Mortgage Loan Originator SAFE Exam Prep Flashcards

Real Estate Settlement Procedures Act (RESPA)

Known as Regulation X, this consumer protection statute protects consumers from excessive settlement costs, kickbacks, and referral fees in federally related mortgage loans.

Truth-In-Lending Act (TILA)

Known as Regulation Z, this federal law promotes the informed use of consumer credit by requiring standardized disclosures of costs and terms.

ALIENS

An acronym for the six pieces of information that define a mortgage application: Property Address, Loan amount, Income, Estimate of property value, Name, and Social Security number.

Special Information Booklet

A document titled 'Your Home Loan Toolkit: A Step-by-Step Guide' provided to consumers within $3$ business days of application to help them understand real estate transactions.

Mortgage Servicing Disclosure Statement

A RESPA Section $6$ disclosure where the lender indicates whether the loan's servicing may be assigned, sold, or transferred.

Affiliated Business Arrangement (ABA)

A disclosure required when a settlement service provider refers a consumer to a provider in which they have an ownership interest of more than $1\%$.

HUD-1 Settlement Statement

A form used to itemize actual costs in transactions that involve a borrower and a seller, typically used for HELOCs or Reverse Mortgages.

Annual Escrow Statement

A notice delivered once a year summarizing deposits and payments from an escrow account; surpluses of $50$ or more must be returned to the borrower.

Qualified Written Request (QWR)

A letter sent to a servicer requesting information or notifying them of an error, which the servicer must acknowledge within $5$ business days.

Force-Placed Insurance

Insurance coverage placed by a lender on a home when the owner's policy is canceled or inadequate to protect the lender's financial interest.

Loan Estimate (LE)

A disclosure combining the initial TILA and RESPA GFE forms, provided within $3$ business days of application for closed-end consumer credit transactions.

Closing Disclosure (CD)

A final disclosure form combining the HUD-$1$ and final TILA disclosures, provided at least $3$ business days before consummation.

Annual Percentage Rate (APR)

A measure of the cost of credit expressed as a percentage that includes the nominal interest rate plus other costs or fees.

Right of Rescission

A right for consumers to cancel a refinance transaction on their principal dwelling within $3$ business days following consummation.

Home Ownership Equity Protection Act (HOEPA)

Also known as Section $32$, this law establishes requirements and protections for high-cost mortgages.

Higher-Priced Mortgage Loan (HPML)

Also known as Section $35$, these are closed-end residential loans with an APR exceeding the Average Prime Offer Rate (APOR) by specified thresholds.

Yield Spread Premium (YSP)

A fee paid by a lender to a broker for originating a loan at an interest rate higher than the market rate, currently prohibited as a basis for compensation.

Equal Credit Opportunity Act (ECOA)

Known as Regulation B, this law prohibits discrimination in any aspect of a credit transaction based on race, religion, sex, marital status, and other protected classes.

Adverse Action Notice

A notification required within $30$ days after receiving a completed application if the lender denies credit or takes other unfavorable action.

Home Mortgage Disclosure Act (HMDA)

Known as Regulation C, this act requires financial institutions to collect and report data for monitoring discriminatory lending patterns.

Fair Credit Reporting Act (FCRA)

Known as Regulation V, this legislation promotes the accuracy, fairness, and privacy of information in consumer reporting agency files.

Bank Secrecy Act (BSA)

A federal law requiring financial institutions to establish anti-money laundering (AML) programs and file Suspicious Activity Reports (SAR).

Suspicious Activity Report (SAR)

A report filed with FinCEN for transactions involving at least $5,000$ that are suspected to involve illegal activity or have no lawful purpose.

Gramm-Leach-Bliley Act (GLBA)

A law focusing on protecting the privacy of consumer nonpublic personal information held by financial institutions.

Safeguards Rule

A GLBA requirement for financial institutions to develop and maintain a comprehensive information security program.

Mortgage Acts and Practices (MAP)

Known as Regulation N, this rule prohibits material misrepresentations in any commercial communication regarding mortgage credit products.

USA PATRIOT Act

A law requiring lenders to establish Customer Identification Programs (CIP) to verify the identity of individuals opening new accounts.

Homeowners Protection Act (HPA)

Also known as the 'PMI Cancellation Act,' it establishes rules for canceling and terminating private mortgage insurance.

Consumer Financial Protection Bureau (CFPB)

An independent bureau established by the Dodd-Frank Act to supervise financial institutions and enforce federal consumer financial laws.

Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)

A law requiring states to establish minimum standards for the licensing and registration of mortgage loan originators.

Nationwide Mortgage Licensing System (NMLS)

A database established by CSBS and AARMR for the uniform licensing and tracking of mortgage loan originators.

Unique Identifier

An NMLS-assigned number that permanently identifies a loan originator and must be shown on all application forms and advertisements.

Qualified Mortgage (QM)

A category of loans that meet specific product-feature prerequisites and have a presumption of compliance with the Ability-to-Repay (ATR) rule.

Ability-to-Repay (ATR)

A TILA requirement that creditors make a reasonable, good-faith determination that a borrower can repay a loan based on $8$ underwriting factors.

Conforming Loan

A conventional loan that meets the underwriting guidelines and loan limits set by Fannie Mae (FNMA) and Freddie Mac (FHLMC).

Loan Level Price Adjustments (LLPAs)

Additional fees assessed to conventional mortgages based on risk characteristics such as credit score, LTV ratio, and occupancy type.

$203(b)$ Home Mortgages

The primary FHA fixed-rate program used to purchase or refinance one-to-four-unit family dwellings.

Home Equity Conversion Mortgage (HECM)

The FHA's reverse mortgage program for homeowners aged $62$ or older to withdraw equity from their principal residence.

Upfront Mortgage Insurance Premium (UFMIP)

A one-time fee charged by FHA at closing, currently set at $1.75\%$ of the base loan amount.

VA Funding Fee

A fee charged to veterans using the VA home loan benefit to defray the costs of the program, which may be financed into the loan.

Section $502$ Guaranteed Rural Housing Loan

A USDA program providing $100\%$ financing for low-to-moderate-income residents in designated rural areas.

Jumbo Loan

A conventional non-conforming loan with a principal balance that exceeds the conforming loan limits set by FHFA.

Alt-A Mortgage Loans

Loans designed for borrowers with clean credit but featuring risk factors like reduced income documentation or high DTI ratios.

Fully Indexed Rate

The sum of the margin and the index used to determine the interest rate on an adjustable-rate mortgage (ARM).

Margin

The fixed percentage points added to the index of an ARM to calculate the interest rate; it represents the lender's profit.

Payment Shock

A significant increase in a borrower's monthly mortgage payment once a loan begins to amortize or an interest-rate adjustment occurs.

Uniform Residential Loan Application (URLA)

Also known as Form $1003$, this is the official standardized application form for residential mortgage loans.

Net Tangible Benefit

A consumer protection standard ensuring that a refinance provides a basic advantage to the borrower, such as a lower payment or more stable product.

Liquid Assets

Cash on hand or items that can be converted quickly into cash, such as savings accounts, stocks, and mutual funds.

Qualifying Ratios

Calculations like the front ratio (housing expense to income) and back ratio (total debt to income) used to assess a borrower's capacity to repay.

Loan-to-Value (LTV)

The ratio of the loan amount to the lesser of the appraised value or sales price of the property, expressed as a percentage.

Sales Comparison Approach

The most common appraisal method for existing homes, basing value on the recent sales of similar properties in the area.

Chain of Title

The historical record of the passing of property ownership from the present owner back to the original owner.

Promissory Note

The legal document representing the borrower'