect, handle, and store consumer's

nonpublic personal information (NPI).

GLBA requires:

1. Employee training to ensure awareness of security

policies.

2. Physical safeguards: locking of doors, cabinets,

windows, files, etc.

3. The management of systems failures and

consumer notification of a security breach.

1. Privacy rule governs the collection of NPI and the company's information

“sharing policy.”

2. Safeguard rule requires lenders and brokers to develop a written information security

plan that includes:a. Designating a company

security officer to coordinate safeguards.

b. Identify information assets and assess risks.

c. Design and implement the company policy.

d. Select and contract with service providers to implement their own safeguard policies.

e. Evaluate, maintain, and amend policies in light of

charges.

3. Pretexting rule prohibits salesmen or telemarketers

from pretending to be someone other than whom

they are or posturing themselves in a capacity other

than the one in which they function in reality..


Legacy Regulator: Federal Trade Commission.


Fair Housing Act (FHA)


None To provide for fair housing:

1. Covers building, selling, and rental plus any real

estate related transaction.

1. Makes it unlawful for any lender to discriminate based

on race, religion, color, national origin, handicap, or

familial status.

2. Forbids the imposition of different requirements or

more onerous terms that may have a disparate effect on

different borrowers.

3. Requires the Fair Lending Notice to be given to

borrowers.

4. The Equal Housing Opportunity Logo must be present on all statements or

advertising.

Examples of discrimination:

1. Redlining (refusing to lend within a certain geographic region).

2. Excessively low appraisals.

3. Racially exclusive images.

4. Racial steering.

5. Discrimination against women.

5. Excessively burdensome standards or more onerous

terms..

Current: HUD

Legacy Regulator: HUD


Equal Credit Opportunity Act (ECOA) or Regulation B


None To provide for the “availability of credit” to all

credit worthy applicants without regard to any

discriminatory factors on a prohibited basis (race, color, religion, national origin, sex,

marital status, age, or that the consumer receives public

assistance income.)

This applies to all credit transactions.

1. A lender cannot discourage an applicant from applying.

2. May not require a co-applicant to be a spouse.

3. Issues of sex, race, marital status, or child-bearing may

not be considered.

4. The consumer may withdraw an application.

(Next 3 points are referred to as the 30/60/30 rule)

5. A notice of adverse action must be supplied within 30

days of application.

6. The consumer has 60 days to request a reason for the

adverse action.

7. Creditor must give a reason for denial of credit must be given within 30 days of a

request.

8. The purpose of the ECOA disclosure must be given at

application.

1. Credit records and records of denial must be held for 25

months.

2. Lenders must collect information about race and

other personal characteristics for reporting purposes only.

3. Borrowers have the opportunity to receive a copy of appraisal reports they paid

for.

4. Inquiry into marital status can only be done using the following terms: married,

unmarried, separated..


Legacy Regulator: Federal Trade Commission and

Federal Communications Commission.


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Copyright 2013 – Carey Green - 1...Credit), reverse mortgages, time shares involving a lien,...

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