Fire away mortgage test questions and answers
I hope this helps you
Which
of the following statements is NOT TRUE per the definition of "Material
change"?
A
change in the interest rate previously offered a borrower
A
change in the type of loan offered to a borrower
A change that affects the
borrower's information as given on the application such as an incorrect address
A
change that is important enough to influence a borrower in making a borrowing
decision
"Material
change" means a change that would be important to a reasonable borrower in
making a borrowing decision, and includes a change in the interest rate
previously offered a borrower, a change in the type of loan offered to a
borrower, or a change in fees to be charged to a borrower resulting in total
fees greater than $100.
Which
of the following is the BEST DEFINITION of "Exempt use of property"?
property
exempt from the government use; cannot be included as easement
predominant
use of property for environmental studies, exempt from taxation
exclusive use of property
owned by an exempt entity for educational, religious, or charitable purposes.
primary
use of property by state agency for headquarters and offices
"Exempt
use of property" or "use of property for exempt purposes" means
predominant or exclusive use of property owned by an exempt entity for
educational, literary, scientific, religious, charitable, or governmental
purposes, as defined in this chapter.
Which
of the following statements is FALSE per the definition of "Material
benefit" when referencing the current mortgage rates or terms?
A
reduction in principal amount of the loan by 10% or more
Permanent
reduction in the annual interest rate of at least 1% on an annual basis
Reduction of taxes to be
levied on the property by 25%
Conversion
of an adjustable interest rate loan to a fixed rate loan and the annual
interest rate is equal to or less than the current adjustable interest rate
"Material
Benefit" as used in Section 494.00296, F.S., is a beneficial change in the
current mortgage rates or terms where one or more of the following occurred:
(1) Reduction in Principal Amount of the loan by 10% or more; (2) Permanent
reduction in the annual interest rate of at least 1% on an annual basis; or (3)
Conversion of an Adjustable Interest Rate loan to a Fixed Rate loan and the
annual interest rate is equal to or less than the current adjustable interest
rate.
In
general, an "Indirect owner" what percentage does the indirect owner
have control (e.g. voting security, partnership's capital, etc)?
55%
5%
25%
15%
"Indirect
owner" means, with respect to direct owners and other indirect owners in a
multilayered organization: (a)?For an owner that is a corporation, each of its
shareholders that beneficially owns, has the right to vote, or has the power to
sell or direct the sale of, 25 percent or more of voting security of the
corporation. (b)?For an owner that is a partnership, each general partner and
each limited or special partner that has the right to receive upon dissolution,
or has contributed, 25 percent or more of the partnership's capital. (c)?For an
owner that is a trust, the trust and each trustee. (d)?For an owner that is a
limited liability company: 1.?Each member that has the right to receive upon
dissolution, or that has contributed, 25 percent or more of the limited
liability company's capital; and 2.?If managed by elected managers or appointed
managers, each elected or appointed manager. (e)?For an indirect owner, each
parent owner of 25 percent or more of its subsidiary.
Which
of the following is NOT included in the definition of "Rule"?
Memoranda issued by the
Executive Office of the Governor relating to information resources management
Agency
statement interpreting policy and its requirements
Statement
of agency practice that further explains a required statute requirement
An
amendment to an existing rule
"Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule. The term also includes the amendment or repeal of a rule. The term does not include:
(a) Internal management memoranda which do not affect either the private interests of any person or any plan or procedure important to the public and which have no application outside the agency issuing the memorandum.
(b) Legal memoranda or opinions issued to an agency by the Attorney General or agency legal opinions prior to their use in connection with an agency action.
(c) The preparation or modification of:
1. Agency budgets.
2. Statements, memoranda, or instructions to state agencies issued by the Chief
Financial Officer or Comptroller as chief fiscal officer of the state .
Indicate
which statement is NOT a reason for denying licensure to an applicant.
Insufficient credit history
information
Poor
financial responsibility and character
Committed
previous violation involving breach of trust
Pending
felony criminal prosecution involving fraud
...However, it is a ground for denial of licensure if the applicant: (a) Has committed any violation specified in this chapter, or is the subject of a pending felony criminal prosecution or a prosecution or an administrative enforcement action, in any jurisdiction, which involves fraud, dishonesty, breach of trust, money laundering, or any other act of moral turpitude.
(b) Has failed to demonstrate
the character, general fitness, and financial responsibility necessary to
command the confidence of the community and warrant a determination that the applicant
will operate honestly, fairly, and efficiently... 3.?The office may not use a
credit score or the absence or insufficiency of credit history information to
determine character, general fitness, or financial responsibility.
How
many hours of pre-license class must be completed by an applicant for a loan
originator license?
12
20
16
18
Each individual desiring to obtain licensure as a loan originator
shall apply to the
Office of Financial Regulation by submitting the following:(e) Confirmation
from the Registry that the applicant has satisfied the requirement to complete
a 20-hour pre-license class approved by the Registry;
What is
the timeframe allowed in which an applicant may change information on a pending
application form?
2
weeks
15 days.
7
days
1
month
If the
information contained in the NMLS Individual Form (Form MU4) or any amendment
thereto becomes inaccurate for any reason the applicant shall file an amendment
through the Registry correcting such information within 15 days of the change.
How
shall notice be given to each applicant regarding the decision for his/her
application for license?
email
message
written notice.
personal
phone call
list
of approved licensees is on Florida Office of Financial Regulation website
Each
applicant shall be given written notice, personally or by mail, that the agency
intends to grant or deny, or has granted or denied, the application for
license.
What
happens if a license was issued by mistake?
The
application fee is returned to the applicant and license is annulled.
The
license holder may not re-apply for a period of six months.
The license is annulled.
The
license is valid for 30 days only.
A loan
originator license shall be annulled pursuant to s. 120.60 if it was issued by
the office by mistake.
