Federal Mortgage Related Laws

what does RESPA stand for?

real estate settlement procedures act

what is the purpose of RESPA?

• require the disclosure of costs

• eliminate kickbacks and referral fees

  • limit amounts held in escrow accounts

what type of loans are covered by RESPA?

any transactions involving a federally-related mortgage loan

any loan secured by a first or subordinate lien on residential property designed for the occupancy of 1-4 families made by any lender that meets the following criteria:

• lender:

  • intends to sell loan to Fannie Mae, Freddie Mac, or Ginnie Mae

federally-related mortgage loan

what regulation is RESPA implemented by?

Regulation X

the following are…

• title:

  • searches

  • examinations

  • insurance

• attorney services

• preparation of documents

• surveys

• credit reports

• appraisals

• pest inspections

• real estate services

• loan origination

• processing mortgages

  • closing or settling mortgages

settlement services covered by the provisions of RESPA

whether or not the servicing of a mortgage loan may be transferred…

it must be disclosed to the borrower no later than three days after receiving application

Regulation X sets forth rules related to the transfer of…

servicing rights

where is servicing transfer disclosed?

in the Loan Estimate

the entity that is making the transfer

transferor servicer

the entity receiving servicing rights

transferee servicer

if servicing is transferred, when should the transferor servicer give a notice?

no less than 15 days before effective date of transfer

if servicing is transferred, when should transferee servicer give a notice?

no more than 15 days after the effective date of transfer

are servicing entities allowed to provide a joint notice? if so, when?

yes, no less than 15 days before effective date of transfer

during the transferring of servicing rights, how long before a payment from the borrower can face consequences of late payments?

60 days from effective date of transfer

the following items are in what document?

• date of transfer

• contact info from both servicers

• date late payments begin

• statement that loan terms wont change

• info regarding mortgage life or disability insurance

servicing transfer notice

how much cushion can be collected in escrow accounts?

1/6 or 2 months

how often should escrow/reserve accounts be analyzed?

annually

what happens if there is a surplus of $50 or more after doing escrow account analysis?

a refund has to be given to borrower

what is the max penalty of noncompliance of servicer?

up to $2,000

what does section 8 of RESPA deal with?

illegal fees and kickbacks

under section 8 of RESPA, no person may give or receive…

anything of value from the referral of settlement services

what are penalties for violating section 8 of RESPA?

fines up to $10,000 or one year imprisonment

allows the referring of business to receive compensation for referrals under certain conditions

• if there is an ownership of 1% or more

Affiliates Business Arrangement

when should an Affiliate Business Arrangement Disclosure be given?

at or before time of referral

are loans on vacant or unimproved property covered under RESPA?

no

under RESPA, loans for business, commercial, or agricultural purposes are…

not covered

construction loans are not covered under RESPA unless…

lender issues commitment for permanent financing used to purchase the property

what was the purpose of TILA?

disclose credit terms so consumer can compare with other lenders and avoid uninformed use of credit

considered to be any day except sundays and legal public holidays

business day

residential structure which contains between one and four units

• do not need to be attached to real property

dwelling

costs of obtaining credit paid by consumer, expressed as a dollar amount

finance charge

charges paid separately before or at the time of consummation or which are withheld form the proceeds of the loan

prepaid finance charge

TILA specifically applies to…

credit extended for personal, family, or household purposes

what are loans that TILA does not apply to?

business, commercial, or agricultural

under TILA, if an advertisement contains an interest rate…

it must also include APR

• “amount or % down”

• # of pmts or period of pmts

• amount of any payment

• amount of finance charge

closed-end loan trigger terms that require additional disclosures

total finance charge to the total amount financed, measure of the cost of credit, expressed as a yearly rate

APR

the following fees are included in the calculation of…

• buy down feed

• flood certification fees

• warehouse fees

• VA funding feed

• MIPs

• orignation fees

• discount points

• tax service fees

• underwriting fees

• processing fees

• prepaid/per diem interest

• closing fees

• courier fees

the APR

what are the fees that are not included in APR calculation?

• title insurance

• escrowed funds (tax and insurance)

• notary

• appraisal

• termite inspection

• credit report charges

under TRID, what happens if there is a change in terms that exceeds applicable tolerance level?

the information must be re-disclosed

the amounts charged in Loan Estimate should be based on the…

best information reasonably available

if there are charges paid to third-party providers for services that are not required by the creditor…

creditor may charge a consumer more than amount disclosed in loan estimate

what amounts cannot change from the Loan Estimate?

prepaid interest, property taxes, property insurance, and escrow account

if a creditor provides consumer with a list of third-party providers to “shop” and chooses one of the providers from that list…

total for these items cannot exceed 10% of amount disclosed on loan estimate

what are items that have a zero tolerance?

transfer taxes and fees to third-party service providers used that consumer was not allowed to shop for

what is HOEPA under?

TILA

what does HOEPA stand for?

Home Ownership and Equity Protection Act

what loans fall under the scope of HOEPA?

high-cost home loans

what makes a loan a “high-cost home loan”

if the APR exceeds the APOR for a comparable transaction above threshold

how many percentage points above APOR can APR be for a first-lien loan?

