Federal Laws - Part 1

What are the penalties for violation of RESPA/Section 8?

Section 8 of RESPA prohibits referral fees and other forms of kickbacks/fee splitting. Penalties include fines of up to $10,000 and up to one year in prison.

Disclosures due within three business days of loan application…

Loan Estimate

 

Your Home Loan Toolkit: A Step-by-Step Guide

 

CHARM Booklet

 

Variable-rate program disclosures

 

Home equity plan disclosures

 

Notice of Right to Receive an Appraisal Report

What can result in a $1,000,000 fine and 30 years in prison?

Acts of mortgage fraud.

Definition of the term “creditor”

The Equal Credit Opportunity Act (ECOA), the Fair Credit Reporting Act (FCRA), and the Fair and Accurate Credit Transactions Act (FACTA) all use the same definition of creditor. A creditor is any person who regularly extends, renews, or continues credit. Loan originators, lenders, and other mortgage professionals are included in this definition.

Transactions reported under HMDA…

Purchases

Refinances

Home improvement loans 

Pre-qualifications must also be reported, along with their disposition

When a borrower’s LTV reaches 80%...

They are permitted to request cancellation of PMI. The Homeowners Protection Act sets the requirements for cancellation of PMI. It is at the lender’s discretion to permit cancellation – the borrower must be current on payments.

An initial privacy notice is due…

At the time that a customer relationship is established. The Gramm-Leach-Bliley Act requires financial institutions (including mortgage brokers) to provide an initial privacy notice “…not later than when you establish a customer relationship…” The initial privacy notice should also be accompanied by the opt-out notice.

HMDA requires loan originators to…

Request information on an applicant’s race, ethnicity, and sex. The applicant may decline to answer, in which case the loan originator must make a best guess based on visual observation. This information is necessary to meet the reporting requirements of HMDA.

A permissible purpose is required…

When obtaining a credit report. Under FCRA, lenders and mortgage professionals must provide the consumer reporting agency with a certification of permissible purpose in order to pull credit. Loan qualification is considered a permissible purpose.

The Gramm-Leach-Bliley Act does not protect…

Publicly available information. This includes information that can be found in government real estate records, information available from the phonebook, and information included on a public, unrestricted website.

The Loan Estimate must be provided…

No later than three business days after receiving a completed application

 

No later than seven business days prior to consummation

The Closing Disclosure must be provided…

At least three business days prior to consummation

Exceptions to ECOA prohibited inquiries...

Although ECOA prohibits inquiries about protected personal characteristics, mortgage professionals are permitted to ask about race, ethnicity, and sex for the purposes of compliance with government monitoring programs (such as HMDA). Inquiries about protected characteristics may also be used to determine eligibility for special-purpose credit, such as assistance programs through non-profits.

The purpose of the Homeowners Protection Act is to…

Facilitate the cancellation of private mortgage insurance (PMI). Borrowers can request cancellation when their loan reaches 80% loan-to-value (20% equity), but the law requires automatic termination of PMI at 78% LTV (22% equity).

Advertising trigger terms for closed-end loans under TILA include…

Amount or percentage of any down payment

Number of payments or period of repayment

Amount of any payment

Amount of any finance charge

Use of trigger terms in advertisements requires disclosure of:

 Amount and percentage of the down payment

Terms of repayment, such as inclusion of a balloon payment

Annual percentage rate

The TRID Rule does not apply to…

HELOCs

Reverse mortgages

Mortgages secured by a mobile home or dwelling not attached to real property

Fee splitting is illegal when…

One or both settlement service providers fail to perform enough work to earn the fee.

“Low monthly payments” is an example of…

An advertising trigger term under Regulation Z. TILA/Regulation Z requires additional information to be provided in an advertisement that contains trigger terms. Most commonly, APR must be provided if the advertisement includes the note rate.

Regulation B…

Is the regulation that issues the rules for the Equal Credit Opportunity Act.