NMLS Laws and Regulations Latest Updated 2022 Rated A

NMLS Laws and Regulations Latest Updated 2022 Rated A CFPB ✔✔Consumer Financial Protection Bureau What does the CFPB do? ✔✔Regulates RESPA, TILA, ECOA, and HMDA FTC ✔✔Federal Trade Commission What does the FTC do? ✔ ...

NMLS Laws and Regulations Latest Updated 2022 Rated A CFPB ✔✔Consumer Financial Protection Bureau What does the CFPB do? ✔✔Regulates RESPA, TILA, ECOA, and HMDA FTC ✔✔Federal Trade Commission What does the FTC do? ✔✔Monitors Red Flag Rules RESPA ✔✔Real Estate Settlement Procedures Act What does RESPA do? ✔✔•Protects homeowners of Single, 1-4 family dwellings, condos, & homes manufactured on lot. •Educates borrowers costs of loan • Eliminates kickbacks and referral fees (section 8) • Establishes rules for escrow What Regulation is RESPA? ✔✔Reg X (X-ray of my RESPAtory system) Who oversees RESPA? ✔✔(CFPB) Consumer Financial Protection Bureau How long must records be kept under RESPA? ✔✔5 years (RESPA has 5 letters= 5 letters of record keeping) What are the penalties for violating RESPA? ✔✔$10k, 1 yr in prison OR both (5 years x 2= $10,000 fine)TILA ✔✔Truth in Lending Act What does TILA do? ✔✔• part of the Federal Consumer Protection Act and lays out disclosure requirements, advertising requirements as well as rights of rescission and penalties for violation. • Requires creditors to disclose certain key terms and costs of the transaction What Regulation is TILA? ✔✔Reg Z (Today I learned about Zebras. They cost 5k for the first 3 years of life) Who oversees TILA? ✔✔•Consumer Financial Protection Bureau (CFPB), •Advertising: Federal Trade Commission (FTC) How long must records be kept under TILA? ✔✔3 Years (Today I learned about Zebras. They cost 5k for the first 3 years of life) What are the penalties for violating TILA? ✔✔$5k, 1 year Prison or both $500k for class action suits or 1% if net worth of servicer, whichever is less (Today I learned about Zebras. They cost $5k for the first 3 years of life) ECOA ✔✔Equal Credit Opportunity Act What does ECOA do? ✔✔• Keeps lenders form discriminating for age, race, religion, sex, marital status, color, national origin, income from government, or exercising rights under CCPA • Promotes the availability of credit to all applicants • Requires notice of adverse action within 30 days • Handicap is NOT protected by this law (See Fair Housing Lending Laws) What regulation is ECOA? ✔✔Reg B (Be Equal)Who oversees ECOA? ✔✔Consumer Financial Protection Bureau (CFPB) How long must records be kept under the ECOA? ✔✔25 Months (25 letters in "Equal Credit Opportunity Act) What are the penalties for violating ECOA? ✔✔$10k individual fine $500,000 Class Action Lawsuit HMDA ✔✔Home Mortgage Disclosure Act What does HMDA do? ✔✔• Provides Data to public, assists public officials, and identifies evidence of descrimination • Stops Redlining (Government monitoring section 10 of 1003 What regulation is HMDA? ✔✔Reg C ("C" you at home) Who oversees HMDA? ✔✔Consumer Financial Protection Bureau (CFPB) Created by Federal Reserve Board (FRB) How long must records be kept under HMDA? ✔✔3 years Reported on LAR report and turned in every March 1st (LAR has 3 letters= 3 years) FCRA ✔✔Fair Credit Reporting Act What regulation is FCRA? ✔✔Reg V ( "V"ery Fair Credit)What does the FCRA do? ✔✔• Mainly responsible for monitoring who has access to credit info • Creditors must have permissible purpose FACTA or FACT ACT ✔✔Fair and Accurate Credit Transaction Act FACTA is an amendment to what Law? ✔✔Fair Credit Reporting Act (FCRA) What does FACTA do? ✔✔• Requires businesses to take appropriate measures to safeguard from theft in the disposal of consumer reports • Curb identity theft and improve customer dispute resolution • Requires the disclosures for credit score upfront • Requires companies to inform borrowers 30 days prior to posting negative info to credit report TCPA ✔✔Telephone Consumer Protection Act Who