6.5 percentage points

how many percentage points above APOR can APR be for:

• a first-lien loan < $50,000 and is secured by a dwelling that is personal property

• subordinate lien

8.5 percentage points

a loan is considered a high-cost home loan, if points and fees exceed 5% of loan amount greater than or equal to…

$26,968

if points and fees exceed 8% or $1,348 of loan amount less than $26,968…

the loan is considered a high-cost home loan

what are the limits on points and fees based on?

• adjusted annually preceding June 1

Consumer Price Index

a loan would be considered a high-cost home loan, if it has a prepayment penalty…

more than 36 months after consummation

borrowers must receive an additional set of disclosures…

3 days before closing on high-cost home loans

what do the additional set of disclosures for high-cost home loans include?

APR, amount of regular payment and any balloon payment, statement that payment may increase if variable

a loan that results in negative amortization, balloon payments, prepayment penalties, and an increase in interest rate after default…

can not be included in a high-cost home loan

in order to make a high-cost home loan…

there must be written certification that borrower obtained counseling from a HUD-approved counselor

borrowers have a right to rescind a transaction that has security interest on primary residence until…

midnight on third business day

the right to rescind does not apply to…

residential mortgage loan used for purchase, a refi by the same creditor, a transaction in which a state agency is the creditor

if applicable and and the borrower decides to rescind they must provide…

written communication

a closed-end consumer credit transaction secured by the borrower’s principal dwelling that has an APR that exceeds the APOR

higher-priced mortgage loan

a loan that is eligible to be purchased by Freddie Mac does not…

exceed the conforming loan limit

a first-lien loan is considered a higher-priced mortgage loan if it does not exceed conforming limit and is…

1.5 percentage points above APOR

a first-lien jumbo loan is considered a higher-priced mortgage loan if APR is __ percentage points above APOR

2.5

a loan is considered a higher-priced mortgage loan if a subordinate-lien loan is __ percentage points above APOR

3.5

what is the maximum mortgage limit eligible for purchase by Freddie Max for a single-family home?

$806,500

the Dodd-Frank Act authorized the creation of…

the Consumer Financial Protection Bureau (CFPB)

the CFPB implemented what two rules?

ATR Rule & QM Rule

when did the ATR Rule and QM Rule take effect?

January 10, 2014

requires a creditor to make a reasonable, good faith determination that a person applying for a residential mortgage loan has a reasonable ability to repay the loan according to its terms.

Ability to Repay Rule (ATR Rule)

what are the penalties for failing to use the ATR Rule?

up to 3 years of finance charges, legal fees

what does the ATR Rule apply to?

any consumer credit secured by a dwelling

under the ATR Rule, the following are all…

• HELOCs,

• Timeshares,

• Reverse Mortgages,

• Temp Loans with less than 12 months term,

• construction loans less than 12 months term,

• loans made by housing finance agency or other governmental agency

exempt

the creditor has to take these into account for what rule?

• current income or assets

• current employment status

• monthly mortgage and related payments

• debts, alimony, and child support

• DTI or residual income

• credit history

the ATR Rule

when calculating monthly payment for loan, it is calculated using…

the introductory or fully-indexed rate, whichever is higher

when verifying a loan applicant’s income or assets, a creditor must utilize…

reasonably-reliable third party records

what are reasonably-reliable third party records?

• paystubs

• tax returns

• employment information

• records from financial institutions

lenders are deemed to have complied with ATR requirements if…

they satisfy the definition of a qualified mortgage

a qualified mortgage has substantially…

equal periodic payments

a qualified mortgage can not have negative…

amortization

a qualified mortgage does not allow the deferral…

of the payment of principal

a mortgage is not considered a qualified mortgage if…

there is a balloon payment

a qualified mortgage has a loan term of…

no more than 30 years

a qualified mortgage does not have points or fees that exceed…

3% of total loan amount

the threshold limit for points and fees…

varies based on loan amount and are adjusted every year based on inflation

a loan that meets the general QM definition only and the APR does not exceed the APOR by more than 2.25%

a general QM

under a general QM, for a first-lien loan greater than or equal to $134,841, APR cannot exceed APOR by…

more than 2.25%

under a general QM, for a:

• first-lien loan greater than or equal to $80,905, but less than $134,841…

• a subordinate lien that has a loan amount greater than or equal to $80,905

APR cannot exceed APOR by more than 3.5%

under a general QM, the following cannot have an APR that exceeds APOR by…

• first-lien loan less than $80,905…

• loan secured by a manufactured home and loan amount is less than $134,841

• a subordinate lien that has a loan amount less than $80,905

more than 6.5 percentage points

under a general QM, for a loan secured by a manufactured home and loan amount is greater than or equal to $134,841, APR cannot exceed APOR by…

2.25 percentage points

generally, the seasoning period to qualify as a seasoned QM is…

36 months

a loan is a seasoned QM if…

it meets all the requirements for a QM

a loan that is a high-cost mortgage defined by HOEPA can not…

become a seasoned QM

the seasoning period may end later if…

borrower is delinquent for a period of 30 days or more or obtains temporary payment accommodation

prepayment penalties are prohibited on…

high-cost home loans and HPMLs

under ATR/QM Rule, prepayment penalties may not be imposed after…

the first 3 years of the loan term

the Loan Originator Compensation Rule is under what law?

TILA