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🏠
Chapter 1 ● Registered MLO: Meets the definition of an ● State regulatory authorities, like CA-DFPI,
MLO and is an employee of a depository can't pass laws.
History of the mortgage industry institution. ● Federal regulatory authorities, like CFPB and
● Modern mortgage industry: Federal Reserve ● Licensed MLO: Completes a 20-hour course, federal banking agencies (FDIC, NCUA),
System (1913) obtains a license from the Nationwide enforce federal law.
● Federal Home Loan Bank Act (1932): Federal
Home Loan Banks lend to banks
Multistate Licensing System & Registry
(NMLS), and is sponsored by a lender or 📜 Obtaining A License
●

●
Federal Deposit Insurance Corporation (FDIC):
Insures deposits against bank defaults
Federal Housing Administration (FHA, 1934):
●
broker.
NMLS: 📊 The Nationwide Multistate
Licensing System & Registry is a database
Secure and Fair Enforcement Act (SAFE act)
created by Housing and Economic Recovery Act
(HERA)
Largest mortgage insurer; established to help that stores information on mortgage loan SAFE Act (2008-> NMLS & Model law)
recover from the Great Depression originators. Created by both the Conference Pre-licensing Education
● Federal National Mortgage Association (FNMA, of State Bank Supervisors (CSBS) and - 20 hrs ed required by SAFE Act (3hr federal law,
Fannie Mae, 1938): Government-sponsored American Association of Residential 3hrs ethics, 2 hrs non traditional 12 hrs elective)

●
entity (GSE) to increase market liquidity
Federal Home Loan Mortgage Corporation
(FHLMC, Freddie Mac, 1970)
● Mortgage Broker: 🧑‍💼
Mortgage Regulators (AARMR).
Takes mortgage loan
applications but cannot underwrite, acting as
- AND state requirement
Retake 20 hrs ed if fail to acquire license:
- > 3 yrs from taking the 20 hrs
● Government National Mortgage Association
(GNMA, Ginnie Mae, 1968): ●
middlemen.
Mortgage Lender: 💰 Provides funds for
- > 3 yrs from last date of licensure as MLO
- Or has not taken it in the last 3 yrs when required

●
Government-insured mortgages (e.g., FHA)
Department of Housing and Urban
Development (HUD, 1965): Manages federal
●
mortgage loans.
Mortgage Servicer: 💳 Collects payments
and manages escrow accounts.
by state
Testing: uniform state content test (UST): 120 Qs,
>75% correct
housing programs, enforces fair housing laws, ● *An individual negotiating a residential *note: each attempt 30 days apart, fails 3 times,
provides funding, and conducts research mortgage loan with or on behalf of an must wait 6 mo, testing fee $110
● Secure and Fair Enforcement Act of 2018
2008 immediate family member does not need to Application: MU4 (NMLS generic application), MU1
(SAFE Act): Establishes minimum standards for be licensed. (company license application), 10 yrs residential

●
Mortgage Loan Originators (MLO)
Dodd-Frank Act of 2010: Establishes Consumer
Financial Protection Bureau (CFPB) to regulate,
📊 Secondary Mortgage Market:
● Mortgage-backed securities are secured by a
+job history
Background check
Credit report
supervise, and enforce federal law. mortgage or collection of mortgages. Surety bond: malpractice insurance
● Big players: Fannie Mae (1938), Freddie Mac Net worth: liquid assets, sponsor of MLO pay cover

🫵 Mortgage (1970), and Ginnie Mae (1968). State fund: state required

● Mortgage Loan Originator (MLO): ✅ Takes

Loan Originators ● Fannie Mae and Freddie Mac are GSEs
(Government-Sponsored Enterprises) dealing 📜 Issuance Of A License
and negotiates terms, and receives 💸
residential mortgage loan applications, offers with conventional loans, while Ginnie Mae is a Criteria:
government-owned entity that deals with FHA - no license revocation

● MLO is NOT solely engaged as: ⛔ Loan

compensation. and VA loans. - no felony conviction (felony >7 yrs, NEVER fraud,

processor/underwriter (license not required),

only perform real estate brokerage,
👮‍♂️ Regulatory Authorities:
dishonesty, breach of trust, money laundering)
- non-financial felony (7 yrs)
● Regulatory authorities supervise, investigate, - financial responsibility (judgements, tax liens,
extensions of credit relating to time share. and impose civil penalties (not criminal foreclosure > 3yrs, seriously delinquent > 3 yrs,
penalties) to regulate the industry. child support)
- pre-licensing education

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- UST, net worth, surety bond, state fund ● ⛔ Terms or fees of a transaction or proxy for
Temporary authority: allows registered MLO to
become licensed MLO when moving. To be
eligible:
● ✅
terms, dual compensation
Safe harbor: overall $ volume, long-term
performance, # hrs worked, # new
- Employed by state-licensed mortgage company customers, fixed payment, % loan close,
AND quality of files
- Registered MLO past year or licensed 30 days ● 401K contribution limits are <10 transactions
License maintenance: deadline 12/31, in 12 months and <10% of individual total
reinstatement 03/01 (reapply license after 03/01), compensation.
updating MU4 change within 5 days; *An MLO cannot collect fees in their own name, they
- Meet min standard for licensure only collect fees in the name of the lender or broker
- Continuing education (CE: 3 hrs federal law, 2 hrs that they work for.
ethics, 2 hrs nontraditional, 1 elective — Steering: MLO must show the consumer expresses
successive year rule) , late CE interest in and 3 options:
*An instructor can receive credit for their own CE at a - 1. Lowest interest rate qualified;
rate of 2 hours per every 1 hour taught. For example, - 2. Lowest point & fees;
an instructor teaches one 8 hour continuing - 3. Lowest rate w/o risky features
education course, they technically would get 16 Unique identifier: loan document, ads
hours of continuing education for that one class. Recordkeeping: MLO origination records 3 yrs
- Renewal fee
Inactive license requires:
- If after 3 yrs: 20 hrs pre-licensing ed
- If after 5 yrs: 20 hrs ed + SAFE test with UST
Disciplinary action:
- Commissioner: & state regulatory authority can
deny, suspend, revoke, decline renew, impose
fines, cease and desist
- Provide docs within 30 days, $25K per violation
- Examination (routine audit) VS investigation
(complaint, reported violations)

📝 Mortgage Call Report (MCR)

Licensees/registrants are required to file quarterly
(within 45 days of calendar quarter) MCR through
NMLS, which consists of the following components:
- Residential Mortgage Loan Activity
- Financial Condition (annually, within 90 days year
end)

💰Loan originator compensation

●
(2014)
TILA(Reg.Z) , Dodd-Frank mandates, CFPB
created prohibits compensation based on

2
Additional Note Taking

3
Chapter 2 📈 Graduated-payment Loans (GPM): low initial CLTV=(1st mortgage+subordinate liens) ÷

🏠- Fixed
The Products
rate mortgage: 10, 15, 20, 25,30 yrs
monthly payment, increase overtime, negative

💳
amortization (e.g., young professionals) 💳 Down Payment: ⛔ borrow money ✅ gift funds
appraised value

Home Equity Lines of Credit (HELOCs): 5,10,15 Loan limit: change annually
Traditional mtg=30-yr fixed

📈- Non-traditional mtg=15-yr or 25-yr fixed

Adjustable-rate mortgages (ARMs): 2nd most
🌳Growing-equity
yrs, like a credit card, open-ended, I/O payments
Mortgage (GEM):
- Year 2021: $548,250
- Year 2022: $647,200
common
- Fully-indexed rate= index (interest rate, fluctuates
● Monthly payments increase over time
according to a set schedule. 👤 - Year 2023: $726,200
Seller Concessions: the amount that the seller or
● Additional amount beyond a fully amortizing lender can pay toward the borrower's closing costs
with market) + margin (lender profit, never change) payment applied directly to the remaining (Conventional 3%, FHA 6%, VA 4%, USDA
- 1st adj cap / subsequent adj cap / lifetime ajd cap
- Types: hybrid ARM (fixed for X yrs, adjust every 1 yr
after fixed), I/O
mortgage principal to shorten the life of the
loan and increase interest savings.
● Interest rate remains fixed, and no negative
⏰
unrestricted)

💼 Late fee: conventional: 5%; government: 4%

Reserves: PITI (principle, interest, tax,
- Payment options: amortization occurs. insurance)(conventional 2-4 mo, FHA, VA, USDA not
- Interest only
- minimum payment (negative amortization,
most dangerous)
💵 Loan programs: Conventional/Conforming
- Conventional: not backed by the government
📉
required)
Temporary & fixed interest rate buydowns:
discount point
- combined PMT (interest + principal)
(NOT VA, FHA) - Permanent discount buydown
- Timeline notifying the change of rate: 45 days
- Non-conventional: VA, FHA - Temporary 2-1 buydown: enticing party builder
- Negative option ARM recast feature allows the loan
to recast its amortization to ensure that it is paid off
- Conforming: conforms with Fannie Mae & Freddie
Mac, determined by automated underwriting 🔒 contributes buydown fee
Private Mortgage Insurance (PMI):
💰
in the remaining term.
Purchase money second: a loan that
simultaneously closes with a first mortgage along
system (AUS) (can approve above the qualifying
ratio)
conventional/conforming loans, required <20% down
payment, 3rd party provider (diff from MIP: Mortgage
- Fannie (1938): desktop underwriter (DU) Insurance Premium required by FHA)
🏗️
with your down payment. (e.g., to avoid PMI)
Construction loans: higher interest, 6-24 mo
- Take-out or end-loan
💸 - Freddie (1970): loan product advisor (LP)
Bankruptcy:
- Homeowner protection (HPA): how/when PMI is
removed: 80% LTV (lender’s choice); 78% LTV
- Chapter 7: complete liquidation (Conventional:4 required to remove
- Construction permanent/construction-to-perm: pay
interest while building-> done: figure new P&I to
pay off the remaining term
yrs, FHA: 2 yrs, VA: 2 yrs, USDA: 3 yrs)
- Chapter 13: allow pay back (Conventional: 2 yrs, 🏛️Government Loans
- Disbursement plan:
- Fixed disbursement plan
💰 FHA: 1yrs, VA: 1 yrs, USDA: 1 yrs)
Debt-to-income: determine can repay the loan
- Front-end: P&I / gross monthly income
FHA loans
easier to obtain than conventional loans. FHA loans
are HUD-insured and have an unconditional Direct
- Voucher system
(Conventional: 28%, FHA: 31%, VA: N/A, USDA: Endorser (DE) status, which allows the lender to
🏘️ - Warrant system
Blanket mortgage covers more than one parcel
or lot and is often used for subdivision
29%)
- back-end : (P&I + other liabilities)÷ gross
close the loan without FHA review.
💡
- 203 B loan: FHA fixed rate loan ( “B” as basic,

🌉
developments.
Bridge loans: I/O(Interest-only), sell old buy new,
🏠
monthly income (Conventional: 36%, FHA: 43%,
VA: 41% residual income, USDA: 41%)
30 fix)
💡
- 203 K loan: rehab loan ( “K” as thousand $ to

🎈
relocate
Balloon mortgages: larger payment at the end of
Loan To Value: borrower qualifies for a program
or not, higher risk if high
- Loan amount÷appraised price or purchase price
rehab)
💡
- 203K loan: for teacher, firemen, police( “G”
good people)
term (e.g, farmers) (e.g., 360/180 Balloon mortgage -
(whichever is lower) Qualifications for FHA:
This amortized 360 months (30 years) but due in 180
- Combined loan to value: - assumption
months (15 years), requiring a balloon payment.)

