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235 Cards in this Set
- Front
- Back
- 3rd side (hint)
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SAFE Act stands for?
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Secure and Fair Enforcement for Mortgage Liceing Act
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The SAFE act requires ___ and ___ to establish and maintain the NMLS.
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-Conference of State Bank Supervisors (CSBS)
-American Association of Residential Mortgage Regulators (AARMR) |
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Objectives of the NMLS
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-Provide uniform license apps and reporting requirements for state-licensed
- Provide database for licensees and registrants given unique identifiers. -Improve flow of info to/between regulators. -Provide increased accountability and tracking of loan originators. -Streamline licensing process, reduce regulatory burden. - Enhance consumer protection, support anti fraud measures. - Provide consumers easy and free info about MLO's -Establish means by which mlo's are required to act in best interest of consumer. -Facilitate responsible behavior in subprime mortgage market and provide comprehensive training. -Facilitate collection and disbursement of consumer complaints. |
10 Things
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Who is in charge of implementation, interpretation, and compliance of the SAFE Act?
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Consumer Financial Protection Bureau (CFPB).
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Primary mortgage market
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Where lenders originate mortgage loans by lending funds to borrowers.
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Retail lender
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A lender that interacts directly with the borrower and actually makes the loan. (e.g. a bank, savings bank, credit union or mortgage lender).
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Portfolio lender
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This is a retail lender who holds its loans, rather than selling them.
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A retail lender can also offer loans as a wholesale lender through mortgage brokers.
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Correspondant lender
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A smaller lender that takes apps and underwrites and funds them with their own money or a line of credit, then sells them to wholesale lenders immediately upon closing based on previously agreed-upon terms.
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Wholesale lender
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The mortgage investor that prices and funds loans applied for through mortgage brokers. The broker processes an app, then the wholesale lender has it underwritten and funded.
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What does a wholesale lender do with its loans?
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-Service, or
-Sell, or -Assign servicing to another entity. |
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Mortgage Lender
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(Mortgage Banker)
-Makes mortgage loans with its own funds. - Goes through mortgage brokers, mortgage LO's, and mortgage processors who obtain and process the applications from borrowers. |
Key point: They are actually LENDING
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Mortgage Broker
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- Individual or firm that obtains application information from a prospective borrower and attempts to match the borrower with a lender.
- Does not fund loans. |
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Table-funding
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A mortgage broker originates, processes, and closes in his own name a loan underwritten and funded by secondary lender, but then assigns the loan to that lender at the closing table.
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Mortgage Loan Originators
(According to Regulation X, RESPA) |
Any person who originates the loan, including a lender or mortgage broker.
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Licensing and Registration for Loan Originators under the SAFE Act
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- LO's employed by federally regulated agencies must be registered with the NMLS.
- LO's working for other lenders or mortgage brokers must be licensed by the stated and registered with the NMLS. |
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Secondary Markets
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-Composed of lenders and investors that buy/sell real estate mortgages or guarantee loans from primary market lenders
-Where mortgages may be sold individually or bundled with others with similar features into mortgage-backed securities and sold on the equity market. |
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Major participants int he secondary mortgage market created by congress...
Who buys/sells loans and who guarantees them? |
- Federal National Mortgage Association (FNMA). Buy/sell loans
- Federal Home Loan Mortgage Corporation (FHLMC) Buy/sell loans -Government National Mortgage Association Buy/sell loans |
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What is the function of the participants int he secondary market?
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To provide a source of funds for lenders in the primary market.
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What types of loans will FNMA & FHLMC buy?
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- Conforming conventional loans
-FHA insured loans - VA loans -USDA loans -* FNMA also buys commercial (e.g. apartment building) loