SAFE Mortgage Pre-Licensing

20 Hour SAFE Comprehensive Pre-Licensing and Exam Prep

+ Wa State LawJillayne Schlicke

Jillayne Schlicke

National Association of Mortgage Fiduciaries

Section 1 Introduction Introduction of trainer Introduction of students Review the course syllabus

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Section 1 Module 1.1

National exam $922 and a half hours100 questions, 10 are sample questions75% to passIf you pass you will know your score.If you fail, they will give you a printout showing

your strong and weak areas.Prometric.com

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Section 1 Module 1.1Exam Components35% Federal Law

RESPA, TILA, ECOA, FCRA, SAFE

25% General Mortgage Knowledgeprograms, products, terms

25% Loan Originationapplication, qualifying, title, escrow, math

15% Ethicsconsumer protection, fraud, fair housing

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Section 1 Module 1.1Exam prep basics: If you understand the purpose of

each law, you are on your way to selecting the best answer on a multiple choice exam.

There will be two obvious wrong answers. If you know the purpose of the law, you will be able to spot these. Of the two that remain, one will be a little bit better than the other.

Exam writers do not write trick questions. The language of the test questions look tricky because you are being tested on law and most lay people are not use to reading law on a daily basis. This is the only fair way to deliver a 50-state exam.

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Section 1 Module 1.1There are many different learning styles. I will try to

touch all of these throughout the next two days.Auditory-learns by listeningVisual-learns by processing imagesTactile-learns best when writing Whole Body-learns best when entire body is

engagedEmotional-learns best when complex info can be

tied to an emotionLearning disabilities-

You may be eligible for extra accommodations if you have a diagnosed learning disability. Contact the NMLS after reading the exam candidate handbook.

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Section 2 Module 2.0Depository

BankChecking,

savingsCAN fund its

own loansLOs are

“registered”

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Mortgage BrokerNo ck/svgsDoes NOT fund

its own loans Pure middlemanFor a fee, finds

the mortgage money

LOs are licensed.In some states,

these LOs owe fiduciary duties to clients

Non-Depository Lender

Non-Bank Lender

No ck/svgsCAN fund its

own loans via lines of credit with banks

LOs are licensed

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There are many moving parts in the Mortgage Machine. The function of loan origination is just one piece.

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Title Insurance, Escrow

Secondary marketUnderwritingAppraiserHome inspectorLoan originatorLoan processorsRealtors/ Real estate

brokersMortgage insurance Hazard insuranceFlood insuranceState/Fed regulators

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Section 2 Module 2.2 Instructor to review how to complete a

Residential Loan ApplicationAssignment:

Break into small groups and talk about sections of the loan app:

What sections might the customers ask you about?

What sections might the customer consider lying?

What sections might the customer refuse to provide information?

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Section 2 Module 2.2Large group discussion:

OccupancyAssetsHMDAEducationDOBFormer employerWays of holding titleAcknowledgement, signature

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Section 2 Module 2.3Last two most recent paystubsLast two years W-2sLast three months bank statementsMost recent statement on 401Ks or IRAsDocumentation of ownership of stocks, bondsLast two months statements from any investment accountInformation on current mortgage or landlord contact infoSoc number or green card for all borrowers or co-signersLetter of explanation for any known credit problemsDocumentation supporting any other incomeFor self employed, borrowers paid on commission or in the

field of sales, and borrowers who own other real property:Two years signed personal tax returns including all

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Section 2 Module 2.4FIRST RATIOPITIPrincipal, Interest, Taxes, InsuranceDivided byTotal gross monthly income= %

SECOND RATIOPITI plus all other monthly revolving

debtDivided byTotal gross monthly income= %

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Section 2 Module 2.5 FHA

Review FHA PPT slides

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Section 2 Module 2.6 Veteran’s Administration Lending (VA Loans)

See pages 10-11 in the course book

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Section 2 Module 2.7 Conventional Lending


Review Fannie Mae Announcements:09-34 Loan Limits09-37 CondosCriteria for Purchasing ARMsMaximum Allowable Properties Financed

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Section 2 Module 2.8 Non-Conforming Loans

See page 12 in the course book

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Section 2 Module 2.9 QRMs

See page 13-15 in the course book

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Section 3 Credit Module 3.1

Assignment: Break into small groups.Read the credit report.Question: Does this person posses decent and

reasonable credit history?If yes, why?If no, why not?

