Date post: | 07-Nov-2014 |
Category: |
Education |
Upload: | jillayne-schlicke |
View: | 456 times |
Download: | 2 times |
20 Hour SAFE Comprehensive Pre-Licensing and Exam Prep
+ Wa State LawJillayne Schlicke
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 1 Introduction Introduction of trainer Introduction of students Review the course syllabus
2
Jillayne Schlicke
National Association of Mortgage Fiduciaries
3
Section 1 Module 1.1
National exam $922 and a half hours100 questions, 10 are sample questions75% to passIf you pass you will know your score.If you fail, they will give you a printout showing
your strong and weak areas.Prometric.com
Jillayne Schlicke
National Association of Mortgage Fiduciaries
4
Section 1 Module 1.1Exam Components35% Federal Law
RESPA, TILA, ECOA, FCRA, SAFE
25% General Mortgage Knowledgeprograms, products, terms
25% Loan Originationapplication, qualifying, title, escrow, math
15% Ethicsconsumer protection, fraud, fair housing
Jillayne Schlicke
National Association of Mortgage Fiduciaries
5
Section 1 Module 1.1Exam prep basics: If you understand the purpose of
each law, you are on your way to selecting the best answer on a multiple choice exam.
There will be two obvious wrong answers. If you know the purpose of the law, you will be able to spot these. Of the two that remain, one will be a little bit better than the other.
Exam writers do not write trick questions. The language of the test questions look tricky because you are being tested on law and most lay people are not use to reading law on a daily basis. This is the only fair way to deliver a 50-state exam.
Jillayne Schlicke
National Association of Mortgage Fiduciaries
6
Section 1 Module 1.1There are many different learning styles. I will try to
touch all of these throughout the next two days.Auditory-learns by listeningVisual-learns by processing imagesTactile-learns best when writing Whole Body-learns best when entire body is
engagedEmotional-learns best when complex info can be
tied to an emotionLearning disabilities-
You may be eligible for extra accommodations if you have a diagnosed learning disability. Contact the NMLS after reading the exam candidate handbook.
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.0Depository
BankChecking,
savingsCAN fund its
own loansLOs are
“registered”
7
Mortgage BrokerNo ck/svgsDoes NOT fund
its own loans Pure middlemanFor a fee, finds
the mortgage money
LOs are licensed.In some states,
these LOs owe fiduciary duties to clients
Non-Depository Lender
Non-Bank Lender
No ck/svgsCAN fund its
own loans via lines of credit with banks
LOs are licensed
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.1
There are many moving parts in the Mortgage Machine. The function of loan origination is just one piece.
8
Title Insurance, Escrow
Secondary marketUnderwritingAppraiserHome inspectorLoan originatorLoan processorsRealtors/ Real estate
brokersMortgage insurance Hazard insuranceFlood insuranceState/Fed regulators
Jillayne Schlicke
National Association of Mortgage Fiduciaries
9
Section 2 Module 2.2 Instructor to review how to complete a
Residential Loan ApplicationAssignment:
Break into small groups and talk about sections of the loan app:
What sections might the customers ask you about?
What sections might the customer consider lying?
What sections might the customer refuse to provide information?
Jillayne Schlicke
National Association of Mortgage Fiduciaries
10
Section 2 Module 2.2Large group discussion:
OccupancyAssetsHMDAEducationDOBFormer employerWays of holding titleAcknowledgement, signature
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.3Last two most recent paystubsLast two years W-2sLast three months bank statementsMost recent statement on 401Ks or IRAsDocumentation of ownership of stocks, bondsLast two months statements from any investment accountInformation on current mortgage or landlord contact infoSoc number or green card for all borrowers or co-signersLetter of explanation for any known credit problemsDocumentation supporting any other incomeFor self employed, borrowers paid on commission or in the
field of sales, and borrowers who own other real property:Two years signed personal tax returns including all
schedules11
Jillayne Schlicke
National Association of Mortgage Fiduciaries
12
Section 2 Module 2.4FIRST RATIOPITIPrincipal, Interest, Taxes, InsuranceDivided byTotal gross monthly income= %
SECOND RATIOPITI plus all other monthly revolving
debtDivided byTotal gross monthly income= %
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.5 FHA
Review FHA PPT slides
13
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.6 Veteran’s Administration Lending (VA Loans)
See pages 10-11 in the course book
14
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.7 Conventional Lending
See pages 11-12 in the course book
Review Fannie Mae Announcements:09-34 Loan Limits09-37 CondosCriteria for Purchasing ARMsMaximum Allowable Properties Financed
15
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.8 Non-Conforming Loans
See page 12 in the course book
16
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 2 Module 2.9 QRMs
See page 13-15 in the course book
17
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 3 Credit Module 3.1
Assignment: Break into small groups.Read the credit report.Question: Does this person posses decent and
reasonable credit history?If yes, why?If no, why not?