4
 - 4 Cs of underwriting (Credit history, Capacity to - DD-214 is the Certificate of Release or Discharge - no toxic features (3 kinds) : no balloon, I/O,
repay, Cash assets, Collateral) from Active Duty and will show how and when the negative amortization
- No federal debt or judgements (Credit Alert veteran was discharged. - Must have ATR (3 letters)
Verification Reporting System – CAIVRS) - Refinance: IRRRLs: max 90%, funding fee 0.5%, - no > 30 yrs
- Less stringent on borrower, stricter on property no appraisal, no cashback - AMR must be underwritten fully amortized loan max
- 3.5% down payment - Late fee 4% rate first 5 years
- DTI: 31%/43% (The front-end DTI ratio cannot Price based QM: APR < APOR + 2.25% on first lien
exceed 31%, and the back-end DTI ratio cannot USDA loans & 3.5% on second lien (New Safe Harbor)
exceed 43%), gift funds allowed 100% financing, rural, 35K ppl, 30-yr fixed, 90%

💡
- Late fee 4% guarantee, 115% median income, must be living in Ability to Repay (ATR): TILA 2014, Dodd-Frank,
Upfront mortgage insurance premiums (UFMIP): the rural area, late fee 4% CFPB ( MICE DOES)
1.75%, required M- monthly mortgage
Annual mortgage insurance premiums (MIP): paid Conventional/Non-confirming loan I- income & assets
to FHA, less expensive than PMI; Limits: depend on Jumbo loans: > Fannie & Freddie loan limit C- credit history
county Subprime (Alt-A): manually underwritten, replaced E- employment
FHA streamlines: max 85%, refinance, less doc, by Non-QM loans, NINA, SISA, SIFA, No Doc,
underwriting required, appraisal may not be required Low Doc D- DTI
Reverse mortgage (HECM): 62 yrs old, principal - Interagency guidance on nontraditional mortgage O- other debt
residence, low mtg balance, mandatory counseling, product risk (2006): defines nontraditional E- expense (tax, insurance)
negative amortization, no escrows. No federal debt mortgage products, payment shock; repay S- simultaneous mortgage
- Cost: MIP, appraisal, org fee (max $6K), servicing capacity – fully indexed rate; risk mitigating
fee ($30 or $35 interest adj monthly) features, risk layering HOEPA
- Principal limit: age (older), equity (larger), interest - Statement on subprime mortgage lending: High cost home loans (HOEPA Loans, Section 32
rate (lower) -> higher promote consumer protection standards & ensure loan, HCML ): TILA 1994, protect from predatory
- Types: tenure, term, line of credit, modified tenure, that borrowers afford to repay, defining predatory lending (principal dwelling)
modified term lending (based on collateral, repeatedly refinance, - purchase money, refinance, closed-end home
Form 1009: reverse mortgage fraud) equity loans, HELOCs
Loan limit: 115% of median house prices, subject to - HOEPA exemption: reverse, construction
a floor and a ceiling on the limits. FHA calculates Qualified mortgage (QM): TILA 2014, enforced by HOEPA coverage test:
forward mortgage limits by Metropolitan Statistical CFPB, works with Ability To Repay rule (ATR): Annual Percentage Rate (APR) > Average Prime
Area and county, calculated every year prohibit risky features Offer Rate (APOR:)
VA loans - Safe harbor: QM=ATR requirement - 6.5% 1st lien if loan amt <$50K
VA guarantees: 25% loan value ; obtain certificate - Rebuttable presumption: high-priced mortgage - 8.5% 1st lien if jumbo lien >$50k
of eligibility (COE), primary residence (35 loan) violates ATR,residual income left to meet - 8.5% 2nd lien
- Loan limit: full entitlement=$36K, lend up to 4 living expenses after mortgage & other debt Points & fee: >5% loan amt
times, bonus entitlement - Types of QM: general, temporary, small lender Prepayment penalty: can’t be charge for >36 mo or

💡
- Funding fee: first time 2.3%, subsequent 3.6% and balloon >2% amount prepaid
(finance the funding fee into loan)
💡
HOEPA restrictions ( BAPS-no balloon, ability to
- DTI: 41%, threshold supplied by consumer Qualified Mortgage ( Rule of 3) repay, no prepayment penalty, speak w/ counselor)
expenditures survey - points & fees <3% - Counseling, full appraisals, 5 yrs escrow
- Notice of Value (NOV): NOV=CRV (Certificate of - back-end DTI < 43% - 3 biz day disclosure before consummation
reasonable value), underwritten by LAPP - Prepayment penalty limited to 3 yrs (cooling off)
- Closing cost: 1% (2% loan amt)

5
 - Restrict risky features: balloon pay, repayment - >20% price increase if seller acquired the Repurchase: an investor requiring the originating
penalty property in past 91 days to 180 days lender to buy the loan back because of fraud,
- HOEPA closed-end: follow ATR; open-end: unacceptable underwriting or appraisal
expected income + current obligations Terms Early payment default: a new borrower does not
*I came across these terms when I started taking make the 1st, 2nd or possibly the 3rd payment.
HPLM NMLS practice test questions, but they were not Fraud may be the cause
HIgher priced loan, Section 35 of TILA, closed-end covered in the textbook. I wrote them down to help Service Release Premium (SRP): payment
consumer credit traction, principal dwelling me remember these terms that are not mentioned in received by the lender on the sale of a closed
HPLM coverage test: the textbook but are expected to be known for the mortgage loan to the secondary market.
APR >APOR: NMLS test. I recommend that you also jot down any Warranty Deeds have guarantees obligating the
- 1.5% 1st lien unfamiliar terms in your notes. grantor to defend the grantee from claims against the
- 2.5% 1st jumbo lien Basis point: 1 hundredth of a percentage point, title. They give the grantee the best possible

💡
- 3.5% 2 lien 0.01% protection.
HPLM restrictions ( APE: ability to repay, no Table Funding (Wholesaling, white labeling): FMHA: Farmers Home Administration, a government
prepayment unless first 2 yr, escrow acct 5 yrs) funding of the loan at settlement, simultaneously agency created to help dispense loans to farmers
5 yrs escrow acct, written appraisal (3 biz days transferring the loan to the lender. When a Broker or and rural communities following the Great
before Correspondent does not have enough money to fund Depression
consummation) their own loan but wants to give the appearance that Accrued interest: Accrued interest is interest that
- Can’t just rely on they are a direct lender they will usually enter into a you have accumulated on a loan but not yet paid to
collateral table funding agreement with a different lender. your lender. Mortgage interest accrues daily or
- Need verified Par rate is the rate without the borrower using weekly depending on your loan type, and is based
income discount points to lower it or a YSP being paid to on your loan's principal balance and mortgage rate
- No prepayment increase it. Sweat Equity: work done by the borrower that has
penalty if rate Yield Spread Premium (YSP): a form of value and must be listed on the appraisal to be
changes first 4 compensation that a mortgage broker, acting as the eligible. Sweat equity is not an acceptable source of
yrs, otherwise 2% intermediary, receives from the originating lender for funds
- Required housing selling an interest rate to a borrower that is above
counseling the lender's par rate for which the borrower qualifies. Mortgage agreement to inform the borrower(s) that
*note: Section 35 has Extended Lock agreement: If issued, it protects the certain actions are prohibited
all these 5’s, the borrower from rising rates during locked period Demand full payment:
escrow term is 5 yrs. Also remember Section 35 has Delinquent loan: any loan over 30 days past due - Alienation clause: when the loan is transferred
digits 35 in its last APR threshold. 1.5, 2.5, 3.5. Discount point: 1% of the loan amount can be paid - Due on sale clause: prevent the sale of a
upfront and in addition to other origination fees to conventional loan
The HPML Appraisal Rule applies to certain reduce the interest rate - Acceleration clause: when the borrower is in
HPMLs when the property has been resold within a Premium Pricing: utilized in helping the borrower default
180 day period. If the consumer is using a covered pay their closing costs. The premium results from the Go after other assets:
HPML to buy a flipped property, an additional interest rate being increased - Deficiency judgements: go after the borrower's
appraisal may be required (to protect buyer) if the Cash-out refinance: borrowing equity from the assets if the proceeds of the foreclosure sale are
price is more than a certain amount higher than the value of the home thus increasing the loan amount insufficient to cover the amount owed on the lien
seller’s acquisition price, such as: owed against the home (leave you deficient)
- >10% price increase if seller acquired the Rate & Term refinance: an extension of the term or - Exculpatory clause: in the loan agreement, it
property < 90 days reduction of the interest rate to reduce the amount states the lender cannot go after their assets.
owed in the monthly payment (excuses you)

6
Prepayment
- Prepayment privilege clause: you can payoff
the loan at anytime without a fine
- Prepayment Penalty clause: must pay a fine if
pay off early
- Qualified mortgage: pay off first 3 years, pay
2% fine
- HPML Section 35: pay off first 2 years, then
2% fine
Change
- Defeasance clause: when borrower defeats the
mortgage, the lender must send a satisfaction of
mortgage notice or letter < 60 days of paying off
the loan
- Escalation clause: lender can raise the interest
rate under certain condition
- Subordination clause: when senior mortgage
assumes a junior lien position
Open-end VS Close-end
- Open-end clause: allows future advances from
the same line of credit, no ending payoff date
(HELOC & reverse mortgage)
- Closed-end loan: has an end date, amortization
schedule
Partial Release Clause: The Partial release clause
ties in with a blanket mortgage. A blanket
mortgage, allows the borrower, builder, or developer
to put multiple parcels (properties or pieces of land)
into one mortgage called a blanket mortgage and the
partial release clause allows parcels to be sold
separately and will be released from the blanket
mortgage.

