Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
195 Cards in this Set
- Front
- Back
|
What is TILA? |
Truth in Lending Act Implemented by Reg. Z |
|
|
When was TILA enacted? |
1968 |
|
|
TILA is implemented by which regulation? |
Regulation Z |
|
|
What did TILA Establish? |
Requirements for creditors to disclose loan terms, such as the APR and various finance charges. |
|
|
What guidelines are outlined through TILA? |
*Advertising *Recession |
|
|
What restrictions are imposed through TILA? |
Imposes restrictions on specific types of mortgages, including Adjustable-rate mortgages, reverse mortgages, and HELOS. |
|
|
What does TILA prohibit? |
TILA prohibits certain practices relating to payments made to compensate mortgage brokers and other loan originators |
|
|
What is HOEPA? |
Home Ownership and Equity Protection Act |
|
|
HOEPA was an amendment to which Act? |
TILA |
|
|
When was HOEPA enacted? |
1994 |
|
|
When was HOEPA significantly updated? |
2008 and 2014 |
|
|
HOEPA is implemented by which Regulation? |
Regulation Z |
|
|
Who does HOEPA Protect? |
Consumers who obtain high-rate or high-fee mortgages |
|
|
What does HOEPA prohibit? |
*Predatory lending *Certain servicing practices |
|
|
What is MDIA? |
Mortgage Disclosure Improvement Act |
|
|
MDIA is an amendment to which Act? |
TILA |
|
|
When was MDIA enacted? |
July 2008 |
|
|
When did MDIA become effective? |
July 30, 2009 |
|
|
What does MDIA require? |
Requires that refinance transactions are covered by TILA early disclosure guidelines. |
|
|
How long are creditors REQUIRED to wait after the provide the early TIL disclosures to the borrower before closing the loan? |
7 Business Days |
|
|
UNDER MDIA, how can creditors deliver disclosures to the borrower? |
*Electronically *Fax |
|
|
Most recent amendments to TILA were due to what? |
Industry practices that took advantage of or abused consumers. |
|
|
What is the Dodd-Frank Act? |
*Identifies abusive practices *Gave the Consumer Financial Protection Bureau the responsibility to finalize and implement specific mortgage industry rules |
|
|
What is CPA? |
Consumer Protection Act |
|
|
When did TILA become effective? |
July 1969 |
|
|
What is the most important US consumer protection law with regard to borrowing? |
"TILA" Truth in Lending Act |
|
|
TILA was desinged to protect who? |
Consumers' interest |
|
|
Where can you review the full TILA? |
Electronic Code of Federal Regulations database "eCFR 12 (Title 12), Part 1026" |
|
|
What are two of the most notable amendments to TILA? |
*The Home Equity Loan Consumer Protection Act of 1988 * The Home Ownership and Equity Protection Act of 1994 (HOEPA) |
|
|
What is HOEPA? |
Home Ownership and Equity Protection Act |
|
|
What is MDIA? |
Mortgage Disclosure Improvement Act |
|
|
When was MDIA enacted? |
2008 |
|
|
What did MDIA expand? |
Expands the TILA disclosure agreement to cover refinance transactions. |
|
|
What timelines are established by MDIA? |
*Truth in Lending disclosure delivered to borrower from the originator within 7 business days before closing * MLO required to provide a revised disclosure at least 3 business days before closing if the APR is outside of allowable tolerances |
|
|
How does MDIA define "Provided" in terms of delivery of disclosures? |
"Provided" means hand-delivered or mailed |
|
|
What determines the deadlines in terms of actual delivery of disclosures according to MDIA? |
The deadlines apply to when the envelope is postmarked |
|
|
What 2 things summarize the purpose of TILA and Reg. Z? |
1. Ensure Proper Disclosures 2. Enforce Specific Prohibitions |
|
|
Which specific Prohibitions are enforced under TILA and Reg. Z? |
Certain home equity lines of credit, adjustable-rate mortgages, mortgages with high interest rates and reverse mortgages have additional government limitations imposed. |
|
|
True or False: TILA is NOT meant to restrict how much the mortgage loan originator charges each mortgagor. |
True: It is in place to ensure that sufficient and reliable information is provided to consumers so that they can make an informed decision when shopping for credit. |
|
|
Which transactions are covered under the RESPA/TILA Rule changes effective October 3, 2015? |
Closed-end consumer credit transactions secured by real property with or without a dwelling |