18
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 3 Module 3.2
What’s in a FICO Score?See course book pages 16-17
19
Jillayne Schlicke
National Association of Mortgage Fiduciaries
20
Section 4 Title Insurance Module 4.1
What does it mean when we say we hold title to something?
Is there a document called “title” that we get when we buy a home?
Can we do anything we want with and to our home and land?
How deep into the ground and how high up do our property rights extend?
Jillayne Schlicke
National Association of Mortgage Fiduciaries
21
Section 4 Title Insurance Module 4.2For a one time fee, a title insurance
company will check the public records system and disclose all matters that affect the title of real property.
They will insure against loss and defend you should somebody lay claim to your title.
Pay once, it’s good for as long as you or your heirs own the property.
Starts the day of closing and looks backward in time.
Jillayne Schlicke
National Association of Mortgage Fiduciaries
22
Section 4 Title Insurance Module 4.3How does a title company protect
residential homeowners and residential lenders?
See pages 18-19 in the course book
Jillayne Schlicke
National Association of Mortgage Fiduciaries
23
Section 4 Module 4.4 Case Study
Small group assignment:Read the case study “John and Sara” on page 19 of the course book.
Come up with 10 things a loan originator must discuss/discover before moving forward with this transaction.
10 documents10 questions…
Jillayne Schlicke
National Association of Mortgage Fiduciaries
24
Section 4 Module 4.5
Legal rights and responsibilities of a title company.
See pages19-20 in the course book
Jillayne Schlicke
National Association of Mortgage Fiduciaries
25
Section 5 Module 5.1
What is escrow?See pages 21-11 in the course book
Jillayne Schlicke
National Association of Mortgage Fiduciaries
26
Section 5 Escrow
Module 5.1Module 5.2Module 5.3Module 5.4Module 5.5Module 5.6
See pages 21-25 in the course book
Jillayne Schlicke
National Association of Mortgage Fiduciaries
27
Section 6 Appraisals
Module 6.1Module 6.2Module 6.3Module 6.4Module 6.5
See pages 26-28 in the course book
Jillayne Schlicke
National Association of Mortgage Fiduciaries
28
Section 7 Mortgage Math
Module 7.1 See page 21 in the course book
Module 7.2Assignment: Complete the mortgage
math calculations together as a group.
See pages…
Jillayne Schlicke
National Association of Mortgage Fiduciaries
29
Section 8 Processing and Underwriting
Module 8.1 Processing
Module 8.2 Underwriting
See pages 33-35 in the course book
Module 8.3 Case Study: David and RyanSee page 35 in the course bookIn small groups discuss: Is this an approvable
loan?Large group recap
Jillayne Schlicke
National Association of Mortgage Fiduciaries
30
Section 9 Non-Traditional LendingModule 9.1Module 9.2Module 9.3Module 9.4Module 9.5Module 9.6Module 9.7Module 9.8Module 9.9
See pages 37-44 in the course book
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Washington State Law Mortgage Broker Practices Act
MPBA
Consumer Loan ActCLA
DFI.WA.GOVDept of Financial Institutions
31
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 9 AssignmentReview the CSBS/AAMR Guidance on Non-
Traditional Lending
CSBS = Conference of State Bank SupervisorsAAMR = American Association of Mortgage
RegulatorsOct 2006 banking regulators published guidelines
on non-trad lending. Examples:
Interest only loansPay option ARMsReduced/no documentationSimultaneous second lien
32
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 9 CSBS/AAMR Guidance
Ability to repay
Watch for payment shock
Assure borrower understands the loan terms
Avoid misleading claims…payment, rates, refi-out
Risk management strategies
33
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 10 EthicsModule 10.1 Module 10.2 Module 10.3 Module 10.4 Module 10.5 Module 10.6
Use the following:Pages 44-46 in the course bookSection 10 Ethics handout
34
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 10 Module 10.1 Ethics
LawMinimum moral standard“Have to”
EthicsWhen there’s no clear statement in the law
tellingus what to do.“Ought, should.”
35
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 10 Module 10.2 EthicsDifferent sources of moral authorityReligion
We can’t use religion to solve ethical dilemmas when holding a professional role because there are thousands of different religions in the world. Which one would we us?
IntuitionIntuition can sometimes steer us in the wrong direction
Emotion“If I can’t sleep at night it’s not ethical.”If the only reason we’re choosing to do/not do something is out of fear, that’s a pretty low standard of motivation
36
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 10 Module 10.2 EthicsDifferent sources of moral authorityWritten codes of ethics
There is no source of moral authority over LOs other than the law. What written codes of ethics that do exist are voluntary and not mandatory. The written codes of ethics that exist are weak, vague, have no sanctions for violations and in most cases, just simply re-state federal law.
Philosophical ethicsMoral philosophical ethical theories can take the place of a mandatory code of ethics until one is written.
37
Jillayne Schlicke
National Association of Mortgage Fiduciaries
38
Section 10 Module 10.3
Professional StatusSpecialized knowledgeFormal, pre-licensing educationMandatory continuing educationTestLicensingFiduciary DutiesCode of ethics with sanctions for violations
Compare to non-professionals such as a retail salesperson.
Jillayne Schlicke
National Association of Mortgage Fiduciaries
39
Section 10 Module 10.3 and 10.5Question: Are loan originators professional?Specialized knowledgeFormal, pre-licensing educationMandatory continuing educationTestLicensingFiduciary Duties (this is emerging in some states)
Code of ethics with sanctions for violations(this piece is not yet in place.)
LOs are classified as “an emerging profession.”
Jillayne Schlicke
National Association of Mortgage Fiduciaries
40
Section 10 Module 10.4 Assignment: Small group discussion:
What do you remember from past classes in ethics?
What is ethics?
Think about a person you admire or look up to as a mentor, living or dead. What do admire about that person?
Think about an ethical dilemma you’ve faced in your career. How did you solve your dilemma?
Jillayne Schlicke
National Association of Mortgage Fiduciaries
41
Section 10 Module 10.4 Assignment: Large group recap after small
group discussion, while instructor slowly completes the slide with the three normative moral theories.
Lacking any mandatory, prescriptive and descriptive ethical code, this is the best way for LOs to learn ethics. The next slide lays out the following:
--what kind of person do I want to become?--what duties do I have?--what are the possible consequences?
Jillayne Schlicke
National Association of Mortgage Fiduciaries
42
Aristotle Kant J.S. MillRespect
honesty(promotes autonomy)
LoyaltyResponsibilityIntegrityBeneficenceNon-
maleficenceCompassionJustice
384 BC-322 BC
Duty-based ethics
If we have a duty to do something, we ought do it.
What I want for myself, I must also want for the other.
1724-1804
Utilitarianism
Maximize good consequences for the most number of people and also minimize bad consequences for the most number of people
1806-1873
Jillayne Schlicke
National Association of Mortgage Fiduciaries
43
Section 10 Module 10.4Moral Development
The intrinsic worth, value and dignity
of all human persons. Some laws might not be moralLaw , society’s rulesThe good, norms, roles, shared
valuesPractical agreementsMorality comes from external
sources
22+
16 to 2212 to 166 to 123 to 50 to 2
Jillayne Schlicke
National Association of Mortgage Fiduciaries
44
Fiduciary Duties Come from Agency Law
Agency:Consent by one person (principal) that the other (agent) act on his or her behalf.
Agency can be created by oral or written agreement OR it may be implied through conduct.