What is
the minimum net worth a mortgage lender must maintain?
There
are no minimum requirements..
$500,000
$100,0000
$250,000
A mortgage lender may close loans in its own name but may not service the loan for more than 6 months unless the lender has a servicing endorsement.
Only a
mortgage lender who continuously maintains a net worth of at least $250,000 may
obtain a servicing endorsement.
What is
the type of fee acceptable for a mortgage broker to receive from a borrower?
a
finders fee of 1% of the first year's insurance policy coverage for
recommending an insurance broker
service
fee for coordination of documents with title company
nonrefundable application fee
or fee based on the mortgage amount being funded
no
fee is acceptable as compensation
At the time of accepting a mortgage loan application, a mortgage broker may receive from the borrower a nonrefundable application fee.
If the mortgage loan is
funded, the nonrefundable application fee shall be credited against the amount
owed as a result of the loan being funded. A person may not receive any form of
compensation for acting as a loan originator other than a nonrefundable
application fee or a fee based on the mortgage amount being funded.
What is
the timeframe a property owner must begin repairs / rebuilding of homestead
property that has been devastated damaged before the property is considered
abandoned?
2
years after January 1 from the property's damage
18
months after January 1 from the property's damage
3 years after January 1 from
the property's damage
1
year after the property's damage
Failure by the property owner to commence the repair or rebuilding of the homestead property within 3 years after
January 1 following the property's damage or
destruction constitutes abandonment of the property as a homestead.
Which
of the following is NOT considered a prohibited action for a loan originator
regarding loan modification services?
Charge
or attempt to collect or secure payment for loan modification services before
completing all loan modification services
Be employed by only one mortgage
lender or mortgage broker
Execute
a loan modification without the consent of the borrower
Initiate
loan modification services without the borrower agreeing to the loan modification
services
PROHIBITED ACTS. When offering or providing loan modification services, a loan originator, mortgage broker, or mortgage lender may not:
(a) Engage in or initiate loan modification services without first executing a written agreement for loan modification services with the borrower;
(b) Execute a loan modification without the consent of the borrower after the borrower is made aware of each modified term; or
(c) Solicit, charge, receive, or attempt to collect or secure payment, directly
or indirectly, for loan modification services before completing or performing
all services included in the agreement for loan modification services. A fee
may be charged only if the loan modification results in a material benefit to
the borrower. The commission may adopt rules to provide guidance on what
constitutes a material benefit to the borrower.
How
long must samples of advertisements be kept for recordkeeping?
2 years.
Indefinitely
5
years
1
year
Each person required to be licensed under this chapter must
maintain a record of samples of each of its advertisements,
including commercial scripts of each radio or television broadcast, for examination by the office for
2 years after
the date of publication or broadcast.
What is
the type of fee acceptable for a mortgage broker to receive from a borrower?
no
fee is acceptable as compensation
a
finders fee of 1% of the first year's insurance policy coverage for
recommending an insurance broker
service
fee for coordination of documents with title company
nonrefundable application fee
or fee based on the mortgage amount being funded
At the time of accepting a mortgage loan application, a mortgage broker may receive from the borrower a nonrefundable application fee.
If the mortgage loan is
funded, the nonrefundable application fee shall be credited against the amount
owed as a result of the loan being funded. A person may not receive any form of
compensation for acting as a loan originator other than a nonrefundable
application fee or a fee based on the mortgage amount being funded.
How
many years must books, accounts and records be maintained?
5
years
3 years.
1
year
6
months
All
books, accounts, records, documents, and receipts for expenses paid by the
licensee on behalf of the borrower, including each closing statement signed by
a borrower, shall be preserved and kept available for examination by the office
for at least 3 years after the date of original entry.
Which
of the following is NOT considered a prohibited action for a loan originator
regarding loan modification services?
Charge
or attempt to collect or secure payment for loan modification services before
completing all loan modification services
Execute
a loan modification without the consent of the borrower
Be employed by only one
mortgage lender or mortgage broker
Initiate
loan modification services without the borrower agreeing to the loan
modification services
PROHIBITED
ACTS. When offering or providing loan modification services, a loan originator,
mortgage broker, or mortgage lender may not: (a)?Engage in or initiate loan
modification services without first executing a written agreement for loan
modification services with the borrower; (b)?Execute a loan modification
without the consent of the borrower after the borrower is made aware of each
modified term; or (c)?Solicit, charge, receive, or attempt to collect or secure
payment, directly or indirectly, for loan modification services before
completing or performing all services included in the agreement for loan
modification services. A fee may be charged only if the loan modification
results in a material benefit to the borrower. The commission may adopt rules
to provide guidance on what constitutes a material benefit to the borrower.
Who is
to sign the Anti-Coercion form?
The
Commissioner and the borrower
The
borrower first and two other witnesses in attendance at closing
The borrower
The
lender and the borrower
Such
notice shall be given to said borrower in the form prescribed by the Director
in Rule 69O-124.013, F.A.C., in writing, with a copy of said notice to be
signed by the borrower and retained by the lender.
If a
corporation owns property to be considered for the homestead exemption, how
many years must it lease the land to be operating as a cooperative?
50
years
75
years
98 years.
125
years
A
corporation leasing land for a term of 98 years or more for the purpose of
maintaining and operating a cooperative thereon shall be deemed the owner for
purposes of this exemption.
What
action may the office take if it has reason to believe a violation is, has or
is about to occur?
provide
evidence of the violation or its possible occurance to the appropriate legal
entities
contact
the Registry and the Attorney General to begin an investigation
assemble
a committee to discuss the concerns with the licensee so that he/she has an opportunity
to respond prior to punitive actions
issue
and serve an order to cease and desist to the person believed to be in
violation
The
office may issue and serve upon any person an order to cease and desist and to take
corrective action if it has reason to believe the person is violating, has
violated, or is about to violate any provision of this chapter, any rule or
order issued under this chapter, or any written agreement between the person
and the office.
What recourse
does an individual have should he / she believes a violation has occurred under
this regulation?
May
phone the Attorney General's office over the recorded phone line and provide
details and concerns
May
write or email the Registry so the Registry can review with the Office
appropriately
May file a written complaint
with the Office.
May
contact the Commissioner to issue a cease and desist order
Any
person having reason to believe that a provision of this act has been violated
may file a written complaint with the office setting forth details of the
alleged violation.
Score: 100%
Question 3
What is
the charge against a person who unlawfully obtains money and property in excess
of $50,000 affecting five or more victims?
A
misdemeanor of the third degree
A
misdemeanor of the first degree
A
life felony
A felony in the first degree
Any
person who violates any provision of this chapter, in which the total value of
money and property unlawfully obtained exceeds $50,000 and there are five or
more victims, commits a felony of the first degree, punishable as provided in
s. 775.082, s. 775.083, or s. 775.084.
Which
of the following is NOT an action the Office may impose for disciplinary
action?
Impose
a fine
Issue
a reprimand
Deny
a license
Notifies the principal loan
originator to have wages withheld
If the
office finds a person in violation of any act specified in this section, it may
enter an order imposing one or more of the following penalties: (a)?Issuance of
a reprimand. (b)?Suspension of a license, subject to reinstatement upon
satisfying all reasonable conditions imposed by the office. (c)?Revocation of a
license. (d)?Denial of a license. (e)?Imposition of a fine in an amount up to
$25,000 for each count or separate offense. (f)?An administrative fine of up to
$1,000 per day, but not to exceed $25,000 cumulatively...
Which
of the following is NOT an action the Office may take in an effort to reduce
the burden on licensees being examined?
Limit the period of time for
the examination so that it is conducted quickly.
Furnish
a copy of all examinations to an appropriate regulator
Accept
an examination from an appropriate regulator
Conduct
a joint or concurrent examination with another regulatory agency
To reduce the burden on
persons subject to this chapter, the office may conduct a joint or concurrent
examination with a state or federal regulatory agency and may furnish a copy of
all examinations to an appropriate regulator if the regulator agrees to abide
by the confidentiality provisions in chapter 119 and this chapter. The office
may also accept an examination from an appropriate regulator.
Upon
discovery of violation, the AZDFI will notify the violator of the allegations
via:
A written notice that
explains the alleged acts and contains a time and place for a hearing
A
telephone call
A
copy of their license with "revoked" stamped on it
A
face to face interview
When it
has been discovered that a person participating in the conduct of the financial
institution or enterprise has been in engaged in any questionable acts, the
violator and the financial institution where they are employed will receive a
written notice from the Superintendent that contains a statement of the alleged
facts and a time and place at which a hearing shall be held.
How
quickly must the civil penalty assessed against a person for violation of title
be paid?
By
the fifteenth of the month following the service of the notice of the
assessment on the person.
Within
10 days after the service of the notice of the assessment on the person.
Within thirty days after the
service of the notice of assessment on the person.
By
the 1st of the following month after the notice of the assessment on the
person.
If the
assessment is not paid in full within thirty days after the service of the
notice of the assessment on the person, the attorney general, on request of the
superintendent, shall bring an action in the superior court in the county in
which a violation of this section is alleged to have occurred in the same
manner as the filing of other actions.
Relative
to license maintenance, mortgage brokers, mortgage bankers, and mortgage loan
originators must meet specific DFI requirements; which of the following acts is
not a DFI requirement?
Employing
brokers or bankers keep and maintain the MLO's license at the principal place
of business during the MLO's term of employment.
NMLS
Registered MLO's may be granted a temporary license for up to 180 days.
Mortgage
loan originators must notify the superintendent of a change in residence.
Within
thirty days of a mortgage loan originator, employers must notify the
superintendent of the licensee's termination and return the license to the
superintendent..
For
answer B to meet specific DFI requirements, the employing broker or banker must
notify the superintendent of the mortgage loan originators' termination within
five days of the licensee's termination. (A.R.S. § 6-991.04).
Mortgage
brokers are required to observe generally accepted accounting principles and
practices; which of the following acts is not a generally accepted accounting
principle?
Immediate
deposit of all monies received into an escrow account with a licensed escrow
agent.
Monetary
withdrawals from the escrow account can only be disbursed according to the
terms of the escrow instructions.
The mortgage broker may serve
as the escrow agent and disburse funds at closing.
The
Mortgage Broker may accept an appraisal fee, a credit investigation fee, and an
application fee which may not be commingled with other broker monies.
(§
6-906. Accepted Accounting Practices) C. A mortgage broker shall immediately
deposit all monies received by the mortgage broker in an escrow account with an
escrow agent licensed pursuant to chapter 7 of this title. Withdrawals shall
only be disbursed according to the terms of the escrow instructions. The escrow
agent shall not be the mortgage broker. A mortgage broker, however, may accept
an appraisal fee, which the mortgage broker shall only use to obtain an
appraisal, a credit investigation fee and a fee in connection with an application
for a mortgage loan. The mortgage broker shall not commingle the appraisal fee
or credit investigation fee with other monies of the mortgage broker."
What
happens to a cease and desist order if the individual involved resigns from his
position or has his employment terminated?
The
order is null and void.
The order proceeds as if the
person is still employed by the financial institution or enterprise.
The
order is put in pending status for six months and then, if the person does not
gain employment during that time, the order is considered null and void.
The
order is put on hold until the person is employed by another financial
institution or enterprise.
If the
individual involved resigns or has his or her employment terminated, it does
not affect the jurisdiction and authority of the superintendent to issue a
notice and proceed against that person.
REGULATION B
1002.1 Authority,
scope and purpose.