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What’s in a FICO Score?See course book pages 16-17

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Section 4 Title Insurance Module 4.1

What does it mean when we say we hold title to something?

Is there a document called “title” that we get when we buy a home?

Can we do anything we want with and to our home and land?

How deep into the ground and how high up do our property rights extend?

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Section 4 Title Insurance Module 4.2For a one time fee, a title insurance

company will check the public records system and disclose all matters that affect the title of real property.

They will insure against loss and defend you should somebody lay claim to your title.

Pay once, it’s good for as long as you or your heirs own the property.

Starts the day of closing and looks backward in time.

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Section 4 Title Insurance Module 4.3How does a title company protect

residential homeowners and residential lenders?


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Section 4 Module 4.4 Case Study

Small group assignment:Read the case study “John and Sara” on page 19 of the course book.

Come up with 10 things a loan originator must discuss/discover before moving forward with this transaction.

10 documents10 questions…

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Legal rights and responsibilities of a title company.

See pages19-20 in the course book

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What is escrow?See pages 21-11 in the course book

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Section 5 Escrow

Module 5.1Module 5.2Module 5.3Module 5.4Module 5.5Module 5.6


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Section 6 Appraisals

Module 6.1Module 6.2Module 6.3Module 6.4Module 6.5


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Section 7 Mortgage Math

Module 7.1 See page 21 in the course book

Module 7.2Assignment: Complete the mortgage

math calculations together as a group.

See pages…

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Section 8 Processing and Underwriting

Module 8.1 Processing

Module 8.2 Underwriting


Module 8.3 Case Study: David and RyanSee page 35 in the course bookIn small groups discuss: Is this an approvable

loan?Large group recap

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Section 9 Non-Traditional LendingModule 9.1Module 9.2Module 9.3Module 9.4Module 9.5Module 9.6Module 9.7Module 9.8Module 9.9


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Washington State Law Mortgage Broker Practices Act

MPBA

Consumer Loan ActCLA

DFI.WA.GOVDept of Financial Institutions

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Section 9 AssignmentReview the CSBS/AAMR Guidance on Non-

Traditional Lending

CSBS = Conference of State Bank SupervisorsAAMR = American Association of Mortgage

RegulatorsOct 2006 banking regulators published guidelines

on non-trad lending. Examples:

Interest only loansPay option ARMsReduced/no documentationSimultaneous second lien

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Section 9 CSBS/AAMR Guidance

Ability to repay

Watch for payment shock

Assure borrower understands the loan terms

Avoid misleading claims…payment, rates, refi-out

Risk management strategies

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Section 10 EthicsModule 10.1 Module 10.2 Module 10.3 Module 10.4 Module 10.5 Module 10.6

Use the following:Pages 44-46 in the course bookSection 10 Ethics handout

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Section 10 Module 10.1 Ethics

LawMinimum moral standard“Have to”

EthicsWhen there’s no clear statement in the law

tellingus what to do.“Ought, should.”

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Section 10 Module 10.2 EthicsDifferent sources of moral authorityReligion

We can’t use religion to solve ethical dilemmas when holding a professional role because there are thousands of different religions in the world. Which one would we us?

