S.A.F.E. Mortgage Exam Study Guide Flashcards

A series of vocabulary flashcards covering the key terms, laws, and regulatory requirements found in the S.A.F.E. Mortgage Loan Originator study guide.

S.A.F.E. Act

The Secure and Fair Enforcement for Mortgage Licensing Act, part of the Housing and Economic Recovery Act of $2008$, which establishes licensing, application, and reporting requirements for the mortgage industry.

NMLS

The Nationwide Mortgage Licensing System and Registry, where mortgage loan originators must register to receive a Unique Identifier.

Unique Identifier

An NMLS number that must be displayed on all public communications, such as business cards, applications, and marketing materials, but is not required for interoffice communication.

State Mortgage Loan Originator

An individual who works for a non-depository institution (mortgage lender or broker) and must be a $W-2$ employee and maintain a state license.

Registered Mortgage Loan Originator

An individual who works for a depository institution, such as a bank or credit union, and is registered but not required to be state-licensed.

Pre-Licensing Education

A requirement of $20$ hours of education, including $3$ hours of law, $3$ hours of ethics, $2$ hours of non-traditional products, and $12$ elective hours.

Reg X

Also known as the Real Estate Settlement Procedures Act (RESPA) or "reXpa," which aims to help consumers shop for settlement services and avoid unearned fees.

Loan Estimate (LE)

A disclosure providing the estimated costs of a loan, which must be sent within $3$ business days of application and is the lender’s responsibility to ensure delivery.

$0\%$ Tolerance

A category of fees on the Loan Estimate that cannot change at closing, including origination fees, rate lock charges, transfer taxes, and required third-party services.

$10\%$ Tolerance

A category of fees including settlement services recommended by the lender and government recording charges, which cannot exceed the Loan Estimate by more than $10\%$.

Affiliated Business Arrangement (AfBA)

An arrangement where a person refers an applicant to a settlement provider in which they have an ownership interest of more than $1\%$, requiring a specific disclosure.

Closing Disclosure (CD)

The final document showing actual loan costs, which must be provided to the borrower $3$ business days prior to settlement.

Servicing Transfer Statement

A notice required $15$ days before a loan's servicing is transferred; no late fees can be assessed for $60$ days following the transfer.

Initial Escrow Statement

A disclosure due within $45$ days of escrow establishment that limits the cushion to $1/6$ of total annual disbursements.

Section $8$ of RESPA

The section that prohibits illegal kickbacks, fee splitting, and the exchange of things of value for referrals.

Markups

The prohibited practice of a lender increasing third-party fees beyond their true cost, which is a violation of RESPA.

Reg Z

The Truth-in-Lending Act (TILA), or "tilZa," which promotes the informed use of credit and ensures advertising is not misleading.

Annual Percentage Rate (APR)

The cost of credit expressed as a yearly rate; the tolerance for re-disclosure is $1/8\%$ or $.125\%$.Ratio.

Finance Charge

The cost of credit expressed as a dollar amount, representing any cost associated directly with the lender.

CHARM Booklet

The Consumer Handbook on Adjustable-Rate Mortgages, which educates borrowers on the risks of variable-rate mortgage products.

Right to Rescind

A $3$-day cooling-off period after closing for primary residence refinances, during which the borrower can cancel the transaction.

Trigger Terms

Specific numbers in advertisements, such as monthly payment amounts or down payment percentages, that require additional "clear and conspicuous" disclosures.

TRID

The TILA-RESPA Integrated Disclosure Act, which integrated the disclosure processes into the Loan Estimate and Closing Disclosure forms.

Dodd-Frank Act

A bill enacted to regulate consumer financial products and services, creating the CFPB and establishing residential mortgage origination standards.

Ability to Repay (ATR)

A requirement that lenders verify a borrower's financial capacity to repay a loan using factors like $DTI$, credit history, and employment documentation.

Qualified Mortgage (QM)

A loan that meets specific safety criteria, such as having a $DTI$ no higher than $43\%$ and a term no longer than $30$ years, providing the lender with a Safe Harbor.

Average Prime Offer Rate (APOR)

A survey-based estimate of Annual Percentage Rates currently offered on prime mortgage loans, used to determine if a loan is HPML or High Cost.