(a) Authority and scope. This
part, known as Regulation B, is issued by the Bureau of Consumer Financial
Protection (Bureau) pursuant to title VII (Equal Credit Opportunity Act) of the
Consumer Credit Protection Act, as amended (15 U.S.C. 1601 et seq.). Except as
otherwise provided herein, this part applies to all persons who are creditors,
as defined in § 1002.2(l), other than a person excluded from coverage of
this part by section 1029 of the Consumer Financial Protection Act of 2010,
title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111--203, 124 Stat. 1376. Information collection requirements
contained in this part have been approved by the Office of Management and
Budget under the provisions of 44 U.S.C. 3501 et seq. and have been assigned
OMB No. 3170--0013.
(b) Purpose. The
purpose of this part is to promote the availability of credit to all
creditworthy applicants without regard to race, color, religion, national
origin, sex, marital status, or age (provided the applicant has the capacity to
contract); to the fact that all or part of the applicant's income derives from
a public assistance program; or to the fact that the applicant has in good
faith exercised any right under the Consumer Credit Protection Act. The
regulation prohibits creditor practices that discriminate on the basis of any
of these factors. The regulation also requires creditors to notify applicants
of action taken on their applications; to report credit history in the names of
both spouses on an account; to retain records of credit applications; to
collect information about the applicant's race and other personal
characteristics in applications for certain dwelling-related loans; and to
provide applicants with copies of appraisal reports used in connection with
credit transactions.
[Codified to 12 C.F.R.
§ 1002.1]
Childbearing, childrearing. In
evaluating creditworthiness, a creditor shall not make assumptions or use
aggregate statistics relating to the likelihood that any category of persons
will bear or rear children or will, for that reason, receive diminished or
interrupted income in the future.
Race, color, religion,
national origin, sex. Except as otherwise permitted or
required by law, a creditor shall not consider race, color, religion, national
origin, or sex (or an applicant's or other person's decision not to provide the
information) in any aspect of a credit transaction.
[Codified to 12 C.F.R.
§ 1002.8]
§ 1002.9 Notifications.
(a) Notification of action taken, ECOA
notice, and statement of specific reasons. (1) When
notification is required. A creditor shall notify an applicant of action taken
within:
(i) 30 days after receiving
a completed application concerning the creditor's approval of, counteroffer to,
or adverse action on the application;
(ii) 30 days after
taking adverse action on an incomplete application, unless notice is provided
in accordance with paragraph (c) of this section;
(iii) 30 days
after taking adverse action on an existing account; or
(iv) 90 days after
notifying the applicant of a counteroffer if the applicant does not expressly
accept or use the credit offered.
B) Provide
a written statement of the reasons for adverse action and the ECOA notice
specified in paragraph (b)(1) of this section if the applicant makes a written
request for the reasons within 60 days of the creditor's notification.
§ 1002.12 Record
retention.
b) Preservation of records. (1)
Applications. For 25 months (12 months for business credit, except as provided
in paragraph (b)(5) of this section) after the date that a creditor notifies an
applicant of action taken on an application or of incompleteness, the creditor
shall retain in original form or a copy thereof:
B) The
statement of specific reasons for adverse action; and
(4) Enforcement proceedings and
investigations. A creditor shall retain the information beyond
25 months (12 months for business credit, except as provided in paragraph
(b)(5) of this section) if the creditor has actual notice that it is under
investigation or is subject to an enforcement proceeding for an alleged violation
of the Act or this part, by the Attorney General of the United States or by an
enforcement agency charged with monitoring that creditor's compliance with the
Act and this part, or if it has been served with notice of an action filed
pursuant to section 706 of the Act and § 1002.16 of this part. The
creditor shall retain the information until final disposition of the matter,
unless an earlier time is allowed by order of the agency or court.
(i) Ethnicity, and
race using either;
(A) For ethnicity,
the aggregate categories Hispanic or Latino, and not Hispanic or Latino; and
for race, the aggregate categories American Indian or Alaska Native, Asian,
Black or African American, Native Hawaiian or Other Pacific Islander, and
White; or
(B) The categories
and subcategories for the collection of ethnicity and race set forth in
appendix B to 12 CFR part 1003.
[Codified to 12 C.F.R.
1002.13]
§ 1002.14 Rules
on providing appraisals and other valuations.
(a) Providing appraisals and other
valuations. (1) In
general. A creditor shall provide an applicant a copy of all
appraisals and other written valuations developed in connection with an
application for credit that is to be secured by a first lien on a dwelling. A
creditor shall provide a copy of each such appraisal or other written valuation
promptly upon completion, or three business days prior to consummation of the
transaction (for closed-end credit) or account opening (for open-end credit),
whichever is earlier. An applicant may waive the timing requirement in this
paragraph (a)(1) and agree to receive any copy at or before consummation or
account opening, except where otherwise prohibited by law. Any such waiver must
be obtained at least three business days prior to consummation or account
opening, unless the waiver pertains solely to the applicant's receipt of a copy
of an appraisal or other written valuation that contains only clerical changes
from a previous version of the appraisal or other written valuation provided to
the applicant three or more business days prior to consummation or account
opening. If the applicant provides a waiver and the transaction is not
consummated or the account is not opened, the creditor must provide these
copies no later than 30 days after the creditor determines consummation will
not occur or the account will not be opened.
(2) Disclosure. For applications
subject to paragraph (a)(1) of this section, a creditor shall mail or deliver
to an applicant, not later than the third business day after the creditor
receives an application for credit that is to be secured by a first lien on a
dwelling, a notice in writing of the applicant's right to receive a copy of all
written appraisals developed in connection with the application. In the case of
an application for credit that is not to be secured by a first lien on a
dwelling at the time of application, if the creditor later determines the
credit will be secured by a first lien on a dwelling, the creditor shall mail
or deliver the same notice in writing not later than the third business day
after the creditor determines that the loan is to be secured by a first lien on
a dwelling.