IntuitionIntuition can sometimes steer us in the wrong direction

Emotion“If I can’t sleep at night it’s not ethical.”If the only reason we’re choosing to do/not do something is out of fear, that’s a pretty low standard of motivation

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Section 10 Module 10.2 EthicsDifferent sources of moral authorityWritten codes of ethics

There is no source of moral authority over LOs other than the law. What written codes of ethics that do exist are voluntary and not mandatory. The written codes of ethics that exist are weak, vague, have no sanctions for violations and in most cases, just simply re-state federal law.

Philosophical ethicsMoral philosophical ethical theories can take the place of a mandatory code of ethics until one is written.

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Professional StatusSpecialized knowledgeFormal, pre-licensing educationMandatory continuing educationTestLicensingFiduciary DutiesCode of ethics with sanctions for violations

Compare to non-professionals such as a retail salesperson.

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Section 10 Module 10.3 and 10.5Question: Are loan originators professional?Specialized knowledgeFormal, pre-licensing educationMandatory continuing educationTestLicensingFiduciary Duties (this is emerging in some states)

Code of ethics with sanctions for violations(this piece is not yet in place.)

LOs are classified as “an emerging profession.”

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Section 10 Module 10.4 Assignment: Small group discussion:

What do you remember from past classes in ethics?

What is ethics?

Think about a person you admire or look up to as a mentor, living or dead. What do admire about that person?

Think about an ethical dilemma you’ve faced in your career. How did you solve your dilemma?

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Section 10 Module 10.4 Assignment: Large group recap after small

group discussion, while instructor slowly completes the slide with the three normative moral theories.

Lacking any mandatory, prescriptive and descriptive ethical code, this is the best way for LOs to learn ethics. The next slide lays out the following:

--what kind of person do I want to become?--what duties do I have?--what are the possible consequences?

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Aristotle Kant J.S. MillRespect

honesty(promotes autonomy)

LoyaltyResponsibilityIntegrityBeneficenceNon-

maleficenceCompassionJustice

384 BC-322 BC

Duty-based ethics

If we have a duty to do something, we ought do it.

What I want for myself, I must also want for the other.

1724-1804

Utilitarianism

Maximize good consequences for the most number of people and also minimize bad consequences for the most number of people

1806-1873

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Section 10 Module 10.4Moral Development

The intrinsic worth, value and dignity

of all human persons. Some laws might not be moralLaw , society’s rulesThe good, norms, roles, shared

valuesPractical agreementsMorality comes from external

sources

22+

16 to 2212 to 166 to 123 to 50 to 2

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Fiduciary Duties Come from Agency Law

Agency:Consent by one person (principal) that the other (agent) act on his or her behalf.

Agency can be created by oral or written agreement OR it may be implied through conduct.

“I can get you the best loan”“I can get you the best rate”


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ManipulationCoercion

Completely

Controlled

Influences

Completely Non-

ControlledInfluences

Persuasion

SubstantiallyNot

Controlling

SubstantiallyControlling


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Duty of Loyalty

Duty of Care

What Fiduciary does will, in good faith, advance the interests of the client and not the Fiduciary’s personal interests

Act in good faith

Reasonable person test

Informed


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Fiduciary Duties May Include…1. Disclose all loan information to

the borrower2. Act in good faith and deal fairly3. Avoiding secret fees or

undisclosed fee splitting4. No self dealing

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Fiduciary Duties are Higher When…

Broker/LO has higher level of knowledge, experience, skills

Client has limited knowledge

Client is relying exclusively on you

Greater the imbalance the higher the duty


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Module 11.1Module 11.2Module 11.3Module 11.4Module 11.5Module 11.6Module 11.7Page 47 in the 2012 course bookPage 37 in the 2013 course book

Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm

Section 11 Fair Housing

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1968 Civil Rights Act1968 Fair Housing

Act~

Protected Classes:RaceColorReligion (Creed)SexNational OriginFamilial Status

Sexual orientation added in 2012

Disability

Section 11Module 11.1, 11.3

Intent v. Effect

Realtors and lenders have great power to affect neighborhoods


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RedliningDenying or increasing the cost of services to residents of a racially specific geographical area