High Priced Mortgage Loan (HPML)

A loan that exceeds the $APOR$ by specific thresholds ($1.5\%$ for conforming loans) and requires an escrow account for at least $5$ years.

HOEPA

The Home Ownership and Equity Protection Act (Section $32$), which regulates high-cost loans and requires HUD-approved counseling.

Homeowners Protection Act (HPA)

A law that facilitates the cancellation of Private Mortgage Insurance ($PMI$) when equity reaches $20\%$ or $22\%$.

Reg B

The Equal Credit Opportunity Act (ECOA), which prohibits discrimination against credit applicants based on factors like race, religion, sex, and age.

Notice of Action Taken (NOAT)

A notification required within $30$ days of application to inform the consumer of the approval, denial, or incompleteness of their loan application.

Redlining

The illegal practice of a lender refusing to make loans in a particular geographic area.

Reg C

The Home Mortgage Disclosure Act (HMDA), which requires lenders to report data to identify discriminatory lending patterns in communities.

Reg V

The Fair Credit Reporting Act (FCRA), ensuring the accuracy, fairness, and privacy of consumer information on credit reports.

FACTA

The Fair and Accurate Credit Transactions Act, an update to FCRA aimed at preventing identity theft and improving credit score access.

Disposal Rule

A rule requiring the burning, shredding, or pulverizing of sensitive consumer documents to prevent identity theft.

US Patriot Act

Legislation that establishes anti-money laundering programs and requires the filing of Suspicious Activity Reports ($SAR$).

Gramm-Leach-Bliley Act (GLB)

A law focusing on the protection of non-public personal information ($NPI$) through privacy notices and security programs.

Safeguards Rule

A part of GLB that requires financial institutions to implement and maintain an effective security program to protect consumer info.

MAP Rule

Mortgage Acts and Practices (Regulation $N$), which prohibits material misrepresentations in the advertising of mortgage products.

GSEs

Government Sponsored Enterprises, specifically Fannie Mae ($FNMA$) and Freddie Mac ($FHLMC$), which purchase conforming mortgages.

FHA Mortgages

Loans overseen by HUD that are "insured" by the federal government and require a minimum down payment of $3.5\%$ for credit scores of $580$ or higher.

HECM

Home Equity Conversion Mortgage, a HUD-approved reverse mortgage for homeowners aged $62$ or older.

VA Mortgages

Loans "guaranteed" by the Department of Veterans Affairs that offer $100\%$ financing with no monthly mortgage insurance for eligible veterans.

USDA Mortgages

Loans for low-income borrowers in rural areas that offer $0\%$ down payment for homes generally not exceeding $25$ acres.

Piggyback Loan

A second mortgage opened at the same time as the first mortgage to avoid paying $PMI$ by keeping the first loan at $80\%$ $LTV$.

Service Release Premium (SRP)

Fees that lenders receive for selling or transferring the servicing rights of a mortgage loan to another entity.

Table Funding

A wholesale lending arrangement where a broker originates and closes a loan using a warehouse line of credit and then assigns it to a lender.

Mortgage-Backed Securities (MBS)

Investment vehicles in the secondary market made up of bundled mortgage loans.

$1003$/URLA

The Uniform Residential Loan Application, which is the standard document used to collect borrower information for a mortgage.

Asset Seasoning

The requirement that funds used for a down payment must be in the borrower's account for at least $60$ days.

Front-end Ratio

A housing ratio calculated by dividing the $PITIA$ by the borrower's gross monthly income.

Market Approach

Also known as the Sales Comparison Approach, it is the most common appraisal method, using at least $3$ comparable properties sold within the last $12$ months.

Title Insurance

Insurance used to protect the lender or homeowner against property claims or liens from the past that were missed during a title search.

Wet Settlement

A loan settlement where funds are disbursed on the same day as the closing, typically used for purchase transactions.

Promissory Note

The legal document containing the borrower's promise to repay the loan and the specific terms of the debt.

Loss Payee Clause

A mortgagee clause in a hazard insurance policy that ensures insurance payments are made to the lender.

Straw Buyer

A person whose personal profile is used to hide the identity of the true party in a fraudulent mortgage transaction.

Equity Stripping

A predatory lending practice where an investor buys a property from a homeowner facing foreclosure and leases it back to them to strip their equity.