oversees TCPA? ✔✔Federal Trade Commission (FTC) What does TCPA do? ✔✔• Prevents telemarketers from harassing customers • DO NOT CALL registry-Good for forever unless number is disconnected or transferred to new customer • Lenders 2 exceptions: Call 90 days after an app is taken or 18 months after a closed transaction How long must records be kept under TCPA? ✔✔2 years (only "2" exceptions for lenders) What are the penalties for violating TCPA? ✔✔$16k ("16" calls is harassment) CIP ✔✔Customer Identification ProgramOFAC ✔✔Office of Foreign Assets Control (OFAC! my client is a terrorist) SAR ✔✔Suspicious Activity Report What does the USA Patriot Act do? ✔✔• Prevents terrorist funding • Enforces CIP • Terrorist checking done through OFAC • SAR can be submitted to FinCEN" Who oversees the USA Patriot Act? ✔✔Financial Crimes Enforcement Network (FinCEN- Part of treasury) GLB ✔✔Gramm Leach Bliley Act What does GLB do? ✔✔• Requires companies to tell customers if they plan to share their personal info • Companies must give customers an "Opt Out" option • GLB Safeguard Rule: Requires all companies to design, implement, and maintain safeguards to protect customers information from theft. What are the penalties for violating GLB? ✔✔$10k for individual lawsuit $100k for financial business lawsuit 5 years in prison FHA ✔✔Fair Housing Act What does the FHA do? ✔✔• Largest insurer of Mortgage Loans • Prohibits discrimination in residential Real Estate Transactions based on Race, Color, Religion, Sex, National Origin, Handicap/disability, and Familial status• Anyone is eligible for an FHA loan Who oversees FHA? ✔✔The U.S. Department of Housing and Urban Development (HUD) Who oversees the Dodd-Frank Act? ✔✔A director who is appointed by the President What does the Dodd- Frank Act do? ✔✔• Promotes financial stability and prevents abusive practices •Changed pay structure for MLOs •Imposed the appraisal management company • Passed in July 2010 (Robin Hood of Laws) Dodd-Frank Act updated TILA to require _________? ✔✔homeownership counseling for neg ARM loans if they are 1st time homebuyers AARMR ✔✔American Associate of Residential Mortgage Regulators SRR ✔✔State Regulatory Registry NMLS/R ✔✔Nationwide Mortgage Licensing System/Registry Who oversees NMLS/R? ✔✔• Conference of state Bank Supervisors (CSBS) Who created NMLS/R? ✔✔Sate Regulatory Registry (SRR), an LLC AARMR What are key aspect of NMLS/R? ✔✔•Bankers do not have to take exam • NMLS does not approve or deny applications for licenses, they only process them for the states • State actually approves or denies applications • NMLS does not have authority to press charges or fine, the STATE doesWho has the authority to fine violators of NMLS/R? ✔✔The State HERA ✔✔Housing and Economic Recovery Act What does HERA do? ✔✔• Intended to renew public faith in Fannie Mae and Freddie Mac after the subprime mortgage crisis of 2008 • Allows states to refinance subprime loans with mortgage revenue bonds • Created Federal Housing Finance Agency (FHFA) SAFE Act ✔✔Secure and Fair Enforcement for Mortgage Licensing Act of 2008 Who regulates and oversees the SAFE Act? ✔✔Housing and Economic Recovery Act (HERA) What does the SAFE Act do? ✔✔• Requires the licensing of all mortgage lenders, brokers, and the MLO's that work under them • All MLOs must have a unique identifier# issued from the NMLS • Requires 20 hrs prelicensing education • Requires 8 hours of annual continued education: 3 fed law, 2 ethics/fraud, 2 non traditional mortgage products • Must pass NMLS Test; Fail- 30 day wait, fail3 times- 6 month wait • Requires contract processors and underwriters to be certified • Licenses expire annually on Dec. 31 HUD ✔✔U.S. Department of Housing and Urban Development CSBS ✔✔Conference of state Bank Supervisors What Act is TILA a part of? ✔✔Consumer Credit Protection ActCan a VA Loan be Assumed? ✔✔Yes. Buyer must meet credit criteria but does not have to be a veteran On the 