7
Additional Note Taking

8
Chapter 3: The initial application - Non-APR fee: escrow (taxes, ins), appraisal, - Borrower–7 pages: borrower info, assets &
inspection, survey, home warranty, owner’s title liabilities, real estate, loan property info,
The initial interview ins, title search fees, attorney fees, notary, declarations, acknowledgement & agreements,
Pre Qualified (review + estimate) VS Pre-approved recording fee, transfer tax (TENACTS) military service, demographic info, LO info
(verify) - TENACTS (title ins, escrow, notary, - Lender information form –2 pages: property and
appraisal, credit report, termite inspection, loan info, title info, mtg loan info, qualifying the
The Truth in Lending Act (Regulation Z, seller credit) borrower
TILA, 1968): informed use of consumer credit by - Re-disclosure required - Additional forms: continuation sheet, unmarried
requiring disclosure about its terms & costs (credit, - Change > ⅛% (0.125) for regular loan addendum, additional borrower
APR, advertising), protecting from predatory lending. - Change > ¼% (0.25) for non-traditional loan *Section X of the current 1003 is the Government
Ads trigger terms: (contains number) must Monitoring Section and is where HMDA information
disclose: 1. Amount or % downpay 2. Terms of sex, ethnicity and race are collected.
repayment 3. APR
Adjustable-rate: must say “APR may increase or is Home Mortgage Disclosure Act (Reg. C,
subject to change” HMDA, 1975)
Must disclose APR Implemented by Federal Reserve Board
Ads recordkeeping: 2 yrs Purpose: track info to prevent discrimination
Penalties: $5K or and imprisoned 1 yr (redlining, blockbusting)
Who: 25 covered closed-end loans; >500 open-end
Implemented by Federal Reserve Board The Mortgage Acts and Practice Rule (MAP lines of credit
Apply to: creditors, 4 installments, extend credit 25 rule, Regulation N, 2011) How:
times a year Regulator: FTC & CFPB - LAR (loan application register) made available
When: credit is offered before transaction & Purpose: regulate advertising, prohibit after deleting loan number, date received, date
advertise misrepresentation action taken,
Disclosure include: (record keep 2 yrs) Prohibit: false or misleading ad, material, bait and - due March 1st
- Loan estimate (LE, keep 3 yrs), switch, misrepresentation (stated or implied ) - report quarterly
- Closing disclosure (CD, keep 5 yrs) Recordkeeping: 2 yrs from the date the - Mtg broker exempt because can’t underwrite
- CHARM booklet: adjustable rate mortgage communication was made - Reg C (collect data)
booklet Recordkeeping: 3 yrs
- When your home is on the line booklet (home Complete Application (TILA, Reg Z, 1968)
equity loan, HELOCs, refi) PENSIL The Equal Credit Opportunity Act (ECOA,
- Notice of right to rescind (home equity loan, P-property address Reg. B, 1974)
HELOCs, refi of principal residence): 3 days, 2
💡
E-estimate value Purpose: prevent discrimination on protected classes
copies, take 1 to rescind, refund of escrow due 20 N- name ( score map: sex, color, national origin, religion,
days S- SSN marital status, age, public assistance)
I- income Fair Housing Act (1968)
APR (aka. effective rate ≠ note rate) L-loan amount Civil act rights of 1866 prohibits public and private
APR=Total interest (over the term) + APR closing
racial discrimination in real estate property
cost The Uniform Residential Loan Application transaction, later amended to Title 8 of the civil rights
- APR fee: (fees that are related to actual mtg) orig (URLA) acts of 1968-> Fair Housing Act
fee, lender fee, points, flood determination Fannie: form 1003; Freddie form 65 - Protected classes: sex, race, religion, color,
certificate, doc prep fee, prepaid interest, lender Co-borrower: borrowers who are married disability, national origin, familial status (having
title ins, escrow fee, PMI, UFMIP, FHA Co-mortgagors (fill out separate 1003): unmarried

9
 children in household whom you have legal - Incomplete application: ECOA gives a lender the to proceed (exception: bona-fide, fee for credit
custody of) ability to send a notice to the borrower if their report)
- Prohibit: blockbusting/panic selling, steering, application is incomplete and give the borrower
redlining, refusing to sell/lease after receiving time to respond. This has to happen within 30 Mortgage Disclosure Improvement Act
bona fide (good faith) offer, changing the terms for days of the last action taken on the transaction or (MDIA, 2009, part of TILA)
diff buyers , using ads that indicating preference the incompleteness. Purpose: consumer receive GFE, sufficient time to
- To combat redline: Community Reinvestment Appraisals under ECOA: 3 biz days before review before closing
Act- CRA designs to meet the credit need of consummation (Fannie appraisal waiver, not 3/7/3 rule: disclosures within 3 days, couldn’t close
community; HMDA is designed to meet the required) for 7 biz days, re-disclosure of inaccurate APR >3 biz
housing need - if denied based on appraisal, borrower has 90 days days prior to closing
- Exemption: leasing owner-occupied unit, sold w/o to request a copy, lender has 30 days to deliver Business day: lender’s office hour (including
broker, housing operated by private Saturday), exclude Sunday & federal holidays
organization/clubs The TILA RESPA integrated Disclosure Rule Fee tolerances:

💡
- Ad rules: fair housing opportunity logo, equal (TRID, 2015) - Zero-tolerance: can’t shop for 3rd party
lender slogan Purpose: simplify disclosure process (LE, CD) providers( TRAIL–transfer tax, credit report,
- Complaints: written complaint filed with HUD Doesn’t apply to: (any mortgage doesn’t require LE appraisal, interest rate, loan origination fee)
within 1 yr of violation or CE) reverse, HELOCs, all cash sale, mortgage - 10% cumulative: recording fee, 3rd party
mobile home not secured by real estate provider(can shop for, lender’s list), lender to
Disclosure requirements: return excess fund to consumer < 60 days after
- Loan estimate: Good faith estimate (GFE)+ Initial consummation, give corrected CD < 60 calendar
Truth-in-lending disclosure (TIL) days
*The initial Loan Estimate expires 10 business days - No-tolerance: prepaid interest, insurance, termite
from the date the creditor provided the LE to the inspection, escrow acct, consumer picks service
consumer if the consumer does not expressly providers
provide their Intent to Proceed. Revised LE circumstances: Change
- Closing disclosure: HUD-1, final Truth in Circumstances (no later than 3 biz day after the
Lending circumstance change)
Taking application under ECOA - Home loan toolkit: 3 biz, help mtg process, all - Act of God (out of anyone’s control, e.g. tornado)
- Marital status: can’t request unless: co-borrower, purchases - Inaccurate /changed info specified to consumer
non-applicant liable on account, relying on spouse - Housing counseling: that lender rely on (e.g, low appraisal)
income, resides in community property state, - mandatory: high-cost (section 32) & - New info specific to consumers that lender didn’t
relying on alimony, child support high-priced (section 35) & reverse mortgage rely on (e.g., unknown tax lien)
- Can't deny because of: public assistance, single - optional: all federally-related loan applications Per MEDIA, a loan cannot close any faster than 7
mom must provides a list of >=10 housing business days from application.
- Adverse action: send < 30 days counselors within 3 biz days
- exception: 90 days after counteroffer or - Request for Transcript of Tax Return (4506-C): The Electronic Signatures in Global and
incomplete application sent out the same time as 1003 & LE to verify National Commerce Act (E-Sign Act, 2000)
- Required info: lender’s name, address, nature of income from IRS Purpose: electronic signatures
action, ECOA notice (responsible federal agency), - CHARM Handbook: adjustable-rate mortgages 3 Email & faxing are not considered electronic
principal reasons, 60 days of receiving notice to biz days Written approval, allow to go back to hard copy
request the reasons Rules: can’t require submit verified docs before Able to accept digital delivery
providing LE, no fee until receiving LE, indicate intent

10
Chapter 4 Processing & support, retirement, public assistance, SS, trust considered as recurring monthly debt obligations
income) regardless of the number of months remaining on the
Underwriting
Borrower Analysis
- investment prop: 6 mo PITI payment need to

-
be verified
owner-occupied prop: 2 mo PITI payment
⛔
lease
: utilities, cell phone payment, insurance, tax
payments, union dues, 401k contr
Assets
Assets: liquidate financial reserves; must be - Payment history on previous mtg: 12 mo
VERIFIED (e.g, request for a verification of deposit Nontaxable income: child support, social security, Form 1008 Transmittal summary: summary data for
form 1006 VOD; 60-day bank statement=seasoned; worker’s compensation-> gross-up (X1.25) a mortgage loan in addition to calculated figures
large deposits are defined as a single deposit that Calculate income: (calculate annual income and such as debt-to-income ratio, income, liability
>50% of the total monthly income for the loan); 2 divide by 12 months) amounts, ect.

✅
types (1. Long term=reserves;2. liquid =down pay) - Annually: annual income/12
: money in bank, investment in stocks, CD, money - Monthly: monthly income Qualifying Ratios

⛔
market, retirement saving, vested life ins policy - Twice monthly: semi-monthly income x 2 DTI: Front end (housing expense/gross monthly
: funds not vested, funds can’t be withdrawn, - Bi-weekly: bi-weekly income x (52/2)/12 income); back end (liabilities/gross monthly income)
stock in unlisted corporation, non-vested stock, - Weekly: weekly income x 52/12 - Conventional: 28%/36%
unsecured loans, interest party contribution, cash - Hourly: hourly rate x # hrs worked per week x - FHA: 31%/43%
from cash-out refi on the subject property 52/12 - VA: NA/41% residual income
Reserve: # of mo qualifying payment amount for the Rental income: - USDA: 29%/41%
subject mortgage that borrower could pay using - Subject property: 2-4 principal residence or 1-4 LTV: loan/purchase price or appraised value
financial assets investment property; requires single-family - Conventional: 97% (3% down)
- Amount of reserve required: determined by comparable rent schedule - FHA: 96.5% (3.5% down)
AUS or if manually underwritten, laid out in the - Another property: no restriction on property type - VA: 100% (0 down, funding fee 1st–2.3%;
requirements for that loan product w/ bwr’s (tax returns, fully executed lease agreement) 2nd–3.6%)
qualification - Form 1007 verification of rent - USDA: 100% (0 down, one-time upfront funding
Down payments - Negative net lease: rental income=<mortgage fee)
Amount of down payment: must source funds for payment
down pmt, 60-day seasoned asset, gift fund-re - Calculation: 75% rental income, 25% vacancy Credit Report
repayment is NOT expected (gift letter); down factor, or average of schedule E income with Tri-merge: 1. Experian, 2. Equifax, 3. Transunion. If
payment assistance program by city, county or state depreciation added back. Subtract any payments pull 3, then select the middle score; if pull 2, select
being made for a loan on a property. Must list all lower score
Income properties they own and any liens against those Range: 300-850
Income: 2 types property Borrower’s Signature Authorization: allows the
- Stable income: base salary (w2, tax return, form MLO to order a credit report
8821 authorizes the IRS to disclose your
confidential tax info ), consistent hourly wages, ✅
Liabilities
: mtg payment, property taxes, HOA, homeowner
ins, credit cards, auto loan payment term > 10
Credit Report Factors: payment history (deny if
mortgage late pmt: >60 d late within past 12 mo,
except for extenuating circumstances), credit
social security, retirement, long-term disability
- Variable income: commissions, bonus ( form months, lease payments, real estate loans, HELOCs, utilization, credit mix, age of credit, inquiries &
1005- verification of employment VOE), overtime alimony, child support, maintenance payment, derogatory marks–bankruptcy, foreclosures,
(hourly rateX1.5), self-employed (>=25% recurring debts collections, judgments)
ownership), fluctuating hourly wages, 2nd job *A long term debt is an outstanding debt that - Bankruptcies show on credit report for Chapter 13
income (2 years history – VOE, paystubs, W2) someone holds for more than 12 months or longer. (reorganization 7 yrs); Chapter 7 (liquidation10
Time: 2 yrs same line of work + >3 yrs continuation *Lenders can ignore monthly auto loan costs if 10 or yrs), foreclosure 7 yrs
from the time the loan is originated (alimony, child fewer payments remain VS lease payments must be

11
When borrower does not have traditional credit Purpose: improve consumer access to credit Benefit to the borrower outweighs negatives or cost
score: review utility ratings, rent history, insurance
payment history
Bankruptcy:
information, consumer disputes, prevent identity theft
FACTA: 1 free credit report, Notice to home loan
application disclosure, negative info disclosure made
✅
associated with the loan (refi)
: Reduce interest rate, monthly pmt, shorten term,
ARM->fixed, remove PMI, consolidate mortgages,
- Chapter 13 (reorganization): available to consumer <30 days, borrower can remove risky features, avoid short sale/foreclosure,
Conventional (2 y), FHA (1 y), VA (1 y), USDA(1 y)
- Chapter 7 (liquidation):
Conventional (4 y), FHA (2 y), VA(2 y), USDA(3 y)
dispute negative info, dispute must be resolve < =30
days ⛔
home improvement, cash out
: Churning

Foreclosures The Notice to Home Loan Applicant is required Real Estate Settlement Procedures Act (Reg
- Foreclosure under FACTA and must provide information like the X, RESPA, 1974)
Conventional (7 y), FHA (3 y), VA (2 y), USDA(3 consumer's credit score, the range of possible Purpose: educate borrowers on the cost of loan,