|
|
What transactions are exempt from the RESPA/TILA Rule changes in Oct 2015? |
*Business Purpose Loans *Reverse Mortgages *HELOCs *Chattel-dwelling loans *Credit extended to non-natural persons (Ex: Trusts, Estates, Business Entities) |
|
|
What pieces of information define an "application"? |
*Consumer's Name *Consumer's Income *Consumer's Social Security Number *The Property Address *Estimate Property value *Loan amount sought |
|
|
What initial disclosure are required under the TILA/RESPA rule changes? |
The Loan Estimate (LE) |
|
|
True of False: The Delivery requirements were not changed under the RESPA/TILA changes. |
True: There were no changes to delivery requirements under the RESPA/TILA changes in Oct 2015 |
|
|
Is the Pre-Application (LE/GFE) Disclosure-Fee Worksheet permitted? |
Yes, the Pre-Application Disclosure-Fee worksheet is permitted but must not look like the LE |
|
|
What requirements were updated to the Pre-application Disclosure Fee Worksheet under the RESPA/TILA revisions made |
*Must state in at least 12-point font on the top of the 1st page: "Your actual rate, payment, and costs could be higher. Get an official Loan estimate before choosing a loan" |
|
|
Under RESPA/TILA updates in Oct 2015, when is the LO required to verify the borrower documents? |
It is Prohibited to verify the borrower documents until the LE is provided and the borrower has indicated intent to proceed. |
|
|
Which costs cannot increase from the LE (Loan Estimate) to CD (Closing Disclosure)? |
*Fees paid to creditor or broker *Fees paid to an affiliate of creditor or broker *Transfer taxes *Fees paid to an unaffiliated 3rd party if the creditor did not permit the consumer to shop for the 3rd party *The borrower's interest rate once locked
|
|
|
Which costs may increase from the LE and the CD? |
*Prepaid Interest *Property insurance premiums *Amounts paid into escrow *Charges paid to 3rd party service providers selected by the consumer that are not on the creditors written list *Charges paid for 3rd party services not required by the creditor |
|
|
Which triggers to the Loan Estimate initiate a revised application disclosure? |
*Valid changed circumstance increasing a fee paid to the creditor *Valid changed circumstances increasing the sum of fees by more than 10% *Locking in the loan's interest rate *Expiration of LE with no intent to proceed *Changes in any material term of the loan *APR becomes inaccurate by more than .125% *Permanent financing of construction loan more than 60 calendar days after original LE |
|
|
A Closing Disclosure must be sent within how many days of a revised application? |
Sent within 3 business days of receiving information sufficient to establish that a changed circumstance trigger occurred. |
|
|
When must the Closing Disclosure be delivered to the borrower? |
* No later than 3 business days prior to closing *Cannot be received by the borrower on the same day as a revised LE *Must be received within 3 business days after placing in the mail |
|
|
What is the "Mailbox rule"? |
The period of 3 business days in which the borrower must receive documents after placing them in the mail. |
|
|
Which changes before closing require a revised CD and a new 3-business day period? |
1. APR increases by more than 1/8 of one percent for a fixed-rate loan (1/4 of one percent for a variable-rate loan) 2. Changes in loan product 3. Addition of prepayment penalty |
|
|
The ___________________ aims to give the borrower a complete picture of the fees associated with both the loan and the home purchase transaction. |
The Loan Estimate |
|
|
The ________________ was implemented by the CFPB to combined Truth in Lending Statement and Good Faith Estimate. |
The Loan Estimate |
|
|
What must be included in the initial disclosure? |
All Fees required and charged by the MLO, broker, lender, and other third parties. |
|
|
The Loan Estimate gives the borrower the costs of their credit in the form of what? |
1. APR 2. Total Interest Paid |
|
|
What is the deadline to provide a revised Loan Estimate? |
No later than 7 business days before consummation |
|
|
True or False: Consummation is NOT the same thing as closing or settlement. |
True. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not when they become contractually obligated to the seller on a real estate transaction. |