SteeringGuiding prospective homebuyers to or away from a specific neighborhood based on his/her race

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BlockbustingEncouraging white property owners to sell their homes at a loss by fraudulently implying that racial or religious minorities were moving into their neighborhood


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Section 11 Module 11.4In Mortgage Lending: No one may take any of the

following actions based on race, color, national origin, religion, sex, familial status or handicap (disability):

Refuse to make a mortgage loanRefuse to provide information regarding loansImpose different terms or conditions on a loan, such as

different interest rates, points, or feesDiscriminate in appraising propertyRefuse to purchase a loan orSet different terms or conditions for purchasing a loan.Fair Housing/Fair Lending http://www.hud.gov/offices/fheo/lending/index.cfm

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Section 11 Module 11.7Fair Housing Thought Questions

Should sexual orientation be added as one of the protected classes?

Should we make a woman on maternity leave return to work before counting her income when qualifying for a loan?

Should we make long term disabled applicants provide additional documentation proving that they will stay disabled?

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Section 12 Consumer ProtectionModule 12.1Module 12.2Module 12.3

Pages 53-54 in the course book

Case Study: Carnell v. KMC FundingRead the case. In small groups discuss the

questions.As a large group, share your anwers

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Section 13 Mortgage Fraud

Module 13.1Module 13.2Module 13.3Module 13.4Module 13.5 page 41 in the 2013 course

book

page 54 in the 2012 course book

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FBI US Department of JusticeFinancial Crimes Report to the Public 2010-2011http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011


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Fraud for Housing, or fraud for property, is perpetrated by borrowers and/or one or more industry professionals when they misrepresent information on the loan application. This type of fraud does not usually result in significant losses to a financial institution.

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Fraud for profit consists of systematic transactions by industry professionals who are attempting to steal a significant amount of the funds associated with one or more mortgage transactions. This type of fraud usually involves multiple parties in various disciplines within the mortgage industry, such as mortgage originators, appraisers, real estate brokers, escrow closers, builders and title companies. Fraud for profit usually results in significant—if not catastrophic—losses to financial entities involved in mortgage loan transactions and it is of major concern to the mortgage industry

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Property FlippingSilent SecondStraw BorrowersIdentity TheftAppraisal FraudForeclosure RescueEquity SkimmingLoan Mod ScamsShort Sale Fraud

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Section 13 Module 13.3Red Flags

When seeking employment as an LOWhen working with real estate agents or RealtorsWhen working with consumers

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Section 13 Modules 13.6-13.20SARSSuspicious Activity ReportsAMLAnti Money Laundering

Pages 46 in the 2013 course book

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Financial Crimes Enforcement Network Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators AGENCY: Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. ACTION: Final rule.Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Rules and Regulations Page 8159Subpart C—Reports Required To Be Made by Loan or Finance Companieshttp://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3074.pdf

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Section 14

Reflect on everything learned today.…any final questions?Preview of tomorrow.

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20 Hour SAFE Comprehensive Pre-Licensing and Exam Prep

Jillayne Schlicke

DAY 2

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The Main Fed Law AcronymsTILATruth in Lending ActMDIAMortgage Disclosure Improvement ActRESPAReal Estate SettlementAnd Procedures ActECOAEqual Credit Opportunity ActFCRAFair Credit Reporting ActSAFESecure and Fair Enforcement Act

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Purpose: To promote informed use of credit. (Instead, creates mass confusion.) Gives consumers the right to cancel some transactions (o.o. refi), regulates variable rate loans.

TILA Disclosures: 3 days from date of application, final disclosure at settlement

Disclosure content: variable rate features, payment schedule, demand feature, prepayment penalty, security interest in the property, insurance cancellation, assumption policy.