(3) Reimbursement. A
creditor shall not charge an applicant for providing a copy of appraisals and
other written valuations as required under this section, but may requireapplicants to pay a reasonable fee to reimburse the creditor
for the cost of the appraisal or other written valuation unless otherwise
provided by law.
1002.16 Enforcement,
penalties and liabilities.
(a) Administrative enforcement. (1)
As set forth more fully in section 704 of the Act, administrative enforcement
of the Act and this part regarding certain creditors is assigned to the
Comptroller of the Currency, Board of Governors of the Federal Reserve System,
Board of Directors of the Federal Deposit Insurance Corporation, National
Credit Union Administration, Surface Transportation Board, Civil Aeronautics
Board, Secretary of Agriculture, Farm Credit Administration, Securities and
Exchange Commission, Small Business Administration, Secretary of
Transportation, and Bureau of Consumer Financial Protection.
(b) Penalties and liabilities. (1)
Sections 702(g) and 706(a) and (b) of the Act provide that any creditor that
fails to comply with a requirement imposed by the Act or this part is subject
to civil liability for actual and punitive damages in individual or class
actions. Pursuant to sections 702(g) and 704(b), (c), and (d) of the Act,
violations of the Act or this part also constitute violations of other Federal
laws. Liability for punitive damages can apply only to nongovernmental entities
and is limited to $10,000 in individual actions and the lesser of $500,000 or 1
percent of the creditor's net worth in class actions. Section 706(c) provides
for equitable and declaratory relief and section 706(d) authorizes the awarding
of costs and reasonable attorney's fees to an aggrieved applicant in a
successful action
.
(2) As provided in
section 706(f) of the Act, a civil action under the Act or this part may be
brought in the appropriate United States district court without regard to the
amount in controversy or in any other court of competent jurisdiction within
five years after the date of the occurrence of the violation, or within one
year after the commencement of an administrative enforcement proceeding or of a
civil action brought by the Attorney General of the United States within five
years after the alleged violation.
(3) If an agency
responsible for administrative enforcement is unable to obtain compliance with
the Act or this part, it may refer the matter to the Attorney General of the
United States. If the Bureau, the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System, or the National Credit Union Administration has reason to believe that
one or more creditors have engaged in a pattern or practice of discouraging or
denying applications in violation of the Act or this part, the agency shall
refer the matter to the Attorney General. If the agency has reason to believe
that one or more creditors violated section 701(a) of the Act, the agency may
refer a matter to the Attorney General.
(ii) Inform
the applicant that the Secretary of Housing and Urban Development has been
notified and that remedies may be available under the Fair Housing Act.
TILA
Regulation Z
TILA,
you have a right of rescission
OCC
The 2016 Servicing Rule took effect on October 19, 2017, except the
provisions related to successors in interest and periodic statements for
consumers in bankruptcy, which took effect on April 19, 2018. The CFPB
concurrently issued an interpretive rule under the Fair Debt Collection
Practices Act (FDCPA) to clarify the interaction of the FDCPA and specified mortgage
servicing rules in Regulations X and Z. (81 Fed. Reg. 71977) (October 19,
2016).
In 2018, the Economic Growth, Regulatory Relief, and Consumer
Protection Act (EGRRCPA)11 amended several provisions of TILA, including: (1)
the addition of a new safe-harbor qualified mortgage category for portfolio mortgages
of certain insured depository institutions and insured credit unions; (2)
modification of the waiting period requirements for high-cost mortgage loan
consummation under certain conditions; (3) clarification of “customary and
reasonable” as they pertain to fee appraisers who voluntarily donate appraisal
services to certain charitable organizations; and (4) student loan protections
in the event of bankruptcy or death of the student or non-student obligor. The
EGRRCPA also amended TILA to exclude manufactured or modular housing retailers
and their employees from loan originator compensation requirements when
specific conditions are met, and amended the Secure and Fair Enforcement for
Mortgage Licensing Act (SAFE Act) regarding employment transition of certain
loan originators. These provisions were generally effective on May 24, 2018,
except for the student loan protections, which became effective on November 24,
2018, and the SAFE Act changes, which became effective on November 24, 2019. On
November 16, 2019, the Bureau issued an interpretive rule on the SAFE Act
changes,
Subpart E
certain disclosures and provide limitations for closed-end credit transactions and open-end credit plans that have rates or fees above specified amounts or certain prepayment penalties
Special disclosures are required, including the total annual loan cost rate, for reverse mortgage transactions. Rules also prohibit specific acts and practices in connection with high-cost mortgages. As of 2015 certain closed-end transactions secured by real property, or a cooperative unit (co--ops), as required with disclosures for mortgage transfers and disclosure requirements for periodic statements for residential mortgage loans
All transactions secured by a dwelling have to ability to repay standards.
Credit costs may vary depending on the interest rate, the amount of the loan and other charges, the timing and amounts of advances, and the repayment schedule. The APR, which must be disclosed in nearly all consumer credit transactions, is designed to take into account all relevant factors and to provide a uniform measure for comparing the cost of various credit transactions. The 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. The disclosure of the APR is central to the uniform credit cost disclosure envisioned by the TILA. The value of a closed-end credit APR must be disclosed as a single rate only, whether the loan has a single interest rate, a variable interest rate, a discounted variable interest rate, or graduated payments based on separate interest rates (step rates), and it must appear with the segregated disclosures. Segregated disclosures are grouped together and do not contain any information not directly related to the disclosures required under
Financial institutions may, if permitted by state or other law,
precompute interest by applying a rate against a loan balance using a simple
interest, add-on, discount or some other method, and may earn interest using a
simple interest accrual system, the Rule of 78s (if permitted by law) or some
other method. Unless the financial institution’s internal interest earnings and
accrual methods involve a simple interest rate based on a 360-day year that is
applied over actual days (even that is important only for determining the
accuracy of the payment schedule), it is not relevant in calculating an APR,
since an APR is not an interest
The regulation requires that the terms “finance charge” and “annual
percentage rate” be disclosed more conspicuously than any other required
disclosure, subject to limited exceptions. The finance charge and APR, more
than any other disclosures, enable consumers to understand the cost of the
credit and to comparison shop for credit. A creditor’s failure to disclose
those values accurately can result in significant monetary damages to the
creditor, either from a class action lawsuit or from a regulatory agency’s
order to reimburse consumers for violations of law. If an APR or finance charge
is disclosed incorrectly, the error is not, in itself, a violation of the
regulation if: • The error resulted from a corresponding error in a calculation
tool used in good faith by the financial institution. • Upon discovery of the
error, the financial institution promptly discontinues use of that calculation
tool for disclosure purposes. • The financial institution notifies the CFPB in
writing of the error in the calculation tool.
