UNIFORM STATE CONTENT 1

History of the Mortgage Industry

  • Mortgage Definition: A mortgage is a written instrument using real property to secure repayment of a debt. It's a financial document binding the real property as collateral to ensure loan repayment.
    • If the borrower defaults, the real property's value is used for debt repayment.
    • It is considered a voluntary lien.
  • FNMA (Fannie Mae):
    • The creation of the Federal National Mortgage Association in 1938 increased liquidity in the market.
    • More money became available for lenders.
  • Government-Sponsored Entities: Fannie Mae and Freddie Mac are considered government-sponsored entities.
  • Dodd-Frank Act: The Dodd-Frank Wall Street Reform Act created the Consumer Financial Protection Bureau (CFPB).

Major Players in the Mortgage Industry

  • Mortgage Loan Originator (MLO) Definition: An individual who, for compensation or gain (or expectation thereof):
    • Takes a residential mortgage loan application.
    • Offers or negotiates terms of a residential mortgage loan.
  • MLO vs. Registered MLO: A registered MLO works for a depository institution and is not licensed.
  • NMLS Role: The NMLS does not approve or deny license applications.
  • Unique Identifier: A number identifying the MLO originating a loan; it appears on the residential loan application.
  • Clerical or Support Duties Examples:
    • Communicating with a consumer to obtain information for processing or underwriting a loan.
    • Receiving the appraisal.
    • Collecting a VOE (Verification of Employment).
  • Independent Contractor: A loan processor or underwriter not under the direct supervision of a licensee.
  • MLO Licensing: To be licensed as an MLO, an individual must be sponsored.

Players Graphic

  • Mortgage backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages.
  • Participants: Lender, Borrower, Servicer, Primary Market, Secondary Market

Regulatory Authority

  • Levels of Regulatory Authority for MLOs:
    • State regulatory authority
    • Federal regulatory authority
  • SAFE Act: The SAFE Act is the key federal law regulating the licensing process and responsibilities of mortgage loan originators.

Obtaining a License

  • Steps to Obtain a License:
    1. Complete the Application
    2. Complete PE and Testing Requirements
    3. Pay the Fees
  • Applicant Permissions: An applicant must give permission for a Criminal Background Check and Credit Report.
  • Pre-Licensing Education Hours: 30 hours of pre-licensing education are required for an MLO.
  • National Test Information:
    • Minimum Passing Score: 75%
    • Test Attempts: Can take the test 3 consecutive times, 30 days apart.
    • Re-testing: If unlicensed for 5 or more years, the test must be retaken.
  • Financial Irresponsibility Examples:
    • Foreclosures in the past 3 years.
    • Open tax liens.
  • Bankruptcy: Bankruptcy does not automatically disqualify an individual from licensure due to financial responsibility.

Renewing Your License

  • Renewal Requirements:
    1. Continuing Education
    2. Paying the Fees
    3. Maintaining the minimum requirements for initial licensure
  • Renewal Period: For most states, the renewal period opens on November 1, and the licensee must fulfill all requirements by December 31.
  • Continuing Education Hours: 8 hours of continuing education are required yearly.
  • Continuing Education Rules:
    • MLOs cannot take the same course in the same or successive years.
    • CE counts only in the year it is taken.

Prohibited Acts (SAFE Act)

  • Prohibited Actions:
    • Employing schemes to defraud or mislead borrowers or lenders.
    • Engaging in unfair or deceptive practices.
    • Obtaining property by fraud or misrepresentation.
    • Soliciting contracts allowing fees for "best efforts" even if no loan closes.
  • Commissioner Authority:
    • Investigate or examine licensees.
    • Punish licensees for violations.
    • Require records to be kept.

Examination vs. Investigation

  • Examination: A routine review for compliance.
  • Investigation: Triggered by a consumer complaint or other event suggesting a violation.
  • Maximum Penalty: Under the SAFE Act, the maximum penalty for each act or omission is 25,00025,000.