“I can get you the best loan”“I can get you the best rate”
Section 10 Module 10.5
Jillayne Schlicke
National Association of Mortgage Fiduciaries
45
ManipulationCoercion
Completely
Controlled
Influences
Completely Non-
ControlledInfluences
Persuasion
SubstantiallyNot
Controlling
SubstantiallyControlling
Section 10 Module 10.5
Jillayne Schlicke
National Association of Mortgage Fiduciaries
46
Duty of Loyalty
Duty of Care
What Fiduciary does will, in good faith, advance the interests of the client and not the Fiduciary’s personal interests
Act in good faith
Reasonable person test
Informed
Section 10 Module 10.5
Jillayne Schlicke
National Association of Mortgage Fiduciaries
47
Section 10 Module 10.5
Fiduciary Duties May Include…1. Disclose all loan information to
the borrower2. Act in good faith and deal fairly3. Avoiding secret fees or
undisclosed fee splitting4. No self dealing
Jillayne Schlicke
National Association of Mortgage Fiduciaries
48
Fiduciary Duties are Higher When…
Broker/LO has higher level of knowledge, experience, skills
Client has limited knowledge
Client is relying exclusively on you
Greater the imbalance the higher the duty
Section 10 Module 10.5
Jillayne Schlicke
National Association of Mortgage Fiduciaries
49
Module 11.1Module 11.2Module 11.3Module 11.4Module 11.5Module 11.6Module 11.7Page 47 in the 2012 course bookPage 37 in the 2013 course book
Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm
Section 11 Fair Housing
Jillayne Schlicke
National Association of Mortgage Fiduciaries
50
1968 Civil Rights Act1968 Fair Housing
Act~
Protected Classes:RaceColorReligion (Creed)SexNational OriginFamilial Status
Sexual orientation added in 2012
Disability
Section 11Module 11.1, 11.3
Intent v. Effect
Realtors and lenders have great power to affect neighborhoods
Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 11 Module 11.2
RedliningDenying or increasing the cost of services to residents of a racially specific geographical area
SteeringGuiding prospective homebuyers to or away from a specific neighborhood based on his/her race
51
BlockbustingEncouraging white property owners to sell their homes at a loss by fraudulently implying that racial or religious minorities were moving into their neighborhood
Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 11 Module 11.4In Mortgage Lending: No one may take any of the
following actions based on race, color, national origin, religion, sex, familial status or handicap (disability):
Refuse to make a mortgage loanRefuse to provide information regarding loansImpose different terms or conditions on a loan, such as
different interest rates, points, or feesDiscriminate in appraising propertyRefuse to purchase a loan orSet different terms or conditions for purchasing a loan.Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm
52
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 11 Module 11.7Fair Housing Thought Questions
Should sexual orientation be added as one of the protected classes?
Should we make a woman on maternity leave return to work before counting her income when qualifying for a loan?
Should we make long term disabled applicants provide additional documentation proving that they will stay disabled?
53
Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 12 Consumer ProtectionModule 12.1Module 12.2Module 12.3
Pages 53-54 in the course book
Case Study: Carnell v. KMC FundingRead the case. In small groups discuss the
questions.As a large group, share your anwers
54
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 13 Mortgage Fraud
Module 13.1Module 13.2Module 13.3Module 13.4Module 13.5 page 41 in the 2013 course
book
page 54 in the 2012 course book
55
FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 13 Module 13.1
Fraud for Housing, or fraud for property, is perpetrated by borrowers and/or one or more industry professionals when they misrepresent information on the loan application. This type of fraud does not usually result in significant losses to a financial institution.
.
56
FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 13 Module 13.1
Fraud for profit consists of systematic transactions by industry professionals who are attempting to steal a significant amount of the funds associated with one or more mortgage transactions. This type of fraud usually involves multiple parties in various disciplines within the mortgage industry, such as mortgage originators, appraisers, real estate brokers, escrow closers, builders and title companies. Fraud for profit usually results in significant—if not catastrophic—losses to financial entities involved in mortgage loan transactions and it is of major concern to the mortgage industry
57
FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 13 Module 13.2
Property FlippingSilent SecondStraw BorrowersIdentity TheftAppraisal FraudForeclosure RescueEquity SkimmingLoan Mod ScamsShort Sale Fraud
58
FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 13 Module 13.3Red Flags
When seeking employment as an LOWhen working with real estate agents or RealtorsWhen working with consumers
59
FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 13 Modules 13.6-13.20SARSSuspicious Activity ReportsAMLAnti Money Laundering
Pages 46 in the 2013 course book
60
Financial Crimes Enforcement Network Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators AGENCY: Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. ACTION: Final rule.Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations Page 8159Subpart C—Reports Required To Be Made by Loan or Finance Companieshttp://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3074.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 14
Reflect on everything learned today.…any final questions?Preview of tomorrow.
