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MLO - CHAPTER 2
Real Estate Settlement Procedures Act
| Question | Answer |
|---|---|
| What is the Code of Federal Regulations (CFR)? | the collection of all administrative rules and regulations from the various departments and agencies of the federal government |
| What does the CFPB's Regulation X implement? | the Real Estate Settlement Procedures Act (RESPA) REGXPA |
| In Regulation X, federally related mortgage loans are loans, --- | secured by a first or subordinate lien on residential real property |
| Qho enforces RESPA? | Consumer Financial Protection Bureau (CFPB) |
| What are the exemptions from RESPA as provided by Regulation X? | - 25acres/more - Commerical/agriculture loan - Temp loans (construction), exemption does not apply if being converted to permanent by the same bank - HELOCs - Vacant land - Not new loans p63 more |
| RESPA requires that borrowers receive | several disclosures during the loan process |
| What do RESPA disclosures inform the borrower of? | - Settlement costs associated with the mortgage transaction -Outline lender servicing and escrow account responsibilities - Identify business relationships between settlement service providers |
| Application -- is defined as | the submission of a borrower's financial information in anticipation of a credit decision relating to a federally related mortgage loan |
| Application is triggered when including what 6 things: | 1. Property 2. Estimated value 3. Name 4. Income 5. Loan amount PENCIL |
| A three-page form designed to encourage the consumer to shop for a mortgage loan and settlement services to determine which mortgage company is best for them | Good Faith Estimate (GFE) |
| How is a Good Faith Estimate (GFE) triggered? | receipt of application or info sufficient to complete an application |
| What is the Good Faith Estimate(GFE) used primarily for? | reverse mortgages |
| Which transactions will not receive a GFE or LE, but a Truth-in-Lending disclosure? | -HELOC -Manufactured housing not secured by real estate - Loan through certain types of homebuyer assistance programs |
| the GFE must be provided no later than | three business days after receipt of written application |
| "Business day" is defined under Regulation X as | a day on which the offices of the business entity are open to the public for carrying on substantially all of the entity's business functions |
| What are 2 reasons why an LO wouldnt be required to provide a GFE before end of 3-business-day period? | - Lender denies application - Borrower withdraws application |
| Reg X requires that the estimated settlement charges and loan terms listed on the GFE be honored by the loan originator for at least ________________ from the date the GFE is provided | 10 business days |
| What is the only fee a mortgage lender may, at its option, charge for after providing GFE | cost of a credit report |
| What are the 3 categories of tolerance for fees estimated on the GFE? | 1. Zero Tolerance Category 2. Ten percent Tolerance Category 3. No Tolerance Category |
| This category of fees is subject to a zero-tolerance standard. The fees estimated on the GFE may not be exceeded at closing | Zero-tolerance category |
| What fees fall in the zero-tolerance category? | - LO's origination charge, including Processing and UW fees - Credit or charge for interest rate when locked -Adjusted origination charge while rate locked - State/local property transfer taxes |
| For this category of fees, while each individual fee may increase or decrease, the sum of the charges at settlement may not be greater than ten percent above the sum of the amounts included on the GFE | Ten percent Tolerance Category |
| What fees fall in the Ten Percent tolerance category? | -LO required settlement services -LO required services, title services, title insurance, owners title insurance - Government recording charges |
| This category of fees is not subject to any tolerance restriction. The amounts charged for the following settlement services included on the GFE can change at settlement, and the amount of the change is not limited. | No Tolerance Category |
| Which fees fall in the No Tolerance Category? | - LO required services where borrower selects third-party provider - Title services -Initial escrow deposit -Daily interest charges -Homeowners insurance |
| LO's must retain documentation of any reasons for a new GFE for __________________ after settlement | no less than 3 years |
| Within _______ (excluding legal public holidays, Saturdays, and Sundays) after a person applies, the lender shall provide to the person a _________________ stating whether the servicing of the loan may be assigned, sold, or transferred | Three days Servicing Disclosure Statement |
| In what year did HUD revise Regulation X to permit affiliated business arrangements? | 1983 |
| What did Congress define as an affiliated business arrangement? | LO has affiliate relationship or ownership interest of more than 1 percent in a provider of settlement services And LO directly or indirectly refers business |