✅
y) credit scores, any factors that adversely affected the prohibit kickback, place limit use of reserve account
- Short sale (asking price < amount due on the score (up to 4 key factors), the date the score was Apply to: 1-4 units, federal related mortgage
current owner's mortgage) received and the name of the company that provided loan, owner occupied, reverse mortgage, property

⛔
Conventional (4 y), FHA (3 y), VA (2 y), USDA(3 y) the report.
💡
improvement loans
Amount Owed/Credit Utilization: the less, the less Not apply to: ABC TV ( Agriculture loan 25+
risky Economic Growth, Regulatory Relief and acres, Business loan, Commercial loan, Temporary
Credit inquiries: inquiry stays 2 yrs, score impacted Consumer Protection Act (2018): financing, Vacant land)
12 mo (consider last 90 days) - National security freezing: free
*if the credit report didn’t show the required min
payment amount, the lender should use 5% of
- Summary of consumer rights (obtain, dispute info)
- Summary of consumer identity theft rights (rights
💡
( SKATE: Servicing, Kickback, A, Title, Escrow)
Section 6 Servicing:
outstanding balance of identity theft victims) - Forced placed insurance (notify 45 d before, 30 d
- Credit Freeze: free, security freeze, allow parents before)
The Fair Credit Reporting Act and The Fair (<16 yo) to freeze, if request freeze (1 biz day), - A qualified written request (QWR, borrower
and Accurate Credit Transaction Act (Reg V, online/phone credit lift (1 hr), mail credit lift (3 biz request info about loan): 5 d to acknowledge
FCRA, 1970) day) receipt, 30 d to resolve the issue 15 d extension
Purpose: restricts use of credit reports and requires - Fraud Alerts: free, 90 days-1 year, confirm - Missed payment: attempt to contact 36 days, mail
accuracy on credit reports (CFPB & FTC enforce); identity -> open new account mitigation info 45 d, can’t file Notice Of Default
FCRA requires delete negative info within 7 yrs.,10 Red Flags Rule: prevent identity theft(for financial until payment is 120 d late
yrs for bankruptcies, dispute incorrect items on institutions & creditors) - Payoff request: 7 days
report, risk-based pricing - Reasonable policies & procedures to identify - Defeasance clause: send a satisfaction mortgage
- Detect the red flags
💡
Adverse Action Disclosure: within 30 days (ECOA) notice to borrower within 60 days of paying off
of application, which credit reporting agency(CRA), - Spell out appropriate actions ( bwr “defeated” the mtg)
agency not responsible for the denial, agency will - Keep program current for new threats - Prohibit dual tracking: continue to seek
provide free copy of report (MLO can’t provide) Disposal Rule: how institution should dispose of foreclosure while borrower is being considered for
Reasons to receive free credit report: adverse consumer info-> reduce risk of fraud; all files can be other workout options
action disclosure, on public assistance, unemployed, destroyed after 3 yrs, 5 yrs for CD, hard copies can Section 8 Kickback (except credit application fee),
experience errors on credit report, victim of fraud be destroyed if digitized AfBA (affiliated business arrangements > 1%
ownership)
Fair and Accurate Credit Transaction Act Analyzing the Mortgage: decide if borrower Section 9 Title: buyer may sue treble damages 3X
(FACTA, 2003) should get the loan: Ability to Repay + Tangible Net Section 10 Escrow: (escrow=impound=reserve)1/12
Benefit annual to escrow, at closing 2 mo cushion, annual
Tangible Net Benefit analysis, excess of $50 return 30 d

12
 Uniform Standards of Professional Appraisal Legal rights to own, use, dispose of land
RESPA Penalty: 10K + 3x amount paid to service + Practice (USPAP): must licensed in state, some Title report: the chain of title – chain of the sales
1 yr imprisonment situation, certified (FHA or VA appraisal) and transfers of ownership of the title.
RESPA Disclosure Requirements Appraisal Independence Requirements (AIR, part - easement (use another’s land for limited purpose
3 biz days application: of TILA, Reg Z): MLO can NOT contact appraisal e.g., allow city to widen street; diff from
- Home Loan Toolkit (purchase)= Know Before directly, no influence on report. HVCC(home encroachment);
You Own valuation code of conduct) prohibits - restrictive covenants (to enhance property value by
- Special Information Booklet: reverse, - Coercion: use force to persuade someone controlling development)
HELOCs, secured by mobile home - Collusion: illegal cooperation to deceive - property tax
- Loan Estimate (purchase) or GFE (reverse, - Bribery: persuade someone to act by inducement Title insurance: protect against recording mistakes,
HELOC, mobile home) - Intimidation: frighten someone forged, undisclosed heirs, unsound mind, minors,
- Mortgaging Servicing Disclosure Statement - Threatening: statement of an intention to inflict invalid power of attorney, unpaid taxes, fraud (from
(RESPA) pain the closing date and before)
- List of HUD-approved counselors (RESPA) Appraisal Management Company (AMC): order - Owner’s title insurance (recommended): remains
Before appraisal, neutral third party, required by Fannie & in force borrower/heirs have an interest in the
- AfBA (RESPA) 1% Freddie property, equal to purchase price
- Closing Disclosure (TILA): 3 d before Form 442=Appraisal recertification form: report an - Lender title insurance (required): last until
At update of an appraisal and whether a new appraisal mortgage is paid in full,equal to loan amount
- Finalized Closing Disclosure (TILA) must be obtained.
- Initial Escrow Statement within 45 d of Ownership of Real Property
settlement (RESPA) Types of Appraisals Deed is an instrument that conveys a grantor’s
After Sales comparison approach: most frequently, 3 interest, if any, in real property
- Annual Escrow Statement (RESPA) comparables, within 1 mile of subject property sold in - Ownership in severalty: 1 person owns it
- Servicing transfer statement (RESPA, 15 d last 6 mo; - Co-ownership: concurrent ownership >=2 person
before, 60 day grace period) - Adjustments (lot size, views, basement, condition, - Tenancy in common: no right to survivorship

✅
# rooms, square footage, Heating & Cooling - Joint tenancy: undivided interest w/ right of

⛔
USA Patriot Act (2001) system). Living space (above grade–e.g., survivorship (property passes automatically to
Purpose: requires ID to be provided for loan with the finished attic, garage, unfinished attic, other co-owners when one co-owner dies),
purpose of identifying terrorists (FinCen -U.S. basement) same time
Department of the Treasury Enforce) - Gross adjustments must <=25% of the - Tenancy by the entirety: husband & wife,
Customer Identification Programs: verify info, comparable value or 15% net of the comparable, equal undivided share of property,
maintain records, check if on list of known or 10% max line item survivorship
suspected terrorists (OFAC list- Office of Foreign - Property Inspection Waiver (PIW) for FNMA=
Asset Control) Automated Collateral Evaluation (ACE) for Financial Encumbrances: Liens (security for a
Info obtained: Name, DOB, ID (US citizen: SSN, tax FHLMC (full appraisal, Form 1004) debt)
ID; Non-US: tax ID, passport ID, Country,Alien ID) Cost approach note=promissory note: written promise to repay a
Patriot Act Disclosure Form: check 2 forms of IDs to Value= estimated land value + debt. Note -> debt (mortgage secures payment)
fill out Patriot Act Disclosure reproduction/replacement cost - depreciation Voluntary Liens: mortgage (written instrument that
Income approach: investment or multi-unit property. uses a specific real property to secure payment of a
Appraisals Earning potential: rent, costs to keep the rental units debt)
Establish a value of security of a mortgage loan rented, compare it to other rental units nearby Involuntary Liens: e.g., mechanics, tax, judgment,
attachment
Title

13
Lien priority: paid in the order they were attached to flood ins in flood zones. max ins= $250K property Table funding: a process allows a broker to
the land; Property tax liens are superior to all other & $100K personal property. negotiate and close the loan under his/her name,
liens - 1973 Flood Disaster Protection Act: Special after closing the mortgage and note are immediately
Default: borrower fails to make payments on a Flood Hazard Areas (SFHA) require flood ins for assigned to that investor
mortgage-> foreclosure loans. SFHA >=1% chance of flooding in any year Warehouse funding: lender obtains funds for a
(100-year flood). closing from a line of credit extended by a
Insurance
Hazard insurance = homeowner insurance: protect
- Flood zone:
💡
- High: A & V ( AV pointy=risky, All Valley–A &
V require ins) insurance is mandatory
commercial bank
Simultaneous issue: when issuing both the lender
and homeowner title policy at the same time
losses incurred by fire or other destruction of the
property, at the time of closing w/ 1 yr renewal, - Moderate: B & X, insurance is optional Debt service: principle and interest. When a
coverage = replacement cost of the improvements - Low: C & X, insurance not required borrower pays a late fee, she/he pays the debt
Loss payee=lender, claim pmt payable jointly to Dry Funding: On the day of loan closing, all parties service (P+I)
lender & borrower (lender: opt1 hold the $ until get together to sign mortgage documents, but all of 360/180 loan: balloon mortgage amortized over 30
borrower replaces home; opt2 apply $ to pay the the paperwork required to officially close the loan years with the lump sum payment due at 15 years
loan) doesn’t have to be completed at that time. Most 5 banking regulators: Federal Reserve Board,
Declaration Page: Borrowers often need home importantly, no mortgage funds are distributed to the Controller of Currency, FDIC, National Credit Union
insurance binders to provide proof of insurance seller on that day. (Technically, the loan doesn’t Administration, CPFB
coverage when purchasing a house with a mortgage. officially “close” until all of the paperwork is
The insurance binder specifies all the protections for completed, approved and mortgage funds are
which the borrower is covered while they wait for a dispersed to the seller.)
new policy, as well as any coverage limits, Dry funding states include Alaska, Arizona,
deductibles, fees, terms and conditions, this is all California, Hawaii, Idaho, Nevada, New Mexico,
included on the declaration page. The declaration Oregon and Washington. All other states are “wet
page is the front page (or pages) of the policy that funding.”
specifics all the pertinent details of the policy. Wet Funding: Much stricter than dry funding, wet
Flood insurance funding requires that all of the paperwork needed to
Flood zone (determined by flood hazard officially close the loan must be completed and
determination form)->flood insurance approved on the exact day of loan closing. With wet
Mortgagee clause is a property insurance provision funding, the seller receives funds on the loan closing
granting special protection for a mortgagee (e.g., date or within two days thereafter. So wet funding
financial institution that has an interest in the moves the entire closing process along much faster
property) named in the policy that, in effect, sets up a than dry funding.
separate contract between the insurer and the Liabilities encompass all of one's financial
mortgagee. obligations, while debt is only those obligations
The National Flood Insurance Act led to the associated with outstanding loans.
National Flood Insurance Program: developed Term mortgage: non-amortizing interest only loan
after losses from hurricanes (Gulf of Mexico); relief and the balance is due at the end of the term as a
losses through a flood, reduce government cost, balloon payment
responsibilities: Escalation clause: allows lender to interest rate of
- Identify & map floodplains (edu ppl risks, info) the loan under certain condition
- The Federal Emergency Management Agency Lis pendens: a notice filed by the lender when it
(FEMA): 100-year flood plain maps & providing initiates a foreclosure lawsuit