61
20 Hour SAFE Comprehensive Pre-Licensing and Exam Prep
Jillayne Schlicke
DAY 2
Jillayne Schlicke
National Association of Mortgage Fiduciaries
The Main Fed Law AcronymsTILATruth in Lending ActMDIAMortgage Disclosure Improvement ActRESPAReal Estate SettlementAnd Procedures ActECOAEqual Credit Opportunity ActFCRAFair Credit Reporting ActSAFESecure and Fair Enforcement Act
64
Jillayne Schlicke
National Association of Mortgage Fiduciaries
65
Purpose: To promote informed use of credit. (Instead, creates mass confusion.) Gives consumers the right to cancel some transactions (o.o. refi), regulates variable rate loans.
TILA Disclosures: 3 days from date of application, final disclosure at settlement
Disclosure content: variable rate features, payment schedule, demand feature, prepayment penalty, security interest in the property, insurance cancellation, assumption policy.
CHARM Booklet required on ARM loans
Section 16 Truth in Lending Act
Modules 16.1-16.3
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
66
Four Government Boxes
This info must be presented in clear and conspicuous place:
Annual Percentage Rate/APR (will cover this soon)
Finance Charge Interest + closing costs
Amount Financed Loan amount less closing costs
Total of Payment All P&I if all payments made
Section 16 Truth in Lending Act
Modules 16.3
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
67
Rescission: on an o.o. refinance, the borrower has 3 days after signing the final loan documents to cancel and receive a full refund from the lender. LOs must refund any money collected for third party services, even if spent.
For TILA RESCISSION purposes, business days include Saturday.
Can the 3 day right of rescission ever be waived?
Section 16 Truth in Lending ActModules 16.4-16.5
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 16 TILA Module 16.4
Case Study: What is the first business day on
which funds may be disbursed if:
Closing date: Thurs, May 2
1st bus. day: Fri, May 32nd bus. day: Sat, May 4
Sun, May 53rd bus. day: Mon, May 6
The loan can fund on Tuesday May 7th
68
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
69
APR is a measure of the cost of credit, expressed as a nominal yearly rate. It relates the amount and timing of value received by the consumer to the amount and timing of payments made.
Disclosure of the APR is central to the uniform credit cost disclosure envisioned by the TILA.
Section 16 Truth in Lending Act A closer look at APR (Annual Percentage
Rate)
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Common consumer question: What costs are included when calculating APR?
At a typical mortgage company, software systems are already programmed to do this for LOs. However, customers ask questions about the TILA disclosure forms and regulators expect licensees to know how to answer basic questions about the information contained in the TILA disclosure form.
70
Section 16 Truth in Lending Act A closer look at APR (Annual Percentage Rate)
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
IncludedPrepaid interestMortgage insurance
premiumsWire transfer feesRecording feesLoan origination feeMortgage broker feeEscrow (closing fee)Discount pointsPest inspection (VA only when
prop is located in mod to high probability of area of pest infestation and lender is paying for it.
Flood Ins. premiums
71
Hazard Insurance (IF obtained from a neutral company)
Seller paid pointsDocument prep feeTitle insurance (lender
policy)Notary feeAppraisalCredit reportImpounds for taxes &
insFlood Hazard Check
Excluded
http://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
72
Section 16 Truth in Lending Act A closer look at APR (Annual Percentage Rate)
Tip: How to remember which costs are included/excluded when calculating APR:
Costs included
These are costs that benefit the lender or costs that the lender requires in order to obtain a loan.
Costs excluded
These are costs that are paid to and benefit third parties other than the lender.
Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
73
APR Tolerances…Can we make a mistake and still be in compliance? Yes:
Example:
|________|_______ APR 7.75_______|________|.25 .125 .125 .25 ARM FRM FRM ARM
ARM = Adjustable Rate Mortgage
FRM = Fixed Rate MortgageTruth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Prepaids Prepaid finance charges = CLOSING COSTS
Impounds = a few months payments of real estate taxes, hazard insurance
74
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 16Module 16.6
Truth In Lending Act Quiz
75
Jillayne Schlicke
National Association of Mortgage Fiduciaries
76
Section 17Mortgage Disclosure Improvement ActMDIA
Module 17.1Module 17.2Module 17.3Module 17.4Module 17.5Module 17.6 --take the TILA/MDIA Quiz
Pages 52+ in the coursebookTruth in Lending AmendmentsRegulation Z, Subpart C, Closed End Credit, Section 226.17,General Disclosure Requirements Effective July 30, 2009
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 17 MDIA Module 17.3 We now have three categories of mortgage
loansHOEPA (Added in 1994 as Section 32 of TILA)High cost/2nd mtg/HELOC
Higher PricedHigh Risk (Added in 2009 as part of MDIA)1.5 or more points higher (APR) FRM3.5 or more points higher (APR) ARM3.5 or more points higher for a subordinate lien
QRM Qualified Residential Mortgage (Added as part of the Dodd Frank Act of 2010)Definition of a QRM scheduled to be announced in 2013
77
Truth in Lending AmendmentsRegulation Z, Subpart C, Closed End Credit, Section 226.17,General Disclosure Requirements Effective July 30, 2009
Jillayne Schlicke
National Association of Mortgage Fiduciaries
MDIA Quiz
78
Jillayne Schlicke
National Association of Mortgage Fiduciaries
79
Section 17 Module 17.6 Quiz ReviewQuiz Question 7:
0 Mon Jan 51 Tues Jan 62 Wed Jan 73 Thurs Jan 84 Fri Jan 95 Sat Jan 10
Sun Jan 116 Mon Jan 127 Tues Jan 13
Jillayne Schlicke
National Association of Mortgage Fiduciaries
80
Section 17 Module 17.6 Quiz Review
TILA Quiz Question 10
Mon July 9 Consumer must receive disclosures
Tues July 10Wed July 11Thurs July 12 Signing is scheduled
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 18 Federal Reserve Board (FRB) ruleon Loan Originator Compensation
81
Module 18.1BackgroundFTC v. Golden Empire
Mortgage
Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf
Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 18 Federal Reserve Board Rule onLoan Originator Compensation
82
Module 18.2 Three main prohibitions:P1: Compensation based on a transaction’s term
or conditions.
P2: Compensation by someone other than the consumer.
P3: Prohibitions against steering.Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 18 Federal Reserve Board Rule onLoan Originator Compensation
83
Module 18.2 Three main prohibitions:P1: Compensation based on a transaction’s term
or conditions:> Payment based on transaction terms or
conditions.> Compensation cannot go up or down
based on the loan’s terms or conditions.> Minimum or max dollar amount of
compensation may not vary with each loan.
Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 18 Federal Reserve Board Rule onLoan Originator Compensation
84
Module 18.2 Three main prohibitions:P2: Compensation by someone other than the
consumer.If an LO will be compensated by the consumer, the LO may not also receive compensation from the lender funding the loan, or any other person connected with that transaction.
Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 18 Federal Reserve Board Rule onLoan Originator Compensation
85
Module 18.2 Three main prohibitions:P3: Prohibitions against steering.
LOs may not steer a consumer to a loan only because the LO will be compensated at a higher rate by selling that product, unless the loan is in the best interest of the consumer.Federal Reserve
Regulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
Section 18 Federal Reserve Board Rule onLoan Originator Compensation
86
Module 18.3Review the Section 18 Handout:RESPA Roundup
RESPA Roundup: Compliance Guide for REPA as it applies to the Federal Reserve Board’s MLO Compensation Rules Published on Sept 24, 2010
Jillayne Schlicke
National Association of Mortgage Fiduciaries
87
Section 19 Real Estate Settlement and
Procedures ActRESPAModules 19.1-19.2
Applies to all federally related loans; sale or refi, primary market loans only.
Exemptions: 25 acres or more, temporary financing, assumptions with lender approval, conversions (contract to deed), secondary market transactions, vacant property.
Which entities must comply?Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
88
Section 19 RESPA Modules 19.1-19.2
Which entities must comply?Lenders (banks, brokers, etc.)Real estate agents/RealtorsTitle and XOAppraisersHome inspectorsMortgage insurance companiesCredit reporting agenciesFlood hazard check companiesAttorneysHazard insurance companiesHome warranty companiesBuilders
Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
89
Section 19 RESPA Modules 19.1-19.2
PurposeTimely disclosure of settlement costsLimits on escrow reserve accountsProhibits seller-directed title
insuranceForbids kickbacks (Section 8. See next
slide)GFE and HUD 1Disclosure of Affiliated Business
ArrangementsDisclosure of potential loan servicing
charges“Settlement Cost Booklet”Lender required use agreements
Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
90
Section 8 Referral Fees
Prohibits the giving or taking of a fee or other thing of value for a referral involving a federally related loan
Un-earned feeA fee we receive but we have performed no work in exchange for receiving the fee.