CHARM Booklet required on ARM loans

Section 16 Truth in Lending Act

Modules 16.1-16.3

Truth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html

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Four Government Boxes

This info must be presented in clear and conspicuous place:

Annual Percentage Rate/APR (will cover this soon)

Finance Charge Interest + closing costs

Amount Financed Loan amount less closing costs

Total of Payment All P&I if all payments made

Section 16 Truth in Lending Act

Modules 16.3


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Rescission: on an o.o. refinance, the borrower has 3 days after signing the final loan documents to cancel and receive a full refund from the lender. LOs must refund any money collected for third party services, even if spent.

For TILA RESCISSION purposes, business days include Saturday.

Can the 3 day right of rescission ever be waived?

Section 16 Truth in Lending ActModules 16.4-16.5


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Section 16 TILA Module 16.4

Case Study: What is the first business day on

which funds may be disbursed if:

Closing date: Thurs, May 2

1st bus. day: Fri, May 32nd bus. day: Sat, May 4

Sun, May 53rd bus. day: Mon, May 6

The loan can fund on Tuesday May 7th

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APR is a measure of the cost of credit, expressed as a nominal yearly rate. It relates the amount and timing of value received by the consumer to the amount and timing of payments made.

Disclosure of the APR is central to the uniform credit cost disclosure envisioned by the TILA.

Section 16 Truth in Lending Act A closer look at APR (Annual Percentage

Rate)


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Common consumer question: What costs are included when calculating APR?

At a typical mortgage company, software systems are already programmed to do this for LOs. However, customers ask questions about the TILA disclosure forms and regulators expect licensees to know how to answer basic questions about the information contained in the TILA disclosure form.

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Section 16 Truth in Lending Act A closer look at APR (Annual Percentage Rate)


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IncludedPrepaid interestMortgage insurance

premiumsWire transfer feesRecording feesLoan origination feeMortgage broker feeEscrow (closing fee)Discount pointsPest inspection (VA only when

prop is located in mod to high probability of area of pest infestation and lender is paying for it.

Flood Ins. premiums

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Hazard Insurance (IF obtained from a neutral company)

Seller paid pointsDocument prep feeTitle insurance (lender

policy)Notary feeAppraisalCredit reportImpounds for taxes &

insFlood Hazard Check

Excluded

http://www.fdic.gov/regulations/laws/rules/6500-200.html

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Section 16 Truth in Lending Act A closer look at APR (Annual Percentage Rate)

Tip: How to remember which costs are included/excluded when calculating APR:

Costs included

These are costs that benefit the lender or costs that the lender requires in order to obtain a loan.

Costs excluded

These are costs that are paid to and benefit third parties other than the lender.


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APR Tolerances…Can we make a mistake and still be in compliance? Yes:

Example:

|________|_______ APR 7.75_______|________|.25 .125 .125 .25 ARM FRM FRM ARM

ARM = Adjustable Rate Mortgage

FRM = Fixed Rate MortgageTruth in Lending Acthttp://www.fdic.gov/regulations/laws/rules/6500-200.html

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Prepaids Prepaid finance charges = CLOSING COSTS

Impounds = a few months payments of real estate taxes, hazard insurance

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Section 16Module 16.6

Truth In Lending Act Quiz

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Section 17Mortgage Disclosure Improvement ActMDIA

Module 17.1Module 17.2Module 17.3Module 17.4Module 17.5Module 17.6 --take the TILA/MDIA Quiz

Pages 52+ in the coursebookTruth in Lending AmendmentsRegulation Z, Subpart C, Closed End Credit, Section 226.17,General Disclosure Requirements Effective July 30, 2009

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Section 17 MDIA Module 17.3 We now have three categories of mortgage

loansHOEPA (Added in 1994 as Section 32 of TILA)High cost/2nd mtg/HELOC

Higher PricedHigh Risk (Added in 2009 as part of MDIA)1.5 or more points higher (APR) FRM3.5 or more points higher (APR) ARM3.5 or more points higher for a subordinate lien