14
Additional Note Taking

15
Chapter 5 Funding & Closing - Creditor to cancel within 20 calendar days - If close for other reason: no later than 30 biz
days
The Closing Disclosure Escrow holdback is the act of collecting additional
Settlement and Closing Agents
Closing Disclosure (CD): at least 3 biz days before funds at closing that will be refunded after necessary
Settlement agent: employees of closing agency
consummation (contractually obligated & loan is repairs have been made to the purchased property.
(can be attorney), prepare docs, ensure signed
funded to creditor); lender to keep CD for 5 yrs In other words, a holdback is a tool that incentivizes
properly, complete funding loan
Corrections to CD: 3 categories of changes the buyer or seller to fix the home promptly to get
Estoppel letter: closing agent sends estoppel letter
- Before consummation that require new 3 day their money back.
to the seller’s lender requesting a payoff amount
waiting if
- APR increases by>= ⅛ % for fixed, >=¼%
Transfer of Servicing Explanation of Documents
for ARM loan OR
- Loan product changes OR RESPA requirement, servicing right can be sold & let At closing, borrower may receive
borrower know. When to notify: - Promissory note (borrower accepts the loan,
- Adds prepayment penalty
- Notify within 3 days after receipt of application agree to repay, sign security instrument,
- Before consummation but do NOT require new 3
- Goodbye Letter (previous servicer): at least 15 d mortgage=deed of trust)
day waiting: still required to provide corrected CD
before loan is assigned, sold or transferred - After transfer $ to seller, seller will sign the deed
- After consummation: provide corrected CD within
- Hello Letter (new servicer): within 15 d after and transfer ownership
30 d, refunds for tolerance violations within 60 d
transfer - May be asked to sign affidavits and declarations:
of consummation
- Grace period (60 d) beginning on the date of declare sth to be true e.g., the house will be
transfer: no late fee, penalty principal residence
Buydowns - Closing agent will record documents in county’s
Permanent: A payment of discount points to reduce public record
the interest rate on a fixed rate loan, or the margin Escrow Accounts
Restricted to the amount sufficient to pay for taxes, Funding: funds are dispersed to proper owners
on an ARM for the life of the loan.
HOA, insurance that are attributable to the period Purchase: buyer (down pay + closing cost)->lender->
Temporary: 2-1 buydown, payment rate will be 2%
from the date the payments were last paid until the seller
below the interest rate on the loan for the 1st yr, 1%
initial payment date. Refi: slower, after 3 d right to rescind if principal
below the interest rate for the 2nd yr, and then the
Max lender can collect at closing: 14 mo of escrow residence
full interest rate for the remaining term of the loan.
Buydown funds: seller or employer, borrower must payment (entire year + 2 mo cushion)
qualified at full interest rate - Monthly charge= 1/12 of total annual escrow Bank Secrecy Act/Anti-Money Laundering
payment for taxes & ins, can add cushion of <= ⅙ (BSA/AML) (1970)
of annual payment Under U.S. Patriots Act
Right of Rescission
Initial escrow account statement: <=45 calendar Purpose: prevent money laundering (money
Provided by TILA on owner-occupied refinance
days of settlement laundering: make $ obtained through criminal
transition
Annual statement: conduct escrow account conduct looks legit)
Borrower can notify the creditor of their wish to
analysis, submit within 30 days of completion of the Require financial institutions:
rescind the loan before midnight on the 3rd biz day
computation year - Compliance program: identity risk, internal
- 2 copies of right to rescind + 1 copy of disclosure
- If shortage: borrower can pay within 30 days of controls, review policies & procedures to achieve
statement (if not provided, borrower’s right
analysis or over the next 12 mo AML compliance—independent testing by 3rd
expires 3 yrs after closing)
- If overage > $50, refund within 30 days party every 12-18 mo, BSA/AML compliance
- Notice must: on separate doc, rescission period,
Cancellation: officer responsible for Suspicious Activity Reports
retention of security interest, outline right to
- consumer request, lender deliver escrow (SARs)
rescind, how to exercise, creditor’s place of biz,
closing statement < 3 biz day before account - SARs file with FinCEN when: insider abuse
fax #
close or, >=$5K w/ identified suspect, >=$5K
- Can be rescind by 1 ppl on the title

16
 potential money laundering or violation or, Gramm-Leach-Bliley Act or Financial
>$25K (most real estate transaction) Modernization Act of 1999 (Reg P, GLBA) LTV Formulas
- Must file within 30 calendar days after Purpose: protect nonpublic personal information 𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡
𝐿𝑇𝑉 = 𝑙𝑒𝑠𝑠𝑒𝑟 𝑜𝑓 𝑎𝑝𝑝𝑟𝑎𝑖𝑠𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 𝑜𝑟 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒
detection, record keep 5 yrs Nonpublic personal information (NPI): not easily
- Annual compliance training: include MLOs obtained publicly e.g., bank acct, credit card acct, 𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 1𝑠𝑡 𝑚𝑜𝑟𝑡𝑔𝑎𝑔𝑒 + $ 𝑑𝑟𝑎𝑤𝑛 𝑓𝑟𝑜𝑚 𝐻𝐸𝐿𝑂𝐶𝑠
𝐶𝐿𝑇𝑉 =
CTR: currency transaction report goes to IRS for
cash transaction > $10K in 1 day
SSN, loan info
💡
3 arms to GLBA ( G, L, B are all senators,
senators’ job is to protect, think about SPF sun
-
𝑙𝑒𝑠𝑠𝑒𝑟 𝑜𝑓 𝑎𝑝𝑝𝑟𝑎𝑖𝑠𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 𝑜𝑟 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒
Note: combined loan-to-value (CLTV) , “C”
for what Currently owe as a total amount:
protection, S-Safeguard, P-pretexting, F-financial primary juniors, HELOCS
Foreclosures: Judicial VS Non-Judicial privacy)
Deed in lieu foreclosure: mtg voluntarily conveys - Safeguard Rule: written info security plan that 𝐻𝐶𝐿𝑇𝑉 =
𝐿𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 1𝑠𝑡 𝑚𝑡𝑔 + 𝑡𝑜𝑡𝑎𝑙 𝐻𝐸𝐿𝑂𝐶𝑠 𝑜𝑟 2𝑛𝑑 𝑚𝑡𝑔
𝑙𝑒𝑠𝑠𝑒𝑟 𝑜𝑓 𝑎𝑝𝑝𝑟𝑎𝑖𝑠𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 𝑜𝑟 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒
the deed to the lender in exchange for satisfaction of describes its program to protect information
the debt, the debtor loss property but avoid - Note: HCLTV: “h” for wHole you can possibly
- Pretexting Rule: When customer information is
foreclosure record, lender not obligated to accept owe
obtained under false pretenses is considered
Exculpation clause: borrower has no personal *Fannie Mae uses CLTV & HCLTV whereas Freddie
pretexting. Prohibit use of forged, counterfeit, lost,
liability for the loan. The borrower's liability is limited Mac uses TLTV & HTLTV for terminology, the
or stolen documents to obtain customer
to the value of the collateral for the loan calculations are the same
information from a financial institution
Judicial foreclosure: lender goes to court to get - Financial Privacy Rule (Opt-Out Rule): if
started (several months, borrower has time to look Cash Available at Closing
share/sells NPI w/ 3rd party, require disclosure w/
for place to live, save $, legal defense) 𝐶𝑎𝑠ℎ = $𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦 × 𝐿𝑇𝑉 − 1𝑠𝑡 𝑚𝑜𝑟𝑡𝑔𝑎𝑔𝑒 − 𝑐𝑙𝑜𝑠𝑖𝑛𝑔 $
option to opt-out
- Mortgage as security instrument - Consumer VS Customer (continuing
- Lender: lender sends Notice of Intent to begin the Interest Only
relationship, requires initial privacy notice +
foreclosure process -> file lawsuit in court (lender 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 𝑙𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 × 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 ÷ 12
out-out before sharing + annual privacy
bears the burden)-> notice of lawsuit to borrower notice,+ revised privacy if change)
(15-30 d to response)-> lf rules in favor of lender: Discount Points
send a Notice of Intent to Sell-> opt1: borrower 1% discount point will buy interest rate down
Mortgage Math
redeems mortgage; opt2: lender holds an auction .25%-.50%
Debt-to-Income ratios
(if no one buys, lender owns the property) 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 ℎ𝑜𝑢𝑠𝑒 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 (𝑃𝐼𝑇𝐼) 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑝𝑜𝑖𝑛𝑡 = 𝑙𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 × # %
𝐹𝑟𝑜𝑛𝑡𝑒𝑛𝑑 𝐷𝑇𝐼(𝐻𝐸𝑅) =
- Borrower: has right of redemption; stay or 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑖𝑛𝑐𝑜𝑚𝑒
get evicted (rent free until receive official 𝐵𝑎𝑐𝑘𝑒𝑛𝑑 𝐷𝑇𝐼(𝑇𝑂𝑅) =
𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑑𝑒𝑏𝑡𝑠(𝑃𝐼𝑇𝐼+𝑜𝑡ℎ𝑒𝑟 𝑑𝑒𝑏𝑡𝑠) Break-even Analysis
𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑖𝑛𝑐𝑜𝑚𝑒
written eviction notice) 𝑆𝑎𝑣𝑖𝑛𝑔 = 𝑃&𝐼 𝑤/𝑜 𝑝𝑜𝑖𝑛𝑡 − 𝑃&𝐼 𝑤/ 𝑝𝑜𝑖𝑛𝑡
Non-judicial foreclosure: faster than judicial 𝑀𝑜𝑛𝑡ℎ𝑠 𝑡𝑜 𝑟𝑒𝑎𝑙𝑖𝑧𝑒 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 = $ 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑝𝑜𝑖𝑛𝑡𝑠 ÷ 𝑠𝑎𝑣𝑖𝑛𝑔𝑠
Qualifying Monthly Payment
because lender doesn’t prove foreclosure is 𝐵𝑟𝑒𝑎𝑘𝑒𝑣𝑒𝑛 𝑦𝑒𝑎𝑟𝑠 =𝑀𝑜𝑛𝑡ℎ𝑠 𝑡𝑜 𝑟𝑒𝑎𝑙𝑖𝑧𝑒 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 ÷ 12
𝑥 = 𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑖𝑛𝑐𝑜𝑚𝑒 × 𝑏𝑎𝑐𝑘𝑒𝑛𝑑 𝐷𝑇𝐼 − 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑑𝑒𝑏
warranted 𝑦 = 𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑖𝑛𝑐𝑜𝑚𝑒 × 𝑓𝑟𝑜𝑛𝑡𝑒𝑑 𝐷𝑇𝐼
- Sign at closing: 1. A promissory note, 2. Deed of HOEPA Triggers (Section 32)
Maximum housing payment is the lesser of 𝑥 or 𝑦 Jan 2022 (Please note that these figures may have
trust (turns the promissory note into debt secured
by a lien on home) changed over time, so please verify the latest data.)
Advanced Calculation to Identify the Sales Price Points & Fee
- Notice of sale (some states: notice of default +
from P&I - If loan amount > $22,969: point & fee >5% loan
notice of sale)-> borrower can reinstate mortgage if
Other housing expenses: hazard insurance, amount
not then -> auction (if no one meet minimum bid,
mortgage insurance, property taxes, HOA, - If loan amount < $22,969: point & fee >8% loan
ownership goes to lender) ->some state allow
assessment fee etc. amount
borrower to redeem after foreclosure
𝑀𝑎𝑥 𝑃 & 𝐼 = 𝑚𝑎𝑥 ℎ𝑜𝑢𝑠𝑖𝑛𝑔 𝑝𝑚𝑡 − 𝑜𝑡ℎ𝑒𝑟 ℎ𝑜𝑢𝑠𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛

17
APR >APOR:
- If 1st lien loan amount <$50K:
APR-APOR> 6.5%
- If 1st a first mortgage that is under $50K and is
secured by personal property (this typically
includes items such as a boat, a trailer, or an RV)
APR-APOR> 8.5%
- If 2nd lien loan amount <$50K:
APR-APOR> 8.5%

Prepayment penalty: 36 mo or 2% amount prepaid

- 𝑃𝑟𝑒𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝑝𝑒𝑛𝑎𝑙𝑡𝑦 ÷ 𝑙𝑜𝑎𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 > 2%

Higher-Priced Mortgage loan (Section 35)

The loan is HPML if the owner-occupied borrower’s
loan APR exceeds the APOR for comparable
transactions.
- If within Freddie Mac loan limits:
APR-APOR>1.5%
- If exceed Freddie Mac loan limits
APR-APOR>2.5%
- Subordinate liens
APR-APOR>3.5%

Adjustable-Rate Mortgage
max 1st adj cap/ max subsequent adj cap/ max
lifetime adj cap

Calculate income
(calculate annual income and divide by 12 months)
-Annually: annual income/12
-Monthly: monthly income
-Twice monthly: semi-monthly income x 2
-Bi-weekly: bi-weekly income x (52/2)/12
-Weekly: weekly income x 52/12
-Hourly: hourly rate x # hrs worked per week x 52/12

Overtime: *1.5
Tax free income: *1.25

18
Additional Note Taking

19
Chapter 6 Mortgage Ethics - Unauthorized fee, advance fee: not approved by - cause substantial injury (not just monetary
servicer agreeing to the short sale are reflected damage, intent to harm, potential for substantial
Ethics on the HUD-1 or CD injury exists)
Ethics (actions toward goal) VS Morality (idea/goal) - not reasonably avoidable by consumers
ECOA and HMDA are the 2 pillars of federal law Short sale= selling a house for less than the - injury>benefits to consumer
regarding fair lending & discrimination outstanding mortgage on it. Homeowner initiates Deceptive Acts or Practices
Types of Mortgage Fraud: Fraud for short sale signed off by lender - Representation or omission likely to mislead
- Housing/Property: borrower misrepresents info Short sale fraud: concealing parties to the - Reasonable consumer perspective
on application to acquire house transaction so the servicer can’t make an informed - The act is material
- Profit: industry insiders (e.g., MLO, appraiser, short sale decision Abusive Acts or Practice
attorney) to defraud lender for profit, steal cash Non-Arm’s length short sale transaction: - The act interferes with the ability of a consumer
equity from lender/homeowner, most damage to borrower has a direct relationship or business to understand
industry affiliation with the seller - Take advantage of consumer’s lack of
- Criminal enterprise: crime organization or money Short sale flip: manipulates the short sale lender understanding, inability to protect interest,or
laundering (Bank Secrecy Act & Patriot Act) into approving a short payoff and conceals an reasonable reliance on covered person
immediate contingent sale to a pre-arranged
Common Fraud Schemes end-buyer at a significantly higher sales price. Predatory Lending & Steering
Straw Buyers: use fraudsters to obtain mortgages Reverse Mortgage fraud: manipulates the senior Lender entices a borrower in taking a mortgage (w/
Air Loans: has a straw or non-existent buyer, or a citizen into obtaining a reverse mortgage loan and high fees, a high interest rate, strips the borrower of
non-existent property; based on something entirely then pockets the senior victim’s reverse mortgage equity, or places the borrower in a lower credit-rated
made up of "pulled out of thin air." loan proceeds. loan) to the benefit of the lender
Illegal Property Flips: property is purchased & Affinity fraud occurs when perpetrators rely on a Credit Insurance Packing: sneaks in paperwork at
resold at inflated price by utilizing fraudulently common bond and exploit the trust and friendship closing that provides for credit insurance
inflated appraisals that typically exists in the group of individuals to Failure to report credit information: lenders do not
Chunking: sale of properties at inflated prices, support the scheme. report to try to maintain the borrower for them to
pitched as investment opportunities to naïve Equity-skimming scheme: an investor buys a avoid other mortgage companies soliciting their
investors property from a homeowner facing foreclosure and customers.
Builder Bailout/Excessive Sales Incentives: leases the home to the homeowner. The fraudster Price Gouging: vendors take advantage of a
builder pays substantial incentives & facilitate pays off the amount owed in the foreclosure to consumer by charging high prices because the
inflated loan amount w/ inflated sale price + inflated acquire the deed & receives homeowner’s equity. consumer has no available alternative.
appraisal (new construction or condo) Loan Modification Schemes: company that claims Excessive Fees : padding closing cost, inflated
Buy and Bail: current on mortgage but home value they can assist homeowners facing delinquency w/ appraisal costs, padded recording fees, unbundling
< $ owed, apply for a purchase money mortgage on options that allow them to keep their property, modify (duplicating charges) . Borrower doesn't realize as
another home and allow 1st home to into foreclosure existing mortgage to stay in the home longer + they can be financed into loan
Foreclosure rescue schemes: promise avoid charge excessive upfront fees, fail to execute High Interest Rate: If the higher interest rates are
foreclosure, pay for services & lose home promises, and put the homeowners at risk not based on loan level price adjustments but to
- The Mortgage Assistance Relief Rule (MARS, obtain more profit from the loan
Reg O, 2010): no upfront fee; require disclosure Unfair, Deceptive, or Abusive Acts or Equity Stripping: go after the equity in the
in ads for mortgage assistance relief providers ; borrower’s home, doesn't care if borrower can pay
Practices (UDAAPs)
can’t advise borrower to stop communicating w/ mortgage, goal is to foreclosure on home and take
Dodd-Frank prohibits UDAPPs
lender equity
Unfair Acts or Practice

20
Churning or Repeated Refinancing: excessive
selling/lending activity to generate fees and
commissions
promote sales. ✅
Permits prerecorded message: as long as do not
Appointment reminder, school is
open/close, biz hours, political calls, health care
Disparate Impact occurs when a facially neutral
policy or practice is applied equally to all applicants,
but the policy or practice disproportionately excludes
Steering or Targeting: steers a borrower into a
subprime product when they could qualify for a loan
with better terms
Restricts on payments: ⛔
providers, collect debts are ok
cash-to-cash money
transfer, giving PIN from cash preload card, bank
or burdens certain groups of people on a prohibited
basis. (e.g, diff credit limit for diff age groups)
Redlining: difficult for residents of a particular
Double selling occurs when a mortgage loan acct info to create check (remotely created payment neighborhood (e.g., poor inner-city) to borrow money
originator accepts a legitimate application and orders) Reverse Redlining: charge poor inner-city
related documentation from a borrower, reproduces Do Not Call Provision: National Do Not Call neighborhoods higher rate/fee
or copies the loan file, and sends the loan package Registry by FTC; can’t solicit someone on the list, Blockbusting: real estate agent/buyer persuades an
to separate warehouse lenders to each fund the scrub their list with the Do Not Call Registry every 31 owner to sell their property at a lower amount
same loan. In some instances, double selling is days. Exemptions: because ppl of other race are buying the house
self-perpetuating because, to keep the scheme - charitable contribution: do not need to search the
going, different loans must be substituted for the national registry (for profit org calling on behalf of Fraud Check
ones on which documents cannot be provided. charitable org must honor the request) Asset Fraud: Verification of assets must match the
Under this scheme, the broker has to make - MLO may solicit clients on the Do No Call list if docs given
payments to the investor who received the copied - Previous client: 18 mo after closing Sales Contract Red Flags: seller’s name on the
documents or the first payment default occurs. - Prospective client who submits inquiry: 3 mo contract must match the name of the owner listed on
- Client w/ written permission w/ un specified the title report
Telemarketing and Consumer Fraud and time frame Occupancy fraud: FHA requires the borrower to
Abuse Prevention Act (1994) - Customer relationship: establishing the credit owner-occupy the property for 60 d. Fannie, Freddie
CFPB prescribes rules. Within the act is relationship (e.g, originate loan, servicing rights)USDA, VA: entire duration of mortgage
Telemarketing Sales Rules (TSR) and Do Not Call - Penalty: $43,792 each call Income fraud: income verification must match docs.

⛔
Provision Form 4506T (request for transcript of tax return)
: deceptive/misrepresentation, invasion of privacy, Fair Lending must be used to verify tax return. Overtime/bonus:
can’t call who have asked not to be called, payment Fair lending: unbiased treatment of borrowers likelihood of continuing in the future

✅
restrictions, disclosure the nature of the call at start (ECOA & Fair Housing Act) Wire fraud: involves the use of some form of
Keep record 2 yrs on calls to ppl that are on Do Disparate treatment: one protected group is treated telecommunications or the internet. These can
Not Call list, restricted hours 8am-9pm local time, differently include a phone call, a fax, an email, a text, or social
existing customer 18 mo, pre-qual: 90 days Overt Evidence of Disparate Treatment: when a media messaging, among many other forms. Wire
Federal Trade Commision (FTC): regulator, lender OPENLY discriminates on a prohibited basis fraud is punishable by prison and/or fines.
customer can report scam to Comparative evidence of Disparate Treatment: Application fraud: info on credit report and
Robocalls: prohibited unless obtain the call when a protected class applicant is treated less application must match
recipient’s prior signed and written agreement favorably than other applicants. Not intentional. (e.g., Employment fraud: verification of income (bank
- At the beginning: inform the customer how same credit score, White got better rate than statement, income deposits)
they can prevent future calls w/ automated Hispanic) Reduce by automated underwriting models Liability Fraud: ensure the borrower had disclosed
opt-out activated by voice or keypress or - Comparative analysis: compare protected class all debts, alimony, child support
toll-free number applicants with control group applicants (e.g, best Constructive fraud: constructive fraud is not
- Connect to human within 2 sec, may not denials VS worst approvals; compare fees, credit intentional, it is still serious (e.g., accidental
hang up an unanswered call before 15 sec terms in similarly situated borrower) omissions, honest account errors)
or 4 rings - HMDA implemented to identify redlining, Actual fraud: Actual fraud is also known as intent to
- Must provide: tel #, name, blockbusting. deceive. Most mortgage fraud is actual fraud.