When a financial institution claims a calculation tool was used in
good faith, the financial institution assumes a reasonable degree of
responsibility for ensuring that the tool in question provides the accuracy
required by the regulation (15 U.S.C. 1640 (c)). For example, the financial
institution might verify the results obtained using the tool by comparing those
results to the figures obtained by using another calculation tool. The financial
institution might also verify that the tool, if it is designed to operate under
the actuarial method, produces figures similar to those provided by the
examples in Appendix J to the regulation. The calculation tool should be checked
for accuracy before it is first used and periodically thereafter
Subpart C – Closed-End Credit Subpart C relates to closed-end credit. It contains rules on disclosures , treatment of credit balances annual percentage rate calculations rescission rights , and advertising
TILA-RESPA Integrated Disclosures must be given for most closed-end
transactions secured by real property or a cooperative unit, other than a
reverse mortgage subject to 12 CFR 1026.33. The TILA-RESPA Integrated
Disclosures do not apply to HELOCs, reverse mortgages, or mortgages secured by
a mobile home or by a dwelling that is not attached to real property. Truth in
Lending disclosures (TIL disclosures) and the Consumer Handbook on Adjustable
Rate Mortgages (CHARM) booklet must still be provided for certain closed-end
Subpart C – Closed-End Credit Subpart C relates to closed-end credit. It contains rules on disclosures treatment of credit balances annual percentage rate calculations, rescission rights and advertising
The TILA-RESPA Integrated Disclosures must be given for most closed-end transactions secured by real property or a cooperative unit, other than a reverse mortgage subject to
The TILA-RESPA Integrated
Disclosures do not apply to HELOCs, reverse mortgages, or mortgages secured by
a mobile home or by a dwelling that is not attached to real property. Truth in
Lending disclosures (TIL disclosures) and the Consumer Handbook on Adjustable
Rate Mortgages (CHARM) booklet must still be provided for certain closed-end
Consumer receives the Closing Disclosure no later than three business days before loan consummation . If the loan is a purchase transaction, the special information booklet must also be provided within three business days of receipt of the consumer’s application
The specifics of these disclosure timing requirements are further discussed below, including a discussion about revised disclosures.
Mortgage loans not subject to the rule are: reverse mortgages, and chattel-dwelling loans.
Reverse mortgages, disclosures must be delivered or mailed to the consumer no later than the third business day after a creditor receives the consumer’s written application (12 CFR For chattel-dwelling mortgage loans, disclosures must be provided to the consumer prior to consummation of the loan (12 CFR 1026.17(b)). Revised disclosures are also required within three business days of consummation if certain mortgage loan terms change For loans like reverse mortgages, the consumer will receive the Good Faith Estimate (GFE), HUD-1 Settlement Statement (HUD-1), and Truth in Lending disclosures as required under the applicable sections of both TILA and RESPA. Consumers receive TIL disclosures for chattel-dwelling loans that are not secured by land, but the GFE and the HUD-1 are not required.
Variable rate and ARM transactions secured by a dwelling have additional disclosure obligations with specific timing requirements both prior to and after consummation.
• Disclosures for variable rate loans must be given for the full
term of the transaction and must be based on the terms in effect at the time of
consummation.
