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NMLS Safe Exam Pt 2

Required Disclosures & Timing

QuestionAnswer
What is the purpose of the Loan Estimate (LE)? To provide borrowers with a clear summary of key loan terms and estimated costs early in the process.
When must the Loan Estimate be delivered? Within 3 business days of receiving a complete application.
What triggers the requirement to issue a Loan Estimate? Receipt of 6 key pieces of borrower information (name, income, SSN, property address, estimated value, loan amount).
What must happen before charging any fees? The borrower must receive the LE and indicate intent to proceed.
What is the only fee that can be collected before LE is delivered? A fee for a credit report.
How long must the Loan Estimate be retained? 3 years after consummation.
What is the purpose of the Closing Disclosure (CD)? To provide final details about the mortgage loan including actual costs and terms.
When must the CD be delivered? At least 3 business days before consummation.
How long must the CD be retained? 5 years after consummation.
What triggers a new 3-day waiting period for the CD? APR increases beyond allowed tolerance, loan product changes, or addition of prepayment penalty.
What happens if minor changes are made to the CD? A new CD must be issued, but no waiting period is required.
What is a valid change of circumstance under TRID? Event beyond control of any party, inaccuracy of information, or borrower-requested changes.
What is the tolerance for lender-required services the borrower cannot shop for? 0% tolerance — charges may not change.
What is the tolerance for third-party services the borrower can shop for? 10% cumulative tolerance.
What costs can change without tolerance restrictions? Prepaid interest, property insurance premiums, escrow amounts, services borrower selects independently.
What is the Home Loan Toolkit? A booklet provided to help borrowers understand the mortgage process.
When is the Home Loan Toolkit required? Within 3 business days of a completed application for a purchase transaction.
What loans are exempt from receiving the Home Loan Toolkit? Refinance, reverse mortgages, and HELOCs.
What is the purpose of the Servicing Disclosure Statement? To inform borrowers whether their loan may be assigned, sold, or transferred.
When must the Servicing Disclosure Statement be provided? Within 3 business days of application.
What is the purpose of the Affiliated Business Arrangement Disclosure (ABAD)? To disclose relationships between parties that may refer settlement services to each other.
When must the ABAD be delivered? At the time of referral or within 3 business days of application.
What is the purpose of the Initial Escrow Disclosure? To outline estimated escrow payments for taxes and insurance.
When must the Initial Escrow Disclosure be provided? At closing or within 45 calendar days.
What is the purpose of the Annual Escrow Analysis? To ensure the servicer is not over- or under-collecting escrow funds.
What must be refunded if an escrow surplus exceeds $50? The surplus must be returned to the borrower within 30 days.
What is the purpose of the CHARM Booklet? To educate borrowers about the risks and features of adjustable-rate mortgages (ARMs).
When must the CHARM Booklet be provided? No later than 3 business days after application for an ARM loan.
What is the purpose of the Early ARM Disclosure? To disclose the terms and risks of an adjustable-rate mortgage.
When must the Early ARM Disclosure be provided? At application or before non-refundable fees are paid.
What is the purpose of the HELOC disclosure booklet? To help borrowers understand home equity lines of credit.
What is the name of the HELOC disclosure booklet? “When Your Home is on the Line: What You Should Know About Home Equity Lines of Credit.”
When must the HELOC booklet be provided? Within 3 business days of application for a HELOC.
What is the purpose of the Homeownership Counseling Disclosure? To inform borrowers about the availability and benefits of third-party homeownership counseling.
When must the Homeownership Counseling Disclosure be provided? Within 3 business days of application (except for reverse mortgages and timeshares).
What must be included in the Counseling Disclosure? A list of at least 10 HUD-approved counseling agencies near the borrower’s zip code.
What is the Mortgage Servicing Disclosure Statement (MSDS)? A disclosure about the potential transfer of servicing rights on the loan.
What does the MSDS inform the borrower? Whether servicing of the loan may be assigned, sold, or transferred.
What must the MSDS include? Contact info, explanation of servicing transfer, and borrower rights.
What is the purpose of the Closing Disclosure (CD)? To provide final, accurate loan terms and costs prior to closing.
When is a revised CD required? If there are changes in APR, loan product, or the addition of a prepayment penalty.
What is the maximum allowed change for APR on a fixed loan before a new CD is triggered? 0.125% (1/8th of 1%).
What is the maximum allowed change for APR on an adjustable loan before a new CD is triggered? 0.25% (1/4th of 1%).
What is the purpose of the Right to Rescind? To give borrowers time to reconsider certain home-secured loans.
What loans are eligible for the Right to Rescind? Refinance or home equity loans on a primary residence.
How long is the rescission period? 3 business days.
When does the rescission period begin? After the last of: loan consummation, delivery of TILA disclosures, or receipt of Notice of Right to Cancel.
How must the Notice of Right to Cancel be delivered? In writing, with two copies provided to each borrower.
Can funds be disbursed during the rescission period? No, lenders must wait until the rescission period expires.
What happens if the Notice of Right to Cancel is not provided? The rescission period extends to 3 years.