|
|
The point in time when a consumer becomes contractually obligated to the creditor on the loan depends on what? |
The applicable State Law |
|
|
True or False: Creditors and settlement agents should verify the applicable State Laws to determine when consummation will occur. |
True. State Law will vary state to state and the Creditor and Settlement agents should know the applicable State's law. |
|
|
What is included on Page 1 of the Loan Estimate? |
*General Terms *Loan Terms table *Projected Payments table *Costs at Closing table *A link for consumers to obtain more info about loans secured by real property at a website maintained by the Bureau |
|
|
What statement must be present on Page 1 of the Loan Estimate? |
"Save this Loan Estimate to compare with your Closing Disclosure" |
|
|
The top of Page 1 of the Loan Estimate must include these two things? |
The Name and Address of the Creditor |
|
|
True or False: If there are multiple creditors involved in a mortgage, use only the creditor completing the Loan Estimate. |
True. If a mortgage broker is completing the LE, use the name and address of the creditor if known. If not known, leave this space blank. |
|
|
What is the Date Issued on a Loan Estimate? |
The Date the Loan Estimate is mailed or delivered to the consumer. |
|
|
True or False: "Applicants" includes the name and mailing address of the consumer(s) applying for the loan. |
True: Use each Applicant's name and mailing address if there are multiple Applicants. |
|
|
The Truth in Lending Act is structured how? |
TILA is structured in: Subparts A through E |
|
|
Subpart A of TILA contains what? |
*Generic information about the purpose and organization of the Federal TILA
*Some basic definitions *The method for cost calculation *Certain exempt transactions *Discusses the method of determining the finance charge |
|
|
Subpart B of TILA contains what? |
*Establishes rules for OPEN-ENDED credit such as Home Equity Lines of Credit (HELOCs) *Requires that initial disclosures and periodic statements be provided *Specifies rules for advertising and rescission |
|
|
Methods determining the finance charge can be found here? |
Subpart A in the TILA Index (1026.1-4) |
|
|
Rules for establishing open-end credit such as HELOCs can be found here? |
Subpart B in the TILA Index (1026.5-16) |
|
|
Subpart C of TILA contains what? |
*Covers CLOSED-END credit (Essential 1st and 2nd mortgage and Home Equity Loans HELs) *Includes rules on initial disclosures *Includes rules on the treatment of credit balances, annual percentage rate calculations, rescission requirements, and advertising *MDIA amendments are mostly found in this section. |
|
|
MDIA amendments are mostly found in this section of TILA? |
Subpart C (1026.17-24) |
|
|
Subpart D of TILA contains what? |
*Regulations for oral and other-than-English language disclosures plus older consumer credit protection state laws (Subpart D was not covered in our lesson) |
|
|
HOEPA amendments are mostly found in this section? |
Subpart E of TILA |
|
|
Subpart E of TILA contains what? |
*Special Rules for mortgage transactions *Requires certain disclosures and provides limitations for CLOSED-END loans that have rates or fees above specified amounts. |
|
|
This is the most well-known part of TILA |
The APR Disclosure |
|
|
What does APR stand for? |
Annual Percentage Rate |
|
|
The APR is a rate that includes these: |
All fees and charges associated with a loan |
|
|
What is a Note Rate? |
The interest rate applied to the unpaid balance of the loan. |
|
|
How are the Note Rate and the APR different? |
Unlike the Note Rate which is just the interest rate applied to the unpaid balance of the loan, the APR takes into account associated fees such as origination fees or commissions. |
|
|
The disclosure of APR gives the consumers this... |
A full picture of the overall cost of the loan |
|
|
What are Finance Charges? |
1.The finance charge is the cost of consumer credit as a dollar amount. 2. Includes any charge payable directly or indirectly by the consumer 3. Does not include any charge of a type payable in a comparable cash transaction. |
|
|
What are Prepaid Finance Charges? |
*Prepaid Finance Charges are paid upfront at settlement. *Effectively reduce the amount of funds available for the consumer's use