• If the variable rate transaction includes either a seller buydown
that is reflected in a contract or a consumer buydown, the disclosed APR should
be a composite rate based on the lower rate for the buy-down period and the
rate that is the basis for the variable rate feature for the remainder of the
term. • If the initial rate is not determined by the index or formula used to
make later interest rate adjustments, as in a discounted variable-rate
transaction, the disclosed APR must reflect a composite rate based on the
initial rate for as long as it is applied and, for the remainder of the term,
the rate that would have been applied using the index or formula at the time of
consummation (i.e., the fully indexed rate). o If a loan contains a rate or
payment cap that would prevent the initial rate or payment, at the time of the
adjustment, from changing to the fully indexed rate, the effect of that rate or
payment cap needs to be reflected in the disclosures. o The index at
consummation need not be used if the contract provides a delay in the
implementation of changes in an index value (e.g., the contract indicates that
future rate changes are based on the index value in effect for some specified
period, such as 45 days before the change date). Instead, the financial
institution may use any rate from the date of consummation back to the beginning
of the specified period (e.g., during the previous 45-day period). • If the
initial interest rate is set according to the index or formula used for later
adjustments but is set at a value as of a date before consummation, disclosures
should be based on the initial interest rate, even though the index may have
changed by close date
The total amount of the finance
charge must be disclosed for all loans. In a transaction secured by real
property or a dwelling, the disclosed finance charge and other disclosures
affected by the disclosed finance charge (including the amount financed and the
annual percentage rate) must be treated as accurate if the amount disclosed as
the finance charge (1) is understated by no more than $100 or (2) is greater than
the amount required to be disclosed. Amount Financed
If the obligation is a renewable balloon payment instrument that
unconditionally obligates the financial institution to renew the short-term
loan at the consumer’s option or to renew the loan subject to conditions within
the consumer’s control, the payment schedule must be disclosed using the longer
term of the renewal period or periods. The long-term loan must be disclosed
with a variable rate feature. If there are no renewal conditions or if the
financial institution guarantees to renew the obligation in a refinancing, the
payment schedule must be disclosed using the shorter balloon payment term. The
short-term loan must be disclosed as a fixed rate loan, unless it contains a
variable rate feature during the initial loan term. Annual Percentage Rate
(Closed-End Credit)
Due to the structure of construction-permanent and certain other multiple advance loans, Regulation Z includes certain optional provisions to help a creditor estimate the components of the APR and finance charge computations for these loans. In many instances, the amount and dates of advances are not predictable with certainty since they depend on the progress of the work. Regulation Z provides that the APR and finance charge for such loans may be estimated for disclosure based on the best information reasonably available at the time of disclosure (
a creditor has optionality as to whether it discloses the advances separate or together as one transaction in certain circumstances. First, a series of advances under an agreement to extend credit up to a certain amount may be considered as one transaction or disclosed as separate transactions
When a multiple-advance loan to finance the construction of a dwelling may be permanently financed by the same creditor, the construction phase and the permanent phase may be treated as either one transaction or more than one transaction
Here is why: construction loans might have thirty draws during a year or more, and it would be difficult to disclose pieces of one loan as draw occur. Because construction loans or
construction permanent loans may be disclosed as one transaction, or as
multiple transactions, computations can be impacted by this decision. If the
actual schedule of advances is not known, the methods set forth in Appendix D
may be used to estimate the interest portion of the finance charge and the
annual percentage rate and to make disclosures.
In a multiple advance construction loan, a creditor may establish an “interest reserve” to ensure that interest is paid as it accrues by designating a portion of the loan amount for that interest payment purpose. If the creditor requires interest reserves for construction loans, Appendix D provides further guidance. Among other things, the amount of interest reserves included in the commitment amount is not treated as a prepaid finance charge, whether the interest reserve is the same as or different from the estimated interest figure calculated under Appendix D (Comment App. D-5). If a creditor permits a consumer to make interest payments as they become due, the interest reserve should be disregarded in the disclosures and calculations under Appendix D (Comment App. D-5.i). If a creditor requires the establishment of an interest reserve and automatically deducts interest payments from the reserve amount rather than allow the consumer to make interest payments as they become due, the fact that interest will accrue on those interest payments as well as the other loan proceeds must be reflected in the calculations and disclosures.
360-Day and 365-Day Years –
By State
Disclosure violations may occur, however, when a financial
institution applies a daily interest factor based on a 360-day year to the
actual number of days between payments. In those situations, the financial
institution must disclose the higher values of the finance charge, the APR, and
the payment schedule resulting from this practice.
***Use TILA-RESPA Integrated Disclosures (See Regulation Z): • Most
closed-end mortgage loans, including: o Construction-only loans o Loans secured
by vacant land or by 25 or more acres
Continue to use TIL20 and RESPA disclosures (as applicable): • HELOCs (subject to disclosure requirements
• Reverse mortgages21 (subject to existing TIL and GFE disclosures) •
Chattel-secured
mortgages (i.e., mortgages secured by a mobile home or by a dwelling that is
not attached to real property, such as land) (subject to existing TIL disclosures,
and not RESPA)
Creditors making closed-end consumer credit transactions secured by real property or a cooperative unit, other than a reverse mortgage, and subject to provisions
The Loan Estimate must be delivered or placed in the mail to the
consumer no later than the third business day after the creditor or mortgage
broker receives the consumer’s application for a mortgage loan . If the Loan
Estimate is not provided to the consumer in person, the consumer is considered
to have received the Loan Estimate three business days after it is delivered or
placed in the mail (this applies to electronic delivery as well) Other than for transactions secured
by a consumer’s interest in a timeshare plan, the Loan Estimate must be
delivered or placed in the mail no later than the seventh business day before
consummation
6 pieces of information are:
The consumer’s name; • The consumer’s income; The consumer’s social
security number to obtain a credit report; • The property address; • An
estimate of the value of the property; and • The mortgage loan amount sought.
Consumer may modify or waive the seven business day waiting
period after receiving the Loan Estimate if the consumer determines that the
mortgage loan is needed to meet a bona fide personal financial emergency that
necessitates consummating the credit transaction before the end of the waiting
period
Zero tolerance. For charges other than those that are specifically excepted, as noted below, creditors may not charge consumers more than the amount disclosed on the Loan Estimate, other than for changed circumstances that permit a revised Loan Estimate. The zero tolerance charges generally include but are not limited to the following: • Fees for required services paid to the creditor, mortgage broker, or an affiliate of either
• Fees paid to an unaffiliated third party if the creditor did not permit the consumer to shop for a third-party service provider for a settlement service or transfer taxes
percent cumulative tolerance. Charges for third-party services and recording fees paid by or imposed on the consumer are grouped together and are subject to a 10 percent cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10 percent
These charges are: Recording fees •
Charges for required third-party services if: o
The charge is not paid to the creditor or the creditor’s affiliate The consumer is permitted by the creditor to shop for the third-party
service
Variances permitted without tolerance limit:
Prepaid interest; property insurance premiums; amounts placed into an escrow, impound, reserve or similar account
• Charges paid to third-party service providers for services required by the creditor if the creditor permits the consumer to shop and the consumer selects a third-party service provider not on the creditor’s written list of service providers
• Property taxes and other charges paid to third-party
service providers for services not required by the creditor
Refunds of errors within 60 days of consummation. If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan Estimate beyond the applicable tolerance threshold, the creditor must refund the excess to the consumer no later than 60 calendar days after consummation
• For charges subject to zero tolerance, any amount charged beyond the amount disclosed on the Loan Estimate must be refunded to the consumer
• For charges subject to a 10 percent
cumulative tolerance, to the extent the total sum of the charges exceeds the
sum of all such charges disclosed on the Loan Estimate by more than 10 percent,
the difference must be refunded to the consumer
Loan Estimate - Revisions and Corrections
(A): Changed circumstances – increased settlement charges. Changed
circumstances that occur after the Loan Estimate is provided to the consumer
that cause estimated settlement charges to increase more than is permitted
under the TILARESPA Integrated Disclosure rule
A natural disaster that damages the property or otherwise results
in additional closing costs; o A creditor’s estimate of title insurance is no
longer valid because the title insurer goes out of business; or o New
information not relied on when the Loan Estimate was provided is discovered,
such as a neighbor of the seller filing a claim contesting the property
boundary.