What does “business day” mean for rescission purposes? All calendar days except Sundays and federal holidays.
Can the borrower waive their right to rescind? Yes, in case of a bona fide personal financial emergency with a written request.
How long must evidence of the Right to Rescind be retained? At least 2 years.
What is the purpose of the List of Providers Disclosure? To allow borrowers to shop for third-party services.
When must the List of Providers be given? At the time the Loan Estimate is delivered.
What happens if a borrower chooses a provider not on the list? The fees are not subject to the 10% cumulative tolerance.
What happens if a borrower chooses a provider from the list? The fees are subject to the 10% cumulative tolerance.
What is the purpose of the Written List of Settlement Service Providers? To meet TRID’s requirement when the borrower is allowed to shop for services.
What is the purpose of the Revised Loan Estimate? To reflect valid changes in circumstances that affect loan terms or settlement costs.
When must the Revised Loan Estimate be delivered? Within 3 business days of receiving information that triggered the revision.
Can a Revised LE be used to reset tolerances after CD is issued? No, after CD is delivered, only a revised CD may reset tolerances.
What are some valid changed circumstances? Borrower-requested changes, new information, events beyond the control of any party.
What is not considered a valid changed circumstance? Technical errors, underestimations, or discovery of previously available information.
What is the latest a Loan Estimate can be revised? 4 business days prior to consummation.
What is the Closing Disclosure’s purpose in TRID? To disclose final costs, terms, and cash to close.
What is the timing rule for the CD? Must be received 3 business days before consummation.
If the APR changes beyond tolerance, what must happen? A new CD must be issued and a new 3-day waiting period begins.
What is a Pre-Disclosure Waiting Period? A required waiting period before consummation can occur — 7 business days from LE delivery.
What is the Post-Disclosure Waiting Period? A 3-business-day waiting period required after CD delivery.
What is the “Intent to Proceed”? The borrower’s clear expression (oral or written) to move forward with the loan application.
When can a lender collect fees other than for a credit report? Only after receiving the borrower’s Intent to Proceed.
How must Intent to Proceed be documented? Orally or in writing, and must be documented by the lender.
What is a Business Day for CD delivery purposes? All calendar days except Sundays and federal holidays.
What is a Business Day for LE delivery purposes? A day on which the lender is open to the public for carrying out most business functions.
What is a Consummation? The time when the borrower becomes contractually obligated to the lender.
What is the difference between consummation and closing? Consummation is the legal obligation; closing is the document signing.
What is an Escrow Closing Notice? A disclosure when an escrow account will be canceled.
When must the Escrow Closing Notice be provided? At least 3 business days before escrow is closed.
What loans require an Escrow Closing Notice? First-lien loans with escrow accounts that are being canceled.
What is the Post-Consummation Partial Payment Policy Disclosure? Explains how the lender handles partial mortgage payments.
When must the Partial Payment Disclosure be provided? On the Closing Disclosure.
What is a partial payment? A payment that is less than the full amount due on the loan.
What are the lender's options for handling partial payments? Accept, return, or hold in suspense until full payment is made.
What is the Loan Servicing Transfer Notice (Goodbye Letter)? A notice that informs the borrower their loan servicing is being transferred.
When must the Goodbye Letter be sent? 15 days prior to the servicing transfer.
What is the Welcome Letter? A notice from the new servicer confirming receipt of servicing rights.
When must the Welcome Letter be sent? Within 15 days after the servicing transfer.
What is the 60-day servicing grace period? Borrower cannot be penalized for payments sent to the old servicer during the first 60 days of transfer.
What is the purpose of the Initial Escrow Account Disclosure? To outline estimated escrow payments and anticipated disbursements.
How long must escrow statements be retained? 2 years.
When must a Revised CD be issued before closing? At least 3 business days before consummation if major changes occur.
Can the borrower waive the 3-day CD waiting period? Only in cases of a bona fide personal financial emergency.
What is the earliest possible consummation date if the CD was delivered on a Monday? Thursday (3 business days later).
What fees are subject to 0% tolerance under TRID? Fees paid to lender, mortgage broker, or affiliates for services borrower cannot shop for.
What fees are subject to 10% cumulative tolerance under TRID? Fees for services borrower can shop for from provided list.
What fees have no tolerance limit under TRID? Prepaid interest, property insurance, and escrow amounts.
What is the maximum timeframe for delivering a Revised LE after a change? 3 business days from receiving information about the change.
What happens if the lender fails to issue a timely Revised LE? The original LE amounts must be honored.
What must be documented when issuing a Revised LE? Reason for revision and documentation supporting the change.
What is the waiting period if APR changes by more than 1/8% for fixed loans? 3 additional business days before closing.
What is the waiting period if APR changes by more than 1/4% for ARMs? 3 additional business days before closing.
What is the LE good for once issued? 10 business days unless borrower indicates intent to proceed.
What must happen if closing is delayed by more than 60 days? A new LE may be required due to expiration of fees or terms.
What happens if the borrower receives multiple CDs? The most recent CD is used at consummation.
Created by: jenniferhudson
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