|
|
|
Examples of Prepaid Finance Charges are: |
*Borrower's Points *Loan Origination Fees *Real Estate Construction Inspection Fees *Odd days' interest *Mortgage guarantee insurance fees paid to the Federal Housing Administration *Mortgage guarantee insurance fees paid to PMI Private Mortgage Insurance |
|
|
What is a MGIC? |
Mortgage Guaranty Insurance Company |
|
|
What are Precomputed Finance Charges? |
They are charges that are paid on an ongoing basis, after settlement, over the life of the mortgage |
|
|
What is an example of a Precomputed Finance Charge? |
The Monthly mortgage interest payment |
|
|
What are the three fees included in the overall Finance Charge? |
1. Third-Party Fees 2. Closing Agent Fees 3. Mortgage Loan Origination Fee |
|
|
What are Third Party Fees? |
Charges by 3rd parties if use o the 3rd party is required by the creditor or if the creditor can earn part of the fees |
|
|
What are Closing Agent Fees? |
Charges by closing agents if the agent is required by the creditor or if the creditor can earn part of the fees.
|
|
|
What is the Mortgage Loan Origination Fee? |
Charges by the mortgage brokers, whether paid for by the borrower directly or with loan proceeds, even if not required by the creditor and/or the creditor does not benefit from the fees.
|
|
|
Failure to report certain fees as finance charges can be construed as an effort to deceive the borrower and as a violation of what?
|
TILA |
|
|
The mortgage loan originator is required to disclose this...
|
All charges known at the time of disclosure.
|
|
|
RESPA stands for what? |
The Real Estate Settlement Procedure Act (RESPA)
|
|
|
If the finance charge is deemed inaccurate the borrower might be able to do this? |
Back out of the mortgage (or rescind) causing the lenders to suffer losses. |
|
|
What are finance charges? |
Finance charges are the fees charged by the mortgage loan originator to the borrower for the borrower to get the mortgage loan.
|
|
|
When did the Federal Reserve issue a rule clarifying the accuracy tolerance of the Finance Charge? |
1995. This rule only applies to closed-end credits, (ie. HELOCs are not included.) |
|
|
According to the Truth-In-Lending Act, Accuracy Tolerances for Closed-End Credit states that for all loans originated after 1995 and secured by real property or a dwelling , the disclosed finance charge is considered accurate if it does not vary from the actual finance charge by more than this amount? |
$100 |
|
|
What are examples of items included in Finance charges? |
1. Interest 2. Transaction Fees 3. Points and the Loan Origination Fee 4. Credit Guarantee Insurance 5. Premiums or other charges for insurance against loss or damage to property 6. Discount Points 7. Debt-cancellation fees |
|
|
Name items that are EXCLUDED in Finance Charges? |
1. Application Fees 2. Fees for unanticipated Late Payment 3. Seller's Points 4. Real-estate related fees (property appraisal fees or fees for inspections to assess the value) |
|
|
True or False: Under TILA and Regulation Z finance charge disclosures for open-end credit must be accurate since there is no tolerance for finance charge errors. |
True. Under TILA and Regulation Z, finance charge disclosures for open-end credit must be accurate since there is no tolerance for finance charge errors. |
|
|
The right of rescission is one significant consumer protection under with Act? |
TILA |
|
|
The right of rescission allows owners time to do what? (Closed-end credit only) |
1. Reexamine their credit agreements and cost disclosures
2. Reconsider whether they want to risk the property by using it as security for the credit |
|
|
If the required finance charge disclosures are out of tolerance or disclosures are not delivered the right to rescind is extended to what amount of time? (Closed-end Credit only)
|
3 Years |
|
|
How many days does the borrower have to cancel/rescind? |
3 business days |
|
|
How many days does the lender have to return the property or money if the borrower rescinds? |
20 Calendar Days |
|
|
The Right to Recession form includes which 3 important pieces of information for the borrower? |