1003, what information is asked for government monitoring purposes? ✔✔Race & Sex What is the maximum that a disclosed origination fee charge can INCREASE? A. 10% B. 5% C. 0.125% D. 0% ✔✔D. 0 % How many years does a consumer have to take civil action against a creditor suspected of violating the ECOA? ✔✔2 years The definition of a conventional mortgage is ______ ✔✔A loan that is not an FHA, VA, or RHS What does title insurance cover or protect against? ✔✔Any unpaid liens prior to the borrower purchasing the property If a creditor did not inform the borrower within 30 days of a credit decision that was considered an adverse actions, the creditor violated which law or supporting regulations? A. RESPA B. ECOA C. FCRA D. TILA ✔✔B ECOA Which of the following is not found on the market conditions addendum in conjunction with the appraisal?A. Foreclosures B. Seller concessions C. Inventory D. Description of improvements ✔✔D. Description of improvements An ad says " $425 Monthly payments, 5% down payment, and 3.1% APR." What is missing? A. Interest rate B. Finance Charge C. Loan amount D. Nothing ✔✔B. Finance Charge All of the following are considered trigger terms except: A. Amount or percentage of down payments B. Number of payments or period of repayment C. Annual percentage rate D. Amount of any finance charge ✔✔C. Annual percentage rate FEMA stands for? ✔✔Federal Emergency Management Agency USDA, FHA, and VA are all purchased by who? ✔✔Ginnie Mae What does POC mean? ✔✔Paid Outside of Closing ( 3rd party fees) What does TILA require mortgage originators to disclose to the borrower? ✔✔Credit terms for the transaction Which of the following would best help an appraiser determine a home value?A. Pulling active listings within 3 miles of the subject property B. Reviewing tax assessor records C. Closed sales similar to , and in close proximity to the subject D. Finding out how much the subject sold for previously ✔✔C. Closed sales similar to , and in close proximity to the subject The potential patterns, practices, or specific activities indicating the possibility of identity theft are considered to be: A. FACTA Violations B. FCRA Violations C. Red Flags D. ECOA Rules ✔✔C. Red Flags Conforming loans follow the underwriting guidelines of A. Fannie Mae and Freddie Mac. B. FHA and VA. C. Freddie Mac and Ginnie Mae. D. Ginnie Mae and HUD. ✔✔A. Fannie Mae and Freddie Mac. According to ECOA, a borrower can request a copy of the appraisal report used in the decision process within ___ days of a credit decision. ✔✔90 days According to the GLB Act, an individual who obtains or has obtained a financial product or service from a financial institution is a A.borrower. B.consumer. C.creditor. D.customer. ✔✔B.consumer.Under the CFPB, the following groups are identified as types of consumer and protection laws EXCEPT A.Credit Authorization and Security. B.Financial Disclosure. C.Privacy Protection and Consumer Identification. D.Prohibition of Predatory Lending. ✔✔A.Credit Authorization and Security. What type of loan has a non-refundable funding fee? A. conventional loan B. FHA loan C. subprime loan D. VA loan ✔✔D. VA loan Under the SAFE Act, a state has all of the following authorities EXCEPT A.to deny, suspend, or revoke licenses. B.to issue cease and desist orders. C.to waive the requirement for fingerprints for an initial license application. D.to write rules and regulations. ✔✔C.to waive the requirement for fingerprints for an initial license application. When the initial loan amount is multiplied by the note rate, the result is known as the _______? ✔✔Annual Interest Charge How do you calculate gross monthly income using hourly wages? ✔✔Hourly Wage X Hours worked per week X 52/ 12 = Gross monthly income How do you calculate gross monthly income using weekly wages? ✔✔Weekly pay X 52/12=Gross monthly incomeHow do you calculate gross monthly income using bi-weekly salary? ✔✔bi-weekly pay X 26/12= Gross