| An affiliated business arrangement is not a violation of Section 8 of RESPA and Reg X if: | - Disclosure/Notice is given to consumer at/before time of referral is made -Estimated charge made by such provider -Consumer not required to use particular provider -Only thing of value received from arrangement is return on the ownership interest |
| RESPA requires that the referrer retain each signed disclosure document for __________ after its execution | 5 years |
| Regulation X requires the Initial Escrow Settlement Statement must be provided ________________ or _____________ | at settlement or within 45 calendar days of settlement |
| Section 4 of RESPA requires the person conducting the settlement to provide the borrower with _________ at or before settlement that clearly itemizes all charges | HUD-1 Settlement Agreement |
| HUD-1 is utilized for the following: | - HELOC - Reverse Mortgage - Mortgages secured by mobile home - Purchase of property for commercial/agricultural/business -Cash sale |
| standard form used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan to purchase or refinance real estate | HUD-1 Settlement Statement |
| Who is the HUD-1 Settlement statement for? | both the buyer and the seller |
| Who is the HUD-1 prepared by? | title company or whoever is doing the closing |
| When does the HUD-1 have to be given to the borrower? | business day immediately preceding the day of settlement(closing)unless they ask for it in advance |
| Lender must retain completed HUD-1 and HUD-1A for ______ after settlement unless lender does not service it | 5 years |
| What is retention? | how long we have to keep certain documents |
| GFE is kept for | 3 years |
| HUD-1 is kept for | 5 years |
| When the servicing of a federally related loan is assigned, sold or transferred, the transferor servicer must provide a disclosure ___________ | not less than 15 days before effective date of transfer |
| Disclosure after settlement must include: | - Eff. date of transfer - Contact info of servicer - Phone number for person employed by them - Date on which they will cease accepting payment - Any info about effect of transfer -Statement that transfer does not affect any other terms |
| How long is the period after a transfer when no late fee can be imposed on a borrower who has made a payment to the wrong servicer? | 60 days |
| What section of RESPA prohibits any person who gives or receives a fee or thing of value, payments, commissions, fees, gifts or privileges for the referral of settlement business | Section 8 |
| Thing of value defined in Reg X | |
| A referral includes | any oral or written action directed to a person which has the effect of affirmatively influencing the selection of a provider of a settlement service |
| Required use means | situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider |
| Any person who violates the provisions of 12 USC shall be fined not more than __________ or ____________- | $10,000 or imprisoned for not more than one year or both |
| Which section of RESPA states: No seller of property shall require that title insurance covering the property be purchased by the buyer from any particular title company. | Section 9 liable to the buyer in an amount equal to 3 times all charges made for such title insurance |
| What section of RESPA and Reg X sets limits on the amounts that a lender may require a borrower to put into an escrow account | Section 10 |
| Each month the lender may require a borrower to pay into the escrow account no more than ________ payable during the year, in addition they may require a cushion not to exceed _____________ | 1/12 of total disbursements 1/6 of total disbursements |
| 1/6 refers to | 2 months |
| How do you file a RESPA complaint? | With the CFPB |
| The disclosures related to the transfer of ____________ are required for first mortgage liens of federally related mortgage loans, including all refinancing transactions of such loans. | Mortgage servicing |
| ________sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance, and other charges related to the property | RESPA section 10 |
| Payments in excess of the reasonable value of goods provided or services rendered are considered | Kickbacks |
| If a lender has either an affiliate relationship or a direct ownership interest of more than one percent in a provider of settlement services and they directly refer business to the provider, it is per Regulation X a | Affiliated business arrangement or combined business disclosure |
| RESPA is applicable to all _____________ mortgage loans | Federally related |
| Any person or persons who violate the provisions of ________ shall be fined not more than $10,000 or imprisoned for not more than one year, or both. | RESPA section 8 |
| Regulation X requires the ____________must be provided at settlement, or within 45 calendar days of settlement. | Initial Escrow Settlement Statement |
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