QRM Qualified Residential Mortgage (Added as part of the Dodd Frank Act of 2010)Definition of a QRM scheduled to be announced in 2013

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Truth in Lending AmendmentsRegulation Z, Subpart C, Closed End Credit, Section 226.17,General Disclosure Requirements Effective July 30, 2009

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MDIA Quiz

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Section 17 Module 17.6 Quiz ReviewQuiz Question 7:

0 Mon Jan 51 Tues Jan 62 Wed Jan 73 Thurs Jan 84 Fri Jan 95 Sat Jan 10

Sun Jan 116 Mon Jan 127 Tues Jan 13

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Section 17 Module 17.6 Quiz Review

TILA Quiz Question 10

Mon July 9 Consumer must receive disclosures

Tues July 10Wed July 11Thurs July 12 Signing is scheduled

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Section 18 Federal Reserve Board (FRB) ruleon Loan Originator Compensation

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Module 18.1BackgroundFTC v. Golden Empire

Mortgage

Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf


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Section 18 Federal Reserve Board Rule onLoan Originator Compensation

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Module 18.2 Three main prohibitions:P1: Compensation based on a transaction’s term

or conditions.

P2: Compensation by someone other than the consumer.

P3: Prohibitions against steering.Federal ReserveRegulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf

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Module 18.2 Three main prohibitions:P1: Compensation based on a transaction’s term

or conditions:> Payment based on transaction terms or

conditions.> Compensation cannot go up or down

based on the loan’s terms or conditions.> Minimum or max dollar amount of

compensation may not vary with each loan.


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Module 18.2 Three main prohibitions:P2: Compensation by someone other than the

consumer.If an LO will be compensated by the consumer, the LO may not also receive compensation from the lender funding the loan, or any other person connected with that transaction.


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Module 18.2 Three main prohibitions:P3: Prohibitions against steering.

LOs may not steer a consumer to a loan only because the LO will be compensated at a higher rate by selling that product, unless the loan is in the best interest of the consumer.Federal Reserve

Regulation Z: Loan Originator Compensation and Steering 12 CFR 226http://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf

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Module 18.3Review the Section 18 Handout:RESPA Roundup

RESPA Roundup: Compliance Guide for REPA as it applies to the Federal Reserve Board’s MLO Compensation Rules Published on Sept 24, 2010

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Section 19 Real Estate Settlement and

Procedures ActRESPAModules 19.1-19.2

Applies to all federally related loans; sale or refi, primary market loans only.

Exemptions: 25 acres or more, temporary financing, assumptions with lender approval, conversions (contract to deed), secondary market transactions, vacant property.

Which entities must comply?Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm

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Section 19 RESPA Modules 19.1-19.2

Which entities must comply?Lenders (banks, brokers, etc.)Real estate agents/RealtorsTitle and XOAppraisersHome inspectorsMortgage insurance companiesCredit reporting agenciesFlood hazard check companiesAttorneysHazard insurance companiesHome warranty companiesBuilders

Real Estate Settlement and Procedures Act http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm

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PurposeTimely disclosure of settlement costsLimits on escrow reserve accountsProhibits seller-directed title

insuranceForbids kickbacks (Section 8. See next

slide)GFE and HUD 1Disclosure of Affiliated Business

ArrangementsDisclosure of potential loan servicing

charges“Settlement Cost Booklet”Lender required use agreements


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Section 8 Referral Fees

Prohibits the giving or taking of a fee or other thing of value for a referral involving a federally related loan

Un-earned feeA fee we receive but we have performed no work in exchange for receiving the fee.



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TILA/RESPA Definition of “an Application”

Financial DataBorrower’s NameSocIncomeEstimated valueLoan Amount…..Prop address (will have this if refi, might not have

this right away if borrower is still house-shopping.)