Section 19 RESPA Modules 19.1-19.2
Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
TILA/RESPA Definition of “an Application”
Financial DataBorrower’s NameSocIncomeEstimated valueLoan Amount…..Prop address (will have this if refi, might not have
this right away if borrower is still house-shopping.)
…..Any other info deemed necessary by the LO
91
Section 19 RESPA Modules 19.1-19.2
Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
Jillayne Schlicke
National Association of Mortgage Fiduciaries
92
Section 19 Module 19.4Learn how to complete a Good Faith
Estimate
See instructions from HUDInstructions for Completing Good Faith Estimate (GFE) FormCode of Federal RegulationsTitle 24, Volume 5
See example on page 81
Section 19 RESPA Module 19.3Take the RESPA Quiz
Jillayne Schlicke
National Association of Mortgage Fiduciaries
93
New Good Faith EstimateMortgage Brokers who table fund are mortgage
brokersAll yield spread premium dollars credited from the
lender when a borrower selects a higher note rate is for the borrower’s benefit.
This was a huge change for mortgage broker LOs and many fled to non-depository lenders after these 2009 changes were enacted. Then FRB rule on LO Comp (which went into effect April 5, 2011) disallowed steering borrowers into a higher rate loan, solely for the purpose of LOs making more money for all LOs no matter where they work.
Section 20RESPA Amendments in 2009Modules 20.1
Real Estate Settlement and Procedures Act (2009 Changes)http://www.federalreserve.gov/boarddocs/supmanual/cch/respa.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
94
GFE tolerancesViolations, penaltiesDefinition of “An Application”GFE delivery, loan term availabilityChanged circumstancesSeller paid feesRequired useAverage charge pricing, volume discounting
RESPA Amendments Quiz
Section 20RESPA Amendments in 2009Modules 20.1-20.7
Real Estate Settlement and Procedures Act (2009 Changes)http://www.federalreserve.gov/boarddocs/supmanual/cch/respa.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
95
Section 21 Module 21.1 and 21.2Equal Credit Opportunity Act ECOA
1974ECOA points us toward the evaluation based
on creditworthiness only.
Nine categories; the prohibited bases:
RaceColorReligionSexMarital StatusNational OriginIncome from Public Assistance(Age)Whether an applicant has exercised
his or herrights under this act.
Equal Credit Opportunity Acthttp://www.fdic.gov/regulations/laws/rules/6500-1200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
96
Section 21 ECOA Module.21.2It is a violation to discourage an
applicant from making an application for credit on a prohibited basis.
Cannot ask an applicant if he or she receives alimony, child support. The applicant may volunteer such information.
You must ask if he or she PAYS alimony or child support.
Unmarried…ECOA requires the lender to provide a
copy of the appraisal report.Application need not be in writing for
this act to apply.Can we ask questions NOT related to
creditworthiness? Adverse Action Form
Equal Credit Opportunity Acthttp://www.fdic.gov/regulations/laws/rules/6500-1200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
97
Section21Module 21.2Equal Credit Opportunity Act
ECOAMarital Status
1. Unmarried =SingleDivorcedWidowed
2. Married
3. SeparatedEqual Credit Opportunity Acthttp://www.fdic.gov/regulations/laws/rules/6500-1200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
98
Section 21Module 21.3Equal Credit Opportunity Act ECOAQuiz
Jillayne Schlicke
National Association of Mortgage Fiduciaries
99
Passed to ensure consumers have access to credit information used by lenders and others so that remedial steps could be taken when incorrect or outdated information remained in their file.
Purpose of a credit report:Insurance, licensing, instruction from consumer, extension of credit, employment, response to a court order, potential investor risk, other legitimate business needs.
Credit reports are deemed privileged info.
A CRA has 30 days to respond to a disputed item
Adverse Action: Name, address and phone number of the CRA, reason, and info on how to obtain a free copy of their report.
Section 22 Module 22.1 and 22.2Fair Credit Reporting Act FCRAFair Credit Reporting Act
http://www.fdic.gov/regulations/laws/rules/6500-200.html
Jillayne Schlicke
National Association of Mortgage Fiduciaries
100
Section 22Fair Credit Reporting Act FCRAModule 22.3 Quiz
Jillayne Schlicke
National Association of Mortgage Fiduciaries
101
HMDA Home Mortgage Disclosure ActCRA Community Reinvestment ActGLB Gramm Leach Bliley Act AKA
Privacy ActHOEPA Home Owner’s Equity Protection
ActBank Secrecy ActU.S. Patriot ActPMI ActFACTA Fair and Accurate Credit
Transactions ActDo Not Call
Additional Federal Laws Quiz
Section 23 Modules 23.1-23.10Other Federal Laws Governing Mortgage
Lending
Jillayne Schlicke
National Association of Mortgage Fiduciaries
ECOARaceColorReligionSexNational OriginMarital StatusIncome from PublicAssistanceAgeWhether an
applicanthas exercised his orHer rights under thisAct.