1. Notice of 3 business days for borrower to cancel (whichever of the three events happens last) 2. Notice of 20 Days for lenders to return money or property if they rescind 3. Cancellation Instructions and the last date to cancel |
|
|
The borrower has the right to Rescind after three business days after the last of these three events? |
1. The mortgage closing date 2. The date the owner received the TILA disclosure 3. The date the owner received the Right to Rescission form. |
|
|
If there is any inaccurate information on the disclosure documents the borrower has the right to rescind for this amount of time? |
3 Years |
|
|
As required by law, the mortgage loan originator must provide the owners with instructions to do what? |
Rescind |
|
|
True or False: The mortgage loan originator reminds the owner that they need to sign and date the notice to rescind. |
True |
|
|
True or False: If the rescission notice is placed in the mail, the postage stamped date is considered the delivery date. |
True |
|
|
The Loan Estimate is designed to provide what to consumers? |
*Disclosure that help understanding the key features, costs and risks of the mortgage loan for which they are applying. |
|
|
The Closing Disclosure is designed to provide disclosures that will be helpful to the consumer in understanding what? |
All costs of the Transactions |
|
|
The Loan Estimate must be delivered to the consumer within...? |
3 Business days after they submit the loan application. |
|
|
The Closing Disclosure must be provided to the consumer by...? |
3 Business Days before they close on the loan |
|
|
The Loan Estimate and Closing Disclosure must be used for most _______________ Consumer Mortgages. |
Closed-End Consumer Mortgages |
|
|
The TILA-RESPA rule does not apply to loans made by persons who are not considered "Creditors" because they make ______ or fewer mortgages a year. |
5 |
|
|
An application is considered received when the consumer provides which information: |
1. consumer's Name 2. Consumer's Income 3. Consumer's Social Security Number to obtain a credit report 4. Address of the property 5. Estimate of the value of the property 6. The mortgage loan amount sought |
|
|
A revised Loan Estimate generally can be provided no later than _________________ . |
7 Days before consummation |
|
|
On the Loan Estimate, what is the definition of an "Applicant"? |
An applicant includes the Name and mailing address of the consumer(s) applying for the loan. |
|
|
On the Loan Estimate, the "Property" is what? |
The address of the property which must include the zip code that will secure the transaction. |
|
|
How is the "Value" of a loan for a purchase money mortgage determined? |
Use the "Sale Price" |
|
|
If the loan is or a transaction without a seller use ______________________________ to determine the value. |
Appraised Value or Estimate Value |
|
|
Loan Terms should be described in this form of time? |
Years |
|
|
Purpose is disclosed using one of four descriptions: |
1. Purchase 2. Refinance 3. Construction 4. Home Equity Loan |
|
|
What is the "Product" on the Loan Estimate? |
1. The payment feature (Negative Amortization, Interest Only, Step Payement, or Seasonal Payment) 2. The type of rate (Adjustable Rate, Step Rate, or Fixed Rate) |
|
|
On the Loan Estimate, what are examples of the "Loan Type" |
*Conventional *FHA *VA *Other- |
|
|
What is a conventional loan? |
A type of loan that is not guaranteed or insured by a Federal or State Agency |
|
|
What is a FHA loan? |
A type of loan that is insured by the Federal Housing Administration |
|
|
What is a VA loan? |
A VA loan is guaranteed by the U.S. Department of Veterans Affairs |
|
|
On a Loan Estimate, the Loan type of "Other" is defined as...? |
Must have a brief description if the loan is insured or guaranteed by another Federal or a State Agency. |
|
|
What is a Loan ID # ? |
The Creditor's loan identification number that may be used by a creditor, consumer, and other parties to identify the transaction. |
|
|
When the interest rate is locked at the time of the Loan Estimate's delivery, what else must be disclosed? |
The date and time (Including the applicable time zone) when the lock period ends. |
|
|
What 6 things must be disclosed in the Loan Terms table? |
1. Loan Amount 2. Initial Interest Rate 3. Initial Monthly Principal & interest amount 4. Any adjustments to these amounts after consummation 5. Whether the loan includes a Prepayment Penalty 6. Whether the loan includes a Balloon Payment |