…..Any other info deemed necessary by the LO

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Section 19 Module 19.4Learn how to complete a Good Faith

Estimate

See instructions from HUDInstructions for Completing Good Faith Estimate (GFE) FormCode of Federal RegulationsTitle 24, Volume 5

See example on page 81

Section 19 RESPA Module 19.3Take the RESPA Quiz

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New Good Faith EstimateMortgage Brokers who table fund are mortgage

brokersAll yield spread premium dollars credited from the

lender when a borrower selects a higher note rate is for the borrower’s benefit.

This was a huge change for mortgage broker LOs and many fled to non-depository lenders after these 2009 changes were enacted. Then FRB rule on LO Comp (which went into effect April 5, 2011) disallowed steering borrowers into a higher rate loan, solely for the purpose of LOs making more money for all LOs no matter where they work.

Section 20RESPA Amendments in 2009Modules 20.1

Real Estate Settlement and Procedures Act (2009 Changes)http://www.federalreserve.gov/boarddocs/supmanual/cch/respa.pdf

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GFE tolerancesViolations, penaltiesDefinition of “An Application”GFE delivery, loan term availabilityChanged circumstancesSeller paid feesRequired useAverage charge pricing, volume discounting

RESPA Amendments Quiz

Section 20RESPA Amendments in 2009Modules 20.1-20.7

Real Estate Settlement and Procedures Act (2009 Changes)http://www.federalreserve.gov/boarddocs/supmanual/cch/respa.pdf

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Section 21 Module 21.1 and 21.2Equal Credit Opportunity Act ECOA

1974ECOA points us toward the evaluation based

on creditworthiness only.

Nine categories; the prohibited bases:

RaceColorReligionSexMarital StatusNational OriginIncome from Public Assistance(Age)Whether an applicant has exercised

his or herrights under this act.

Equal Credit Opportunity Acthttp://www.fdic.gov/regulations/laws/rules/6500-1200.html

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Section 21 ECOA Module.21.2It is a violation to discourage an

applicant from making an application for credit on a prohibited basis.

Cannot ask an applicant if he or she receives alimony, child support. The applicant may volunteer such information.

You must ask if he or she PAYS alimony or child support.

Unmarried…ECOA requires the lender to provide a

copy of the appraisal report.Application need not be in writing for

this act to apply.Can we ask questions NOT related to

creditworthiness? Adverse Action Form

Equal Credit Opportunity Acthttp://www.fdic.gov/regulations/laws/rules/6500-1200.html

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Section21Module 21.2Equal Credit Opportunity Act

ECOAMarital Status

1. Unmarried =SingleDivorcedWidowed

2. Married

3. SeparatedEqual Credit Opportunity Acthttp://www.fdic.gov/regulations/laws/rules/6500-1200.html

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Section 21Module 21.3Equal Credit Opportunity Act ECOAQuiz

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Passed to ensure consumers have access to credit information used by lenders and others so that remedial steps could be taken when incorrect or outdated information remained in their file.

Purpose of a credit report:Insurance, licensing, instruction from consumer, extension of credit, employment, response to a court order, potential investor risk, other legitimate business needs.

Credit reports are deemed privileged info.

A CRA has 30 days to respond to a disputed item

Adverse Action: Name, address and phone number of the CRA, reason, and info on how to obtain a free copy of their report.

Section 22 Module 22.1 and 22.2Fair Credit Reporting Act FCRAFair Credit Reporting Act

http://www.fdic.gov/regulations/laws/rules/6500-200.html

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Section 22Fair Credit Reporting Act FCRAModule 22.3 Quiz

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HMDA Home Mortgage Disclosure ActCRA Community Reinvestment ActGLB Gramm Leach Bliley Act AKA

Privacy ActHOEPA Home Owner’s Equity Protection

ActBank Secrecy ActU.S. Patriot ActPMI ActFACTA Fair and Accurate Credit

Transactions ActDo Not Call

Additional Federal Laws Quiz

Section 23 Modules 23.1-23.10Other Federal Laws Governing Mortgage

Lending

Jillayne Schlicke


ECOARaceColorReligionSexNational OriginMarital StatusIncome from PublicAssistanceAgeWhether an

applicanthas exercised his orHer rights under thisAct.