102
Fair HousingRaceColorReligion (Creed)SexNational OriginFamilial Status
Sexual orientation added in 2012 as a protected class in all 50 states
Disability
Jillayne Schlicke
National Association of Mortgage Fiduciaries
103
Section 24 SAFE Mortgage Licensing ActModule 24.1
The SAFE Act of 2008
SAFE = Secure and Fair Enforcement Act
Passed in order to increase uniformity, reduce regulatory burden, enhance consumer protection, and reduce fraud. Establishes the Nationwide Mortgage Licensing System and Registry. Title V SAFE Mortgage Licensing Act of 2008
http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
104
Section 24 SAFE Act Module 24.2
“Registered Loan Originator”
An employee of:a depository institution;a subsidiary that is:
owned and controlled by a depositoryinstitution ANDregulated by a federal banking
agency OR
An institution regulated by the Farm Credit Admin
Title V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
105
Section 24 SAFE Act Module 24.2
State or Federally Chartered Depository Banks:
LOs are exempt from testing and education.
NOT exempt from “registration.”
Register with the Nationwide Mortgage Licensing System (NMLS) and will be given a unique identifier.
“Registered” LOsTitle V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
106
Section 24 SAFE Act Module 24.2
Issuance of a License:
Never revokedNo felony last 7 yearsNo felony at any time re fraud, dishonesty,
breach of trust, money launderingFinancial responsibilityPre-licensing educationWritten test
Net worth and surety bond Title V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
107
Section 24 SAFE Act Module 24.2
LO exam:
75% to passCan retake 3 X at 30 day intervalsIf fail 3 X, must wait 6 months
5 year lapse in license: must retake the test
Title V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
108
Section 24 SAFE Act Module 24.2
Continuing Ed
3 hours Federal Law2 hours Ethics, Consumer Protection, Fraud,
Fair Housing2 hours Non Traditional Lending1 hour Undefined
No carry-oversCan’t take the same class each year.
Title V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
109
Section 24 SAFE Act Module 24.3
Take the SAFE Act Quiz
Jillayne Schlicke
National Association of Mortgage Fiduciaries
QRMsQualifiedResidentialMortgage
Downpaymentgood credit
When sold on Wall Street, NO money put aside in loss reserves
2013
• High Priced• aka High Risk,
Subprime,Non-Traditional,Non- Standard
• When sold on Wall St Lenders must put aside 5% of the value of the pool of RMBS to cover potential future losses
• 2009
• High CostHOEPAHomeOwnerEquity ProtectionAct
• Junior LiensSection 32of TILA
• 1994
Section 25 A Look Ahead-Dodd FrankModule 25.1 QRMsDodd Frank Wall Street Reform and Consumer Protection Act
http://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
111
Section 25 Module 25.2 CFPBCFPB = Consumer Financial Protection Bureau
All federal laws governing mortgage lending are now under the CFPB with the exception of Fair Housing which will stay under HUD.
CFPB is currently in the process of finalizing rules on many sections of the Dodd Frank Act and the industry received these from the CFPB in 2013 and the rules will go into effect no later than Jan 2014
Dodd Frank Wall Street Reform and Consumer Protection Acthttp://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
112
Section 25 Module 25.3 LO Comp
LO Comp rules under Dodd Frank mirror the LO Comp rules established by the Fed Reserve Board that went into effect April 5, 2011.
Dodd Frank Wall Street Reform and Consumer Protection Acthttp://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf
Jillayne Schlicke
National Association of Mortgage Fiduciaries
113
Section 26 Recap and Close
Review all remaining unanswered questions. Students complete end-of-course evaluation form.Instructor provides end-of-course completion certificates.
Jillayne Schlicke
National Association of Mortgage Fiduciaries
114
Jillayne SchlickeCE Forward, Inc.National Assoc of Mortgage
Fiduciaries206-931-2241jillayne@ceforward.commortgagefiduciaries.com