Mortgage Laws NMLS TEST PREP

 

A summary of the mortgage laws you need to memorize to pass the Federal test

You don't need to know the date but it helps to know the order of when they passed

and when CFPB took over

Regulation B ECOA Equal Credit Op Act 1975 Federal Reserve Fair Housing Act: race/color/religion/national or/sex/familial status/handicap Prohibited basis: Race/religion/sex/age/public assistance Self tests ~ 25 months keep records  Free copy of appraisal/  copy 3 days before consummation/ Not consummated closed copies 30 days or less Regulation C Home Mortgage Disclosure Act of 1975 HMDA  Regulation C requires many financial institutions to annually  disclose loan data about the communities to which they provided residential mortgages.   LAR reports Loan Application Register  low/mod      Was under Federal Reserve now after 2011 CFPB  COVERED LOANS               Fines: $10000 or $500,000 or 1% worth Regulation N MAP Act Mortgage Acts Protection Advertisements keep 24 months Homeowner’s Protection Act 1998 Cancel PMI Release PMI  78%  or date scheduled or refinance Real Estate Settlement Procedures Act (RESPA), (Regulation X) 1968 Excludes excess of 25 acres/farm/ commercial   includes: 1-4 and 2nd td a-kickbacks b-unearned and splits c-fees not earned attorney % servicing sold, foreclosure Regulation Z TILA 1968 APR disclosures  Dodd Frank Title X Federal Trade Commission changed to CFBP UDAPP appraisal updated every 2 years OKAY Section 32 and 35 are difficult for me to memorize as I don't do  hard money loans. Draw some diagrams to help you remember.  Read out loud, sing about: 32 HOEPA only owner-occupied refinances HIGH COST 1994 The CFPB High-Cost Mortgage Amendments to Truth in Lending Act (Regulation Z)  2014 expanding the types of mortgage loans subject to the protections of the  Home Ownership and Equity Protections Act (HOEPA),  expand tests for HOEPA coverage, and a new prepayment penalty threshold test on mortgages. Three separate HOEPA threshold tests based on: • The transaction’s annual percentage rate (APR) •  The amount of points and fees paid in connection with the transaction •  Prepayment penalties you may charge under the loan or credit agreement     first mortgage, the interest-rate trigger point: loan’s   APR exceeds 8 percent more than the rates on Treasury securities  posted on the 15th of the month prior to the application and is of comparable maturity.  APOR 1st APR exceeds 6.5 over 2nd APR exceeds 8.5 over 8.5 % points for first-lien loans if dwelling is personal property and less than $50,000 Prepay more than 36 months or exceeds 2% 1. Total lender points and fees are greater than  5 percent of the total loan amount. percentage  includes certain fees such as origination fees, broker fees,  processing fees and servicing setup fees. 2.  5 % of the total loan amount if loan amount is $20,000 or more;  or · The lesser of 8% or $1,000 for loan amounts less than $20,000  (adjusted annually);  or TRIGGER: fees and points (mortgage-broker fees)  borrowers pay at or before closing exceed $547/561  (2007 amount increased) or 8 percent of the total loan amount, whichever is larger.  Extra 3 days rescission      default interest rate cannot be greater than the initial rate on the promissory note.  no more than two regular monthly periodic payments may be paid  in advance from the loan proceeds at the closing. No prepay unless: The lender has verified the borrowers’ gross income through DTI new loan will be 50 percent or less.  The money used to prepay the mortgage does not come from  and is not affiliated with the current lender.  prohibit a prepayment penalty being charged if  current lender refinances the mortgage.  The prepayment penalty does not exceed the first five years of the mortgage. Due-on-demand clauses restricted. no lender may refinance a borrower into a  Section 32 mortgage within the first 12 months  of the original Section 32 mortgage, unless the refinance is demonstrated to be in the borrower’s best interest SECTION 35 High priced HPML                                                                                                                                                       1st lien APR 1.5 higher than APOR Or 2nd APR 3.5 higher than APOR percentage point benchmarks that characterize HPMLs are: ·  ​1.5 percent​. The rate at which an HPML  exceeds the prime rate for a first-lien mortgage,  which has a principal balance that does ​not​ exceed  Freddie Mac’s maximum principal obligation for purchase. ·  ​2.5 percent​. The rate at which an HPML  exceeds the prime rate for a first-lien mortgage,  which has a principal balance that ​does​ exceed  Freddie Mac’s maximum principal obligation for purchase. ·  ​3.5 percent​. The rate at which an HPML  exceeds the prime rate for a subordinate-lien mortgage Freddie Mac purchase eligible HPMLs  that are fixed-rate mortgages or adjustable rate mortgages  (ARMs) 5/1 with 7/1 or 10/1 terms.  These HPMLs cannot be prepayment penalty mortgages or ARMs with an initial fixed-rate period of less than seven years. 35 requires impound except for co-op, construction start,  bridge less than 12, reverse, rural less than 50000 Appraisal required 2 appraisals on flips seller acquired the property  90 days (or fewer) before the borrower’s agreement to purchase the property,  and the borrower’s agreement price is greater than 10 percent.  or seller acquired the property 91 to 180 days  before seller’s acquisition price by more than 20 percent. Loss mitigation more than once Fines: $10000 1 year jail Telephone Consumer Protection Act 1991  from 1934 Communications Act  FCC regulates Fines $1500 per/ Gramm Leach Bliley 1999 Privacy /  affiliated parties consumer customer 2011 under CFPB Fines: lessor of 1 mill or 1% assets 5 years jail/ FACT ACT identity theft red flags covered account risks fraud alerts  Fines $100- $1000/ Fair Credit Reporting Regulation V    Opt out   medical Regulation P  Privacy notices at start and annual limit share account number 15 USC 6151 – DO NOT CALL Patriot Act FINANCIAL Crimes Enforcement Network  Fincen OFAC Dept Treasury SAR report   Categorize the laws Respa is X = REXPA with pneumonic devices REXPA is about time lines Study a little and in the middle of a topic go get a healthy snack or walk around the building. 25 minutes, 5 minute break Cramming isn't the best.  Take the 20 hour classes and then schedule test for about nine  days after the class and study every night for two hours.