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Fair HousingRaceColorReligion (Creed)SexNational OriginFamilial Status

Sexual orientation added in 2012 as a protected class in all 50 states

Disability

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Section 24 SAFE Mortgage Licensing ActModule 24.1

The SAFE Act of 2008

SAFE = Secure and Fair Enforcement Act

Passed in order to increase uniformity, reduce regulatory burden, enhance consumer protection, and reduce fraud. Establishes the Nationwide Mortgage Licensing System and Registry. Title V SAFE Mortgage Licensing Act of 2008

http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf

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Section 24 SAFE Act Module 24.2

“Registered Loan Originator”

An employee of:a depository institution;a subsidiary that is:

owned and controlled by a depositoryinstitution ANDregulated by a federal banking

agency OR

An institution regulated by the Farm Credit Admin

Title V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf

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State or Federally Chartered Depository Banks:

LOs are exempt from testing and education.

NOT exempt from “registration.”

Register with the Nationwide Mortgage Licensing System (NMLS) and will be given a unique identifier.

“Registered” LOsTitle V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf

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Issuance of a License:

Never revokedNo felony last 7 yearsNo felony at any time re fraud, dishonesty,

breach of trust, money launderingFinancial responsibilityPre-licensing educationWritten test

Net worth and surety bond Title V SAFE Mortgage Licensing Act of 2008http://mortgage.nationwidelicensingsystem.org/SAFE/NMLS%20Document%20Library/SAFE-Act.pdf

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LO exam:

75% to passCan retake 3 X at 30 day intervalsIf fail 3 X, must wait 6 months

5 year lapse in license: must retake the test


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Continuing Ed

3 hours Federal Law2 hours Ethics, Consumer Protection, Fraud,

Fair Housing2 hours Non Traditional Lending1 hour Undefined

No carry-oversCan’t take the same class each year.


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Take the SAFE Act Quiz

Jillayne Schlicke


QRMsQualifiedResidentialMortgage

Downpaymentgood credit

When sold on Wall Street, NO money put aside in loss reserves

2013

• High Priced• aka High Risk,

Subprime,Non-Traditional,Non- Standard

• When sold on Wall St Lenders must put aside 5% of the value of the pool of RMBS to cover potential future losses

• 2009

• High CostHOEPAHomeOwnerEquity ProtectionAct

• Junior LiensSection 32of TILA

• 1994

Section 25 A Look Ahead-Dodd FrankModule 25.1 QRMsDodd Frank Wall Street Reform and Consumer Protection Act

http://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf

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Section 25 Module 25.2 CFPBCFPB = Consumer Financial Protection Bureau

All federal laws governing mortgage lending are now under the CFPB with the exception of Fair Housing which will stay under HUD.

CFPB is currently in the process of finalizing rules on many sections of the Dodd Frank Act and the industry received these from the CFPB in 2013 and the rules will go into effect no later than Jan 2014

Dodd Frank Wall Street Reform and Consumer Protection Acthttp://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf

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Section 25 Module 25.3 LO Comp

LO Comp rules under Dodd Frank mirror the LO Comp rules established by the Fed Reserve Board that went into effect April 5, 2011.

Dodd Frank Wall Street Reform and Consumer Protection Acthttp://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf

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Section 26 Recap and Close

Review all remaining unanswered questions. Students complete end-of-course evaluation form.Instructor provides end-of-course completion certificates.

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Jillayne SchlickeCE Forward, Inc.National Assoc of Mortgage

Fiduciaries206-931-2241jillayne@ceforward.commortgagefiduciaries.com

SAFE Mortgage Pre-Licensing

Education

orgsafenmls

federal reserve

real estate

annual percentage

small groups

dodd frank

closed end

loan originator