21
Power of Attorney (POA): must be approved by
underwriter before it is allowed (fake POA is major
causes of fraud)

22
Additional Note Taking

23
Summary B: Balloon notice 1009: Reverse mortgage
R: Right of rescission (owner-occupied) 442: appraisal recertification form
Document retention
A: ARM disclosure DD-214 is the Certificate of Release or Discharge
5 yrs: Closing Disclosure (5 pages), SAR (suspicious
W: When your home is on the line from Active Duty
activity reports), affiliated business disclosure
L: Loan estimate 4506-T Request for Tax Transcripts
3 yrs: Loan Estimate (3 pages), LAR (Loan
MU4: generic application (for licensing)
application registry) disclosure, LOC(Loan
C: CHARM booklet MU1: company license application
application) (“3Ls”)
C: Closing disclosure 8821: authorizes the IRS to disclose your
25 months: ECOA disclosures
T: Transfer a mortgage notice (30 days of confidential tax info
2 yrs: TILA disclosures, DNC (Do Not Call List),
transferring the mortgage ownership)
Mortgage Acts and Practice disclosures(MAP)

Penalty
RESPA disclosure ( 💡KAMILAS)
K- Know before you own handbook
What rules apply to what lender
TILA (Reg Z, 1968): Implemented by Federal
Reserve Board, informed use of consumer credit by
Unauthorized fax: $500
A- AfBA requiring disclosure about its terms & costs (credit,
FCRA $1K
M- Mortgage servicing disclosure (intention) APR, advertising), protecting from predatory lending.
FACTA: 5K &/or 1 yr in prison
I- Initial escrow - Creditors: 4 installments, extend credit 25 times a
TILA (1968): $5K single, $25K reckless, $1M
L- List of HUD-approved counselors (10) year
knowingly
A- Annual escrow HMDA (Reg C, 1975): Implemented by Federal
ECOA: $10K
S- Servicing transfer disclosure (15 d before transfer, Reserve Board, track info to prevent discrimination
RESPA (1974): $10K &/or 1 yr in prison
60 d grace period) (redlining, blockbusting)
SAFE Act: $25k
- Creditors: 25 covered closed-end loans; >500
DNC: $43K (do not call)
NMLS number will go open-end lines of credit
HMDA: penalty matrix
GLB: 5yrs in prison + $10K fine for individual or Form 1003
$100K for financial institutes (1999, Reg P, 3 rules: Promissory note Underwriting DTI
safeguard, opt-out, pretext) Mortgage Recommended to submit file through AUS to
Advertisement determine
Trust deed Manual: conforming 36% up to 45% (depends on
Valid contract
credit score, reserve requirement), no front-end DTI
Competent party
Automated Underwriting System required
Mutual agreement
Fannie Mae: Desktop Underwriter (DU) AUS: 50%, more buying power
Legal object
Consideration Freddie Mac: Loan Product Advisor (LPA)
FHA: Total Scorecard Common Indexes
Competent party coming together to make a mutual LIBOR (London Interbank Offered Rate)
agreement regarding a legal object for consideration Forms COFI (FHLBB 11th District Cost of Funds Index)
1003 URLA (Fannie 1003, Freddie 65) CMT (Constant Maturity Treasury)
4 types of property descriptions 1004 URAR-Appraisal SOFR (Secured Overnight Financing Rate )
Monument method 1004MC: Market conditions addendum (enhance the
Government land survey method transparency of the market trends and conditions FTC (Federal Trade Commission) enforces:
Lots and block method (most common) conclusions made by the appraiser) FCRA, MAP, Telemarketing and Consumer
Mets and Bound method (most accurate) 1005 VOE -payroll Fraud and Abuse Prevention Act, DNC
1006 VOD - bank
TILA disclosure ( 💡BRAWL CCT )
1007 VOR - rent
1008 Transmittal summary

24
 Days to remember - Mortgage Servicing (RESPA): Forced Placed - Telemarketing and consumer fraud and abuse
Insurance 45 days 1st notice 30 days 2nd notice prevention act: can contact pre-qualified customer
3 days
36 days (not existing customer) 90 days
- Notice of right to rescind
- Borrower missed payment: attempt to contact in 36 - If deny credit based on appraisal, borrower has
- 3/7/3 rule: disclosures within 3 days, couldn’t
days 90 days to request a copy
close for 7 biz days, re-disclosure of inaccurate
45 days - FHA requires 90 days before resale
APR >3 biz days prior to closing
- CD & corrected CD: 3 days before consummation - Licensees/registrants are required to file quarterly 120 days
- 3 days of receiving application: Mortgaging (within 45 days of calendar quarter) - Can’t file notice of default until payment is 120
Servicing Disclosure Statement, Home Loan - Change of rate for ARMs: 45 days to notify days late
Toolkit, Special Information Booklet, LE, List of - RESPA Section 6 Servicing: forced placed - Quarterly Mortgage Call Report (MCR)
HUD-approved counselors, CHARM Booklet, insurance notify 45 d before, and 30 d before) - Transitional Authority
Balloon Payment Notice (required by HOEPA and - RESPA Section 6 Servicing: missed payment, mail - Re-certified Appraisal
due 3 biz days prior to closing) mitigation info 45 days 18 months
5 days - a servicer shall submit an initial escrow account - Existing customer can be called up to 18 months
- Qualified written request (QWR): 5 days to statement to a borrower within 45 calendar days of
acknowledge the receipt the date of establishment of the escrow account.
10 days 60 days
- MU4 change: 10 days to update - Bwr has 60 d of receiving ECOA notice to request
- Initial LE expire the reasons for credit denial
- Lender to return excess fund to borrower &
15 days
corrected CD within 60 d after consummation
- Qualified written request (QWR): 15 day
(10% cumulative fee tolerances)
extension
- 60-day bank statement=seasoned
- Servicing transfer statement: send 15 days before
- Loan will not be approved if has mortgage
the transfer,
payment 60 days late for past 12 months
- Goodbye letter: at least 15 d before loan is
- Defeasance clause: send a satisfaction mortgage
assigned, sold or transferred
- Hello letter (new servicer): within 15 d after
transfer
-
💡
notice to borrower within 60 days of paying off
( bwr “defeated” the mtg)
60 day grace period for servicing transfer
20 days - FHA requires borrower to owner-occupy the
- Right To Rescind: refund of escrow due 20 days property for 60 d.
30 days - Notice of ARM adjustment - Interest rate change
- Denied application for credit (based on the that will result in a new payment
appraisal) 90 days
- Notice of incomplete application - Mortgage Call report (MCR): licensees are
- Consumer reporting agencies must correct or delete required to file financial condition annually, within
inaccurate, incomplete, or unverifiable information 90 days year end
within 30 days of receipt of the dispute. - The creditor must notify an applicant of adverse
- SAR report detecting suspicious activity must be action within 90 days after making a counteroffer
filed unless the applicant accepts or uses the credit
- DNC company's call list needs to be updated every during that time.
31 days. If a customer requests to be on a list the - Credit inquiries: inquiry stays 2 yrs, score
company has 30 days to add them. impacted 12 mo (consider last 90 days)

25
 Federal Laws - Special Information Booklet: reverse, - APR fee: (fees that are related to actual mtg) orig
HELOCs, secured by mobile home fee, lender fee, points, flood determination
Real Estate Settlement Procedures Act (Reg
- Loan Estimate (purchase) or GFE (reverse, certificate, doc prep fee, prepaid interest, lender
X, RESPA, 1974) HELOC, mobile home) title ins, escrow fee, PMI, UFMIP, FHA
Purpose: educator borrowers on the cost of loan, - Mortgaging Servicing Disclosure Statement - Non-APR fee: escrow (taxes, ins), appraisal,
✅
prohibit kickback, place limit use of reserve account
Apply to: 1-4 units, federal related mortgage
loan, owner occupied, reverse mortgage, property
(RESPA)
- List of HUD-approved counselors (RESPA)
inspection, survey, home warranty, owner’s title
ins, title search fees, attorney fees, notary,
Before recording fee, transfer tax (TENACTS)
⛔
improvement loans
💡
Not apply to: ABC TV ( Agriculture loan 25+
acres, Business loan, Commercial loan, Temporary
- AfBA (RESPA) 1%
- Closing Disclosure (TILA): 3 d before
- TENACTS (title ins, escrow, notary,
appraisal, credit report, termite inspection,
At seller credit)
💡
financing, Vacant land) - Finalized Closing Disclosure (TILA) - Re-disclosure required
( SKATE: Servicing, Kickback, A, Title, Escrow) - Initial Escrow Statement within 45 d of - Change > ⅛% (0.125) for regular loan
Section 6 Servicing: settlement (RESPA) - Change > ¼% (0.25) for non-traditional loan
- Forced placed insurance (notify 45 d before, 30 d After Ads trigger terms: (contains number) must
before) - Annual Escrow Statement (RESPA) disclose: 1. Amount or % downpay 2. Terms of
- A qualified written request (QWR, borrower - Servicing transfer statement (RESPA, 15 d repayment 3. APR
request info about loan): 5 d to acknowledge before, 60 day grace period) Adjustable-rate: must say “APR may increase or is
receipt, 30 d to resolve the issue 15 d extension subject to change”
- Missed payment: attempt to contact 36 days, mail Must disclose APR
The Truth in Lending Act (Regulation Z,
mitigation info 45 d, can’t file Notice Of Default Ads recordkeeping: 2 yrs
until payment is 120 d late TILA, 1968): informed use of consumer credit by
requiring disclosure about its terms & costs (credit, Penalties: $5K or and imprisoned 1 yr
- Payoff request: 7 days
- Defeasance clause: send a satisfaction mortgage APR, advertising), protecting from predatory lending.
Implemented by Federal Reserve Board The Equal Credit Opportunity Act (ECOA,
💡
notice to borrower within 60 days of paying off
( bwr “defeated” the mtg) Apply to: creditors, 4 installments, extend credit 25 Reg. B, 1974)
- Prohibit dual tracking: continue to seek times a year
foreclosure while borrower is being considered for When: credit is offered before transaction &
advertise
💡
Purpose: prevent discrimination on protected classes
( score map: sex, color, national origin, religion,
marital status, age, public assistance)
other workout options
Section 8 Kickback (except credit application fee), Disclosure include: (record keep 2 yrs) Fair Housing Act (1968)
AfBA (affiliated business arrangements > 1% - Loan estimate (LE, keep 3 yrs), Civil act rights of 1866 prohibits public and private
ownership) - Closing disclosure (CD, keep 5 yrs) racial discrimination in real estate property
Section 9 Title: buyer may sue treble damages 3X - CHARM booklet: adjustable rate mortgage transaction, later amended to Title 8 of the civil rights
Section 10 Escrow: (escrow=impound=reserve)1/12 booklet acts of 1968-> Fair Housing Act
annual to escrow, at closing 2 mo cushion, annual - When your home is on the line booklet (home - Protected classes: sex, race, religion, color,
analysis, excess of $50 return 30 d equity loan, HELOCs, refi) disability, national origin, familial status (having
RESPA Penalty: $10K + 3x amount paid to service + - Notice of right to rescind (home equity loan, children in household whom you have legal
1 yr imprisonment HELOCs, refi of principal residence): 3 days, 2 custody of)
RESPA Disclosure Requirements copies, take 1 to rescind, refund of escrow due 20 - Prohibit: blockbusting/panic selling, steering,
3 biz days application: days redlining, refusing to sell/lease after receiving
- Home Loan Toolkit (purchase)= Know Before APR (aka. effective rate ≠ note rate) bona fide (good faith) offer, changing the terms for
You Own APR=Total interest (over the term) + APR closing diff buyers , using ads that indicating preference
cost - To combat redline: Community Reinvestment
Act- CRA designs to meet the credit need of