|
|
What 4 things must be disclosed in the Projected Payments Table? |
1. Principal & Interest 2. Mortgage Insurance 3. Estimated Escrow 4. Estimated Total Monthly Payments; Estimated Taxes, Insurance, & Assessments even if not paid with escrow funds |
|
|
The Total Closing Costs are disclosed on which page of the Loan Estimate? |
Page 2 |
|
|
What are origination charges? |
Items the consumer will pay to each creditor and loan originator for originating and extending credit. |
|
|
Up to four main categories of costs are disclosed on Page 2 of the Loan Estimate. They are...? |
1. A good-faith itemization of the Loan Costs and other Costs associated with the loan 2. A calculating Cash to Close table that shows how the amount of cash needed at closing is calculated 3. An adjustable Payments (AP)Table w/ relevant info about how the monthly payments will change 4. An Adjustable Interest Rate Table if the interest rate will change |
|
|
"Other Costs" on a Loan Estimate include what? |
include taxes, governmental recording fees, and certain other payments involved in the real-estate closing process. |
|
|
Total Loan Costs Table of the Loan Estimate include what three things? |
1. Total Loan costs is the sum of the subtotals of Origination Charges 2. Services You Cannot shop for 3. Services You Can shop for |
|
|
The "Other Costs Table" is broken into 4 subheaders. They are...? |
1. Taxes and Other Government Fees 2. Prepaids 3. Initial Escrow Payment at Closing 4. Other |
|
|
What are Prepaids? |
Prepaids are items to be paid by the consumer in advance of the first scheduled payments of the loan. |
|
|
Name three Prepaids? |
1. Homeowner's Insurance Premium 2. Mortgage Insurance Premium 3. Prepaid Interest, Property taxes |
|
|
Initial Escrow Payment at Closing includes: |
1. Homeowner's Insurance 2. Mortgage Insurance 3. Property Taxes 4. A maximum of five other items |
|
|
What are Lender Credits? |
Lender Credits is the amount of any payments from the creditor to the consumer that do not pay for a particular fee on the Loan Estimate and is disclosed as a negative number
|
|
|
What is an AIR table? |
Adjustable Interest Rate Table |
|
|
When is an AIR Table disclosed? |
...When the loan’s interest rate may increase after consummation.
|
|
|
A comparisons table discloses what? |
The Comparisons table discloses information related to the costs of the loan In Five Years, the Annual Percentage Rate (APR), and the Total Interest Percentage (TIP) |
|
|
"In 5 years" includes what information? |
*The total amount the consumer will have paid in principal, interest, mortgage insurance, and loan costs paid through the end of the 60th month after the due date of the first periodic payment *The amount of principal paid through the end of the 60th month after the due date of the first periodic payment |
|
|
What does "TIP" stand for? |
Total Interest Percentage |
|
|
Define TIP |
The TIP is the total amount of interest that the consumer will pay over the loan term, expressed as a percentage of the loan amount.
For example, if the Loan Amount is $100,000 and the total amount of interest that the consumer will pay over the Loan Term is $50,000, then the TIP is 50%. |
|
|
True or False: The consumer is NOT required to sign the Loan Estimate |
True. The consumer is NOT required to sign the Loan Estimate. |
|
|
If these are mentioned in an advertisement, then what else must also be stated? *Amount of down payment *Monthly Payment *Number of Payment Periods *Finance Charge |
*Down payment amount or percentage *Terms of Repayment *Annual Percentage Rate (Not just "APR") *Risk of Rate increases |
|
|
What are "Trigger Terms" and what Act do they possibly violate? |
The expression ‘Trigger Terms’ refers to oversimplified, attention-grabbing terms used in advertisements regulated under TILA |
|
|
True or False: When Trigger Terms are used, all the required advertising terms should be disclosed in close proximity with equal prominence |
True. TILA specifically states that, when a Trigger Term is used, all the required advertising terms should be disclosed in close proximity with equal prominence. This rule is very important. |
|
|
TILA rules are generally enforced by _______?