Mortgage Summary Laws

REG B

Equal Credit Opportunity Act  1974 

ECOA under TILA TITLE XIV

Federal Reserve is boss

prevents discrimination/ redlining

Fair Housing Act race/color/religion/national origin/sex/familial status/ HANDICAP

1st lien

denial in 30 days called adverse action with reasons

If more than 1 applicant notice to one is okay

free copy of appraisal

Borrower gets copy of appraisal 3 days prior to consumation.

Minor revisions of appraisal borrower can waive the 3 days at close

Not closed consumated appraisal to borrower before 30 days

cannot ask about Mrs. Ms. Miss

FINES: $10,000 individual actions. Cass actions: penalty of $500,000 or 1% of the creditor's net worth, whichever is lower.

Ethic means Latino... 

Race is American Indian/Asian/Black/Native Hawaiian/ 

Not covered are: manufactured, reverse, business, loan modifications

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REGULATION C

Home Mortgage Disclosure Act  HMDA

CFPB amended dwelling-secured standard for all loans or lines of credit that are for personal, family, or household purposes. Thus, most consumer-purpose transactions, including closed-end home-equity loans, home-equity lines of credit, and reverse mortgages, are subject to the regulation. 

All closed end loans for home improvement, purchase or refinance

transactional coverage to require reporting of all open end not home-equity lines of credit.

Federal Reserve

2017 platform/website

Loan data and low to moderate income data

Loan Application Register LAR report Annually

loan number/date/ loan type/ $ purpose/property type/occupancy/preapproval/actions/

DTI/ location/ ethnicity (Hispanic)/ race/ sex/ income/ pice/ HOEPA/ rate/ points/FICO/DU or LP/age/

Depository banks report to supervising agencies, non depository report to HUD US Dept of Housing and Urban Development. The Federal Financial Institutions Examination Council posts the records FFIEC  

Fines: $10000 or $500,000 or 1% of worth

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REGULATION X

RESPA Real Estate Settlement Procedures Act

1-4 units and 2nd trust deeds

8 a) no kickbacks

8 b) no splits 

8 c) no unearned $ no attorney or broker referral fees

servicers disclose % of loans sold

FINES: $10000 and 1 year jail

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Regulation Z

CFBP Federal Trade Commission FTC

TILA Truth in Lending HOEPA Home Ownership and Equity Protection Act of 1994

Competitive Equality Banking Act of 1987 - Title I: Financial Institutions Competitive Equality - Amends the Bank Holding Company Act of 1956 

1974 RESPA Act

ABILITY TO REPAY

APR disclosure

CFPR rule 2018 Servicer statement books in BK disclose 14 days after event

Title X Dodd Frank

Predatory lending in refinances and closed-end home equity loans with high interest rates or high fees.

HOEPA Section 32 loans must also meet the same APR and APOR criteria as Section 35 loans, but Section 32 loans also include these three additional criteria, which do not apply to Section 35 loans:

1. The APR is higher than the APOR by more than 6.5 percent.
2. Total lender/broker points and fees are greater than 5 percent of the total loan amount. This percentage includes certain fees such as origination fees, broker fees, processing fees and servicing setup fees.
3. A prepayment penalty exceeds 2 percent of the prepaid amount or occurs more than 36 months after closing. lender cannot extend an HPML without setting up an escrow account to collect premium payments for property taxes / insurance except cooperative shares dwelling’s initial construction loan, bridge loans that have loan terms of 12 months or less, Reverse mortgages, certain located in rural or underserved areas

2013 HOEPA Rule 

 6.5 % points for first-lien loans or

  8.5 % points for subordinate-lien loans 

 8.5 % points for first-lien loans if dwelling is personal property and less than $50,000

Points and Fees Test: Points and fees exceeding the greater of 

 5 % of the total loan amount if loan amount is $20,000 or more; or

  The lesser of 8% or $1,000 for loan amounts less than $20,000 (adjusted annually); or

 TILA Higher-Priced Mortgage Loans Appraisal Rule

Section 35 APR higher than APOR by 6.5

prepayment penalty 36 months

Fines: $5000 - 1 million or 1% of worth

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Telephone Consumer Protection Act of 1991 

amended from Communications Act of 1934

auto dialers, do not call

FCC regulates

Fines: $1500 

*****

Gram Leach Bliley 

Privacy  - Affiliated Parties

consumer vs customer ( has an account and applied)

2011 went under CFPB

2016 only need to give initial notice if they do not share

Must notify annually and at opening

Fines: lessor of 1 million or 1% assets 5 years jail

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FACT Act 2003 FACTA

amended Fair Credit Reporting Act

Red flags

utility companies don't need social security # covered accounts risk identity theft

CREDITOR = bank, broker, or auto dealer

fraud alerts

FINES: $100 -1000

Identity theft, free annual credit report every 12 

Regulation B for Mortgage

 

 

Free NMLS Study Guide

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.