B) Changed circumstances – consumer eligibility: such as income
different than stated
(C): Revisions requested by the consumer: title changes, power of
attorney, legal
(D): Rate locks after initial Loan Estimate.
(E): Expiration of Loan Estimate. If the consumer indicates an
intent to proceed with the transaction more than 10 business days (or any
additional number of days as extended by the creditor orally or in writing)
after the Loan Estimate was delivered or placed in the mail to the consumer, a
creditor may use a revised Loan Estimate. No justification is required for the
change to the original estimate of a charge other than the lapse of 10 business
days or the additional number of days as extended by the creditor
(F): Construction loans. Creditors also may use a revised Loan
Estimate where the transaction involves financing of new construction and the
creditor reasonably expects that settlement will occur more than 60 calendar
days after the original Loan Estimate has been provided if the original Loan
Estimate clearly and conspicuously stated that at any time prior to 60 days
before consummation, the creditor may issue revised disclosures
Documentation of intent to proceed. the creditor must document the consumer’s
communication of the intent to proceed (12 CF Oral communication in person
immediately upon delivery of the Loan Estimate; or • Oral communication over
the phone, written communication via email, or signing a pre-printed form after
receipt of the Loan Estimate.
The Closing Disclosure generally must contain the actual terms and
costs of the transaction form integrates and replaces the HUD-1 and the final
TIL
If the actual terms or costs of the transaction change prior to
consummation, the creditor must provide a corrected disclosure that contains
the actual terms of the transaction and complies with the other requirements of
New three-day waiting period. If the creditor provides a corrected disclosure,
it must provide the consumer with an additional three-business-day waiting
period prior to consummation if the annual percentage rate becomes inaccurate,
the loan product changes, or a prepayment penalty is added to the transaction
“Consummation” occurs when the consumer becomes contractually
obligated to the creditor on the loan, not, for example, when the consumer
becomes contractually obligated to a seller on a real estate transaction. The
time when a consumer becomes contractually obligated to the creditor on the
loan depends on applicable state law Closing Disclosure form no later than
three business days before consummation If the Closing Disclosure is provided
in person, it is considered received by the consumer on the day it is provided.
If it is mailed or delivered electronically, the consumer is considered to have
received the Closing Disclosure three business days after it is delivered or
placed in the mail Settlement agents. Creditors may contract with settlement
agents to have the settlement agent provide the Closing Disclosure to consumers
on the creditor’s behalf, provided that the settlement agent complies with all
relevant requirements
Three-business-day waiting period. The loan may not be consummated
less than three business days after the Closing Disclosure is received by the
consumer. A business day means all calendar days except Sundays and the legal
public holidays
Three categories of changes that require a corrected Closing Disclosure containing all changed terms • Changes that occur before consummation that require a new three-business-day waiting period
• Changes that occur before consummation and do not require a new three-business-day waiting period;
• Changes that occur after consummation. The disclosed APR becomes inaccurate, The loan product changes.
A prepayment penalty is added
When a post-consummation event requires a corrected Closing Disclosure, the creditor must deliver or place in the mail a corrected Closing Disclosure not later than 30 calendar days after receiving information sufficient to establish that such an event has occurred.
In transactions involving a seller, the settlement agent must provide the seller with a corrected Closing Disclosure if an event occurs within 30 days of consummation that makes the disclosures inaccurate as they relate to the amount actually paid by the seller. The settlement agent must deliver or mail a corrected closing disclosure no later than 30 days from receiving information that establishes the Closing Disclosure is inaccurate and results in a change to an amount actually paid by the seller from what was previously disclosed Changes due to clerical errors. The creditor must provide a corrected Closing Disclosure to correct non-numerical clerical errors no later than 60 calendar days after consummation Refunds related to the good faith analysis.
The creditor can cure a tolerance violation by providing a refund to the consumer and delivering
or placing in the mail a corrected Closing Disclosure that reflects the refund
no later than 60 calendar days after consummation
A special information booklet, otherwise known as the home buying
information booklet, to consumers who apply for a consumer credit transaction secured
by real property or a cooperative unit the “Your Home Loan Toolkit”
If the consumer is applying for a HELOC,
the creditor (or mortgage broker) can provide a copy of the brochure titled
“What You Should Know About Home Equity Lines of Credit” instead of the special
information booklet Creditors must deliver or place in the mail the special information
booklet not later than three business days after receiving the consumer’s loan
application if the creditor denies the consumer’s application or if the
consumer withdraws the application before the end of the three business-day
period, the creditor need not provide the special information booklet When two
or more persons apply together for a loan, the creditor may provide a copy of
the special information booklet to just one of them
Regulation Z provides a flexible rule for disclosure of construction loans and construction-permanent loans
. First, it
provides that a series of advances under an agreement to extend credit up to a
certain amount may be considered as one transaction Regulation Z provides a flexible
rule for disclosure of construction loans and construction-permanent loans
Remember creditor is LENDER, don't let the terms trick you up.