monthly income How do you calculate gross monthly income using semi-weekly/bi-monthly salary? ✔✔Semimonthly salary X 24/ 12 = Gross Monthly Income What is a "minimum investment?" ✔✔the down payment How do you calculate LTV? ✔✔1st loan amount / lesser of the sale price OR appraised value= LTV How do you calculate CLTV? ✔✔1st loan + 2nd loan / lesser of the sale price or appraised value = CLTV What is Acquisition cost? ✔✔Acquisition cost is the total amount needed to purchase the property, including the down payment, loan amount, and any allowable buyer-paid closing costs What is another name for Front-end ratio/DTI? ✔✔HER- Housing Expense Ratio How do you calculate Front-end DTI/HER? ✔✔Total housing expenses (PITI) / Gross monthly income- Ratio % What is another name for back end ratio/DTI? ✔✔TOR- Total Obligations Ratio How do you calculate back-end DTI/TOR? ✔✔Total housing expenses (PITI) + Debt / Gross Monthly Income = Ratio % In what case can we exclude an item on a credit report from their DTI? ✔✔An item with 10 payments or less (excluding leases)When the PITI payment is divided by the gross monthly income, the result is known as the: A. Annual debt payment ratio B. Back ratio C. Gross monthly interest only payment D. Housing debt-to-income ratio ✔✔D. Housing debt-to-income ratio What is the qualifying HER and TOR ratio for conventional loans? ✔✔28% - 36% What is the qualifying HER and TOR ratio for FHA loans? ✔✔31%- 43% What is the qualifying HER and TOR ratio for VA loans? ✔✔Her: not applicable, TOR: 41% What is the qualifying HER and TOR ratio for USDA loans? ✔✔29% - 41% How do you determine the maximum mortgage amount? ✔✔two steps: 1) Gross monthly income X Front End ratio= Max PITI 2) Gross monthly income X Back End ratio - monthly debt = Max PITI The lower of the two is the answer. What is the transfer period window dictated by federal law in which no late fees can be charged to a borrower who sends his or her payment to the original servicer, rather than the new one, before the payment's actual due date (including any grace period or late date allowed within the loan documents)? ✔✔60 Days Mortgage Lenders _______ loans, mortgage brokers _______ loans ✔✔Make, ArrangeWhat is a non-traditional loan? ✔✔Anything other than a 30 year fixed rate loan What are the NMLS background/ qualification requirements? ✔✔• No Felonies within 7 years • No fraud, dishonesty, theft, money laundering etc felonies EVER • Must show financial responsibility • Must pass the NMLS test The primary market is where loans are ___________, the secondary market is where loans are ____________. ✔✔Originated, Sold ________ backs all government loans (FHA, VA, USDA) ✔✔Government National Mortgage Association (Ginnie Mae/GNMA) FNMA/FHLMC ________ loans FHA _______ loans VA and USDA ______ loans ✔✔Purchases, insures, guarantees Mortgage Back Securities (MBS) are a product of ________. ✔✔the secondary market Hard Prepayment Penalty ✔✔A policy that if a property is sold or refinanced within a certain time frame, the lender could charge a set penalty Soft Prepayment Penalty ✔✔A policy that restricts the borrower from being able to refinance within a certain time frame, but will allow the borrower to sell. Due on Sale ✔✔If property is sold, borrower must payoff an outstanding debt Demand Feature ✔✔Lender demands full payment (usually due to default)Exculpatory Clause ✔✔Part of an agreement that relieves one party from the contract Defeasance Clause ✔✔If a borrower defaults on a loan, the defeasance clause allows the lender to take the property without foreclosure ________ loans are loans that 'conform' to FNMA, FHLMC standards ✔✔Conforming Conforming loans are always ___________, but ____________ loans are not always Conforming ✔✔Conventional, Conventional Conventional loans are not backed by _____________ ✔✔the government ________ are non-conforming loans because they exceed the FNMA loan limit of $____________ ✔✔Jumbo loans, $417,000 What is the best way to describe a 2nd mortgage? ✔✔a conventional mortgage that is nonconforming What underwriting program(s) does FNMA use? ✔✔Desktop Originator (DO, used by brokers) Desktop Underwriter(DU, used by lenders) What underwriting program(s) does FHLMC use? ✔✔Loan Prospector (LP, used by lenders and brokers) What is a request for copy of a tax transcript called? ✔✔4506- T What is the tax info authorization form called? ✔✔8821When buying as OO (Owner Occupied), in what time frame must the borrower occupy the property after closing according to FNMA/FHLMC guidelines? ✔✔60 Days What are the two types of mortgage insurance charged on an FHA loan? ✔✔UFMIP - Up Front Mortgage Insurance (Annual) monthly MIP For FHA loans greater than 90% LTV, MIP stays on for _________; FOr loans at 90% LTV or lower, MIP stays on for _______. ✔✔Lifetime, 11 years What is the MAX seller concession allowed on a conventional loan? ✔✔6% What are some aspects of FHA Loans? ✔✔• Gift funds and borrower funds/grant money can be used for downpayment • Sellers can contribute 6% towards closing costs • NO prepayment penalties • Qualifying ratio: 31% - 43% • min down payment 3.5% What are some aspects of VA loans? ✔✔• Requires Certificate of Eligibility (COE) • The amount of guarantee is based of when. how, branch of service, and discharge • Max origination fee 1% • 100% financing, no min investment from borrower • VA Loans are assumable • Only for Vets of armed forces • No mortgage insurance • Max seller concessions 4% • Qualifying back end ratio 41% • Funding fee: Active 2.15%, Reserve/Guard 2.4%. No funding fee for disability or surviving spouse.• Not affected by marital status What are some aspects of USDA Loans? ✔✔• 100% Financing • Only offered in rural areas • Only offered as 30 year fixed rate owner occupied loans • Guarantee fee 1%, can be financed into the loan What are some aspects of ARM loans? ✔✔• Interest rate can increase or decrease over life of loan • Start rate(teaser rate) low introductory rate • Tied to Index (LIBOR most common) • Margin set by lender and doesnt change • CAPS (adjustment period cap, life of loan cap) • What are some aspects of a Balloon Mortgage? ✔✔• They do not fully amortize • Several set payments of "X" then a huge payment at the end of the loan term. • Minimum term allowed on a balloon is 5 years What are some aspects of reverse mortgages? (home equity line of credit) ✔✔• Borrower must be 62 or older • LTV is based on age • Must demonstrate ability to pay taxes and insurance on property. • Can be used to purchase a property • Requires counseling • 3 ways to get money: Lump Sum, Monthly, or HELOC • No repayment until death, heirs can refi or sell within 12 months. What is the borrower of a HECM loan required to pay? A. Principal B. Interest C. Mortgage InsuranceD. HOA and Real Estate Taxes and Insurance ✔✔D. HOA and Real Estate Taxes and Insurance HELOC (Home equity line of credit) is what kind of credit? ✔✔Open- ended An MLO completes an application for HECM with an elderly client who just before closing, told the MLO that they have moved out of the home and into a retrement community while the lon is in Underwiting. What shold the MLO do? ✔✔Notify Underwriting What is interim financing? ✔✔financing taken in draws to finance the construction of a new home, typically replaced later by permanent financing. What is another term for Permanent Financing? ✔✔"Take Out Loan" To certify construction completion, what form must the appraiser complete under FHLMC? ✔✔Form 442 To certify construction completion, what form must the appraiser complete under FNMA? ✔✔Form 1004D A construction loan requires the payment of A. Interest only B. P&I C. PITI D. Monthly admin fee ✔✔A. Interest only What type of loan has a rate of 5% for 5 years, and a rate of 6% for the remaining 25 years? ✔✔Variable rate loan What type of loan cannot be required to be repurchased?