|
The FTC |
|
|
The FTC has the authority to do what if someone violates TILA or Regulation Z? |
*Conduct Investigations *File Administrative Complaints *Issue cease and desist orders against people |
|
|
The FTC can impose civil penalties of up to how much money, per violation per day on any person who violates a cease and desist order |
$10,000 per violation per day |
|
|
At a minimum, a lender must consider which 8 underwriting standards? |
Current income or assets
Current employment status Credit history The monthly payment for the mortgage The monthly payments on any other loans associated with the property The monthly payment for other mortgage related obligations (such as property taxes)Other debt obligations, including Alimony and Child Support |
|
|
What is DTI and what does it evaluate? |
Debt-To-Income The monthly debt-to-income ratio (DTI) or residual income the borrower would be taking on with the mortgage. (Debt-to-income ratio is a consumer’s total monthly debt divided by their total monthly gross income). |
|
|
TILA offers a safe harbor or rebuttable presumption of compliance with the Ability-to-Repay rule by creating loans called this... |
Qualified Mortgages |
|
|
True or False: If a creditor or lender issues a Qualified Mortgage they will have certain protections from legal action in the future if a consumer defaults on their loan. |
True: If a creditor or lender issues a Qualified Mortgage they will have certain protections from legal action in the future if a consumer defaults on their loan. |
|
|
The statutory definition of qualified mortgage requires the creditor to do these two things:
|
(1) Verify and document the income and financial resources relied upon to qualify the obligors on the loan
(2) Underwrite the loan based on a fully amortizing payment schedule and the maximum interest rate during the first five years, taking into account all applicable taxes, insurance, and assessments |
|
|
What is "Steering"? |
When a loan officer "steers" a consumer to a lender offering less favorable terms in order to increase the loan originator's compensation. |
|
|
When was HOEPA passed? |
in 1994 by Congress amidst the rapid growth of subprime lending. |
|
|
HOEPA is an amendment to which Act? |
Truth in Lending Act |
|
|
Two significant additional amendments of HOEPA were completed when? |
2002 and 2008 |
|
|
HOEPA defined specific classes of loans called what? |
Higher-Priced and High-Cost loans |
|
|
Many state laws regarding predatory lending and subprime lending and subprime mortgage lending are modeled on what? |
HOEPA |
|
|
What is "redlining in reverse"? |
Predatory Lending; Excessive unethical lending to a previous under-served population. |
|
|
Subprime lending refers to what? |
Subprime lending refers to an entirely appropriate and legal lending category which caters to borrowers who do not qualify for prime rates or rates reserved for borrowers with blemish-free credit histories |
|
|
What is Asset-based lending? |
Extending credit to borrowers unable to repay the debt is called asset-based lending. This problem is exacerbated by mortgage loan originators who do not verify income. In such a case, once a borrower fails to make payments, the lender would foreclose on the property, thus obtaining the property as their asset.
|
|
|
What is Loan Flipping? |
Repeatedly refinancing, or ‘flipping,’ loans for the purpose of continuously collecting fees from homeowners.
|
|
|
What are Excessive Fees? |
Incorporating credit terms and products that are of questionable value to the borrower and that significantly increase the cost of credit.
|
|
|
What are 10 Predatory Lending Examples? |
1. Asset-based lending 2. Loan Flipping 3. Excessive Fees 4. Making unaffordable loans 5. Exploiting the Elderly 6. Exploiting Ignorance 7. Dishonest servicer practices (Pyramiding late fees) 8. Inflated appraisals 9. Misleading Advertisements 10. Advance Fee Schemes |
|
|
How are Subprime loans defined by HOEPA? |
"Higher-Priced Mortgages" |
|
|
HOEPA’s “Higher-Priced Mortgage” definition includes two main categories. They are___________ and __________________.