26
 community; HMDA is designed to meet the Appraisals under ECOA: 3 biz d before - Home loan toolkit: 3 biz, help mtg process, all
housing need consummation (Fannie appraisal waiver, not purchases
- Exemption: leasing owner-occupied unit, sold w/o required) - Housing counseling:
broker, housing operated by private - if denied based on appraisal, borrower has 90 days - mandatory: high-cost (section 32) &
organization/clubs to request a copy, lender has 30 days to deliver high-priced (section 35) & reverse mortgage
- Ad rules: fair housing opportunity logo, equal - optional: all federally-related loan applications
lender slogan HOEPA must provides a list of >=10 housing
- Complaints: written complaint filed with HUD High cost home loans (HOEPA Loans, Section 32 counselors within 3 biz days
within 1 yr of violation loan, HCML ): TILA 1994, protect from predatory - Request for Transcript of Tax Return (4506-C):
lending (principal dwelling) sent out the same time as 1003 & LE to verify
- purchase money, refinance, closed-end home income from IRS
equity loans, HELOCs - CHARM Handbook: adjustable-rate mortgages 3
- HOEPA exemption: reverse, construction biz days , prepared by CFPB
HOEPA coverage test: Rules: can’t require submit verified docs before
APR >APOR: providing LE, no fee until receiving LE, indicate intent
- 6.5% 1st lien if loan amt <50K to proceed (exception: bona-fide, fee for credit
- 8.5% 1st lien if jumbo lien >50k report)
- 8.5% 2nd lien
Points & fee: >5% HMDA
Prepayment penalty: can charge for >36 mo or 2% Home Mortgage Disclosure Act (Reg. C,
amount prepaid
💡
HOEPA restrictions ( BAPS-no balloon, ability to
repay, no prepayment penalty, speak w/ counselor)
HMDA, 1975)
Implemented by Federal Reserve Board, reporting
law, not discrimination law
Taking application under ECOA - Counseling, full appraisals, 5 yrs escrow Purpose: track info to prevent discrimination
- Marital status: can’t request unless: co-borrower, - 3 biz day disclosure before consummation (redlining, blockbusting)
non-applicant liable on account, relying on spouse (cooling off) Who: 25 covered closed-end loans; >500 open-end
income, resides in community property state, - Restrict risky features: balloon pay, repayment lines of credit
relying on alimony, child support penalty How:
- Can't deny because of: public assistance, single - HOEPA closed-end: follow ATR; open-end: - LAR (loan application register) made available
mom expected income + current obligations after deleting loan number, date received, date
- Adverse action: send < 30 d action taken,
- exception: 90 d after counteroffer or incomplete TRID - due March 1st
application The TILA RESPA integrated Disclosure Rule - report quarterly
- Required info: lender’s name, address, nature of (TRID, 2015) - Mtg broker exempt because can’t underwrite
action, ECOA notice (responsible federal agency), Purpose: simplify disclosure process (LE, CD) - Reg C (collect data)
principal reasons, 60 d of receiving notice to Doesn’t apply to: (any mortgage doesn’t require LE Recordkeeping: 3 yrs
request the reasons or CE) reverse, HELOCs, all cash sale, mortgage
- Incomplete application: ECOA gives a lender the mobile home not secured by real estate FCRA
ability for a lender to send a notice to the Disclosure requirements: The Fair Credit Reporting Act (Reg V, FCRA,
borrower if their application is incomplete and give - Loan estimate: Good faith estimate (GFE)+ Initial
the borrower time to respond. This has to happen
1970)
Truth-in-lending disclosure (TIL) Purpose: restricts use of credit reports and requires
within 30 days of the last action taken on the - Closing disclosure: HUD-1, final Truth in accuracy on credit reports (CFPB & FTC enforce);
transaction or the incompleteness. Lending

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FCRA requires delete negative info within 7 yrs.,10 Require financial institutions: The Mortgage Acts and Practice Rule (MAP
yrs for bankruptcies, no time limit for criminal - Compliance program: identity risk, internal rule, Regulation N, 2011)
conviction, dispute incorrect items on report, controls, review policies & procedures to achieve Regulator: FTC & CFPB
risk-based pricing AML compliance—independent testing by 3rd Purpose: regulate advertising, prohibit
Adverse Action Disclosure: within 30 days (ECOA) party every 12-18 mo, BSA/AML compliance misrepresentation
of application, which credit reporting agency(CRA), officer responsible for Suspicious Activity Reports Prohibit: false or misleading ad, material, bait and
agency not responsible for the denial, agency will (SARs) switch, misrepresentation (stated or implied )
provide free copy of report (MLO can’t provide) - SARs file with FinCEN when: insider abuse Recordkeeping: 2 yrs from the date the
Reasons to receive free credit report: adverse or, >=5K w/ identified suspect, >=5K potential communication was made
action disclosure, on public assistance, unemployed, money laundering or violation or, >25K (most
experience errors on credit report, victim of fraud real estate transaction) E-Sign Act
- Must file within 30 calendar days after The Electronic Signatures in Global and
Fair and Accurate Credit Transaction Act detection, record keep 5 yrs
National Commerce Act (E-Sign Act, 2000)
- Annual compliance training: include MLOs
(FACTA, 2003) Purpose: electronic signatures
Purpose: improve consumer access to credit Email & faxing are not considered electronic
information, consumer disputes, prevent identity theft GLBA Written approval, allow to go back to hard copy
FACTA: 1 free credit report, Notice to home loan Gramm-Leach-Bliley Act or Financial Able to accept digital delivery
application disclosure, negative info disclosure made Modernization Act of USA Patriot Act (2001)
available to consumer <30 days, borrower can 1999 (Reg P, GLBA) Purpose: requires ID to be provided for loan with the
dispute negative info, dispute must be resolve < =30 Purpose: protect nonpublic personal information purpose of identifying terrorists (FinCen -U.S.
days Nonpublic personal information (NPI): not easily Department of the Treasury enforce)
The Notice to Home Loan Applicant is required obtained publicly e.g., bank acct, credit card acct, Customer Identification Programs: verify info,
under FACTA and must provide information like the SSN, loan info maintain records, check if on list of known or
consumer's credit score, the range of possible credit 3 arms to GLBA (G, L, B are all senators, senators’ suspected terrorists (OFAC list- Office of Foreign
scores, any factors that adversely affected the score job is to protect, think about SPF sun protection, Asset Control)
(up to 4 key factors), the date the score was received S-Safeguard, P-pretexting, F-financial privacy) Info obtained: Name, DOB, ID (US citizen: SSN, tax
and the name of the company that provided the - Safeguard Rule: written info security plan that ID; Non-US: tax ID, passport ID, Country,Alien ID)
report. describes its program to protect information Patriot Act Disclosure Form: check 2 forms of IDs to
Red Flags Rule: prevent identity theft(for financial - Pretexting Rule: When customer information is fill out Patriot Act Disclosure
institutions & creditors) obtained under false pretenses is considered HOPA
- Reasonable policies & procedures to identify pretexting. Prohibit use of forged, counterfeit, lost, Homeowner protection (HPA): how/when PMI is
- Detect the red flags or stolen documents to obtain customer removed: 80% LTV (lender’s choice); 78% required
- Spell out appropriate actions information from a financial institution to remove
- Keep program current for new threats - Financial Privacy Rule (Opt-Out Rule): if Dodd-Frank Wall Street Reform and
share/sells NPI w/ 3rd party, require disclosure w/
Consumer Protection Act
BSA/AML option to opt-out
Created CFPB, the education, testing, background
Bank Secrecy Act/Anti-Money Laundering - Consumer VS Customer (continuing
check, NMLS number
(BSA/AML) (1970) relationship, requires initial privacy notice +
RESPA, TILA, TRID, ECOA, FACR, FACTA, AIR
Under U.S. Patriots Act out-out before sharing + annual privacy
(appraiser independent registry )
Purpose: prevent money laundering (money notice,+ revised privacy if change)
laundering: make $ obtained through criminal
conduct looks legit) MAP Rule

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The CFPB : Provide federal oversight, penalty, overview laws, HUD works in conjunction with CFP

Laws enforced by CFPB Purpose Year Mnemonic

Ensure consumers are given equal chance to
Reg B Equal Credit Opportunity Act ECOA obtain credit 1974 B for "Be equal" when extending credit

Identify possible discriminatory lending pattern

through the collection of and disclosure of data C for "collecting data", allow to "see--C"
Reg C Home Mortgage Disclosure Act HMDA about applicants & borrowers characteristics 1975 possible discrimination
Note: I came across this information in
some study group discussions, but I
haven't seen it in any exercises that I
Prohibits debt collection companies from using have taken. I am keeping it here so that
abusive, unfair or deceptive practices to collect I am aware of it and won't be surprised
Reg F Fair Debt Collection Practices Act FDCPA debts 2013 to see it on the exam
Secure and Fair Enforcement of Note: very important to know the
Reg H Mortgage Licensing Act SAFE State compliance and bureau registration system 2008 acronym for SAFE
Prohibit false and misleading ads of mortgage prohibit false ads get published on
Reg N Mortgage Acts and Practices MAP products 2011 Newspaper
Mortgage Assistance Relief Help protect distressed homeowners from Imagine Mars as a planet shaped like
Reg O Services Act MARS foreclosure prevention scams 2010 an 'O' (Reg O).
Privacy of Consumer Financial senator's job is to protect -- SPF
Information; Gramm-Leach-Bliley protect (safeguarding, pretexting,
Reg P Act GLBA Protect nonpublic personal information 1999 financial privacy)
Ensure the accuracy, fairness & privacy of
consumer personal information that is assembled
and used by consumer reporting agencies Think of the letter "V" as representing
Note:Fair and Accurate Credit Transactions Act the word "Verification”, verifying the
(FACTA) = Amended the FCRA to include provisions accuracy of the information they collect
Reg V Fair Credit Reporting Act FCRA for identity theft prevention and credit report accuracy 1970 and report about consumers

Help consumers become better shoppers for

settlement services, eliminate unnecessary
Real Estate Settlement Procedures increases in cost due to kickbacks and place
Reg X Act RESPA limitation of the use of reserve account 1974 mispronounce it as Re"X"pa

Promote the informed use of consumer credit by TILA the GodZilla (TILA is the biggest
Reg Z Truth in Lending Act TILA requiring disclosures about its terms and costs 1968 one), credit+APR+ ads

29
Additional Note Taking

30
 Common loan product comparison
Conventional FHA VA USDA

Min down pay 3% 3.5% 0%

DTI 28%/36% 31%/43% 41% residual income 29%/41%

(43% max QM)

Credit score 640 580 (pay off judgements, N/A

CAIVRS: federal debt
database)

Chapter 7 4 yrs 2 yrs 2 yrs 3 yrs

(10 yrs on
credit report)

Chapter 13 2 yrs 1 yr 1 yr 1 yr
(7 yrs on credit
report)

Foreclosure 7 yrs foreclosure/ 4 3 yrs foreclosure/ 3 yrs 2 yrs foreclosure/ 2 yrs short 3 yrs foreclosure/ 3 yrs
(7 yrs report) yrs short sale short sale sale short sale

Loan limit Annually changing Has limit 36K X 4

Concession 3% 6% 4% 6%

Insurance PMI required <20% MIP & UFMIP 1.75% No insurance required USDA 90% note
(HPA act, 80%, 78% base loan amount (HUD guarantee (initial 1%,
required) insures), can be added to Funding fee monthly 0.35%)
loan, 100% insured first 2.3% subsequent 3.6%
Finance into loan Government mortgage
MIP is required for the life ins is required for the
of the loan if >90% LTV If >10% down payment, first life of loan
MIP renewal= 0.85%* funding fee 1.4%
loan/12, if down pay
>10%-> MIP cancel 11
yrs

Refinance 85% max FHA streamline: 85%; IRRLS 90%

HECMs: 62 yo, org fee Funding fee 0.5%
cap $6K

Reserves 2-4 months Not required Not required Not required

Late fee 5% 4% 4% 4%

Other (Fannie-DU, 4 C’s: credit, capacity to COE Guarantee fee

Freddi-LP) repay NOV (notice of value)= CRV
Cash asset LAPP (lender approved 115% max area
Collateral ; processing program) median income
(unconditional direct
endorser DE) Closing cost 1% 35K ppl, low income
Occupancy occurs < 60 VA guarantee 25%
days, maintain 1 yr DD-214 is the Certificate of USDA underwrite &
Release or Discharge from fund the loan
Active Duty

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