|
1. A broader category created in 2008 that covers general subprime loans (Section 35).
a. A Federal Reserve Ruling that took effect in April 2011 included, for specific rulings, a category of “jumbo” loans 2. Another category, which was created in 1994 and amended and significantly expanded in 2002, covers only “high-cost” refinance mortgages. These are often referred to as Section 32 mortgages. |
|
|
Which 4 Protections are limited under HOEPA in Section 32 and Section 35? |
1. Servicer Limitations 2. Appraisal Limitations 3. Further Advertising Limits 4. 3-Business-Day Disclosure Requirement |
|
|
TILA Section __________ protects consumers from abusive and predatory lending practices by imposing prohibited acts and practices on certain higher-priced loans. |
TILA Section 1026.35 (Section 35) |
|
|
Section 35 Higher-priced loans requirements with effective date: June 1, 2013 are:
|
*The creditor must verify the borrower’s ability to re-pay the loan
*Prepayment penalties are generally limited to the first 2 years *The creditor must establish an escrow account for taxes and insurance for at least five (5) years *A closed-end loan cannot be structured as an open-ended loan to evade the requirements |
|
|
Section 35 Higher-priced loans requirements with effective date January 18, 2014:
|
*Appraisals are required for all higher-priced mortgages *The appraisal must be performed by a certified or licensed appraiser who conducts a physical visit of the interior of the property that will secure the transaction |
|
|
What transactions are exempt from the appraisal and escrow requirements? |
* A reverse mortgage transaction *A transaction to finance the initial construction of a dwelling *A transaction originated by a Housing Finance Agency, where the HFA is a creditor for the transaction *A transaction originated pursuant to the US Department of Agriculture's Rural Development Section 502 Direct Loan Program |
|
|
What regulation are implemented in HOEPA Section 35? |
1.Loose Lending (Significantly expanded in 2008) 2. Prepayment Penalties 3. Escrow Creation 4. Regulation Evasion |
|
|
What are Prepayment Penalties as defined by HOEPA? |
HOEPA defines prepayment penalties as the practice of refunds of unearned interest that are calculated by any method less favorable than the actuarial method. |
|
|
What is the correlation of Higher-Priced Mortgage Loans that are regulated in HOEPA Section 35 and Escrow Creation? |
Section 35 Requires that the lender establish an escrow account for the payment of property taxes and homeowners’ insurance. The mortgage loan originator may only offer the borrower the opportunity to opt out of the escrow account after five years. Certain Co-ops and Condos are exempted from the escrow requirement.
|
|
|
What High-Cost Mortgage loan types are covered under HOEPA Section 32? |
Section 32 primarily affects refinancing and home equity installment loans (second mortgages) that also meet the definition of a high-rate or high-fee loan.
|
|
|
Section 32 of HOEPA does not cover what type of High-Cost mortgage loans? |
The rules do not cover loans to buy or to build a home, reverse mortgages or home equity lines of credit
|
|
|
True or False: Section 32 of HOEPA primarily affects refinancing and home equity installment loans with specific APR Triggers |
True: Effective January 2014, there are 4 difference APR Trigger rates that dictate regulation under Section 32 of HOEPA |
|
|
What 5 things are Prohibited under HOEPA Section 32 for High-Cost Mortgages? |
1. Balloon Payments for loans less than 5 years 2. Negative Amortization is prohibited 3. Default rate limitations: interest cannot be higher than before default 4. Prepayment penalties: Are prohibited the same way as Higher-Priced loans under Section 35-consumer's total monthly debt payments cannot be more than 50% of the consumer's monthly gross income 5. Due-On-Demand Clause |
|
|
Explain the Due-On-Demand Clause that is prohibited under Section 32 for High-Cost Mortgages |
Prohibited, except in the following situations
1. There is fraud or material misrepresentation by the consumer in connection with the loan 2. The borrower fails to meet the repayment terms of the agreement 3. There is an action by the borrower that adversely affects the creditor’s security |
|
|
What forms do the Loan Estimate replace? |
The Special Information Booklet, the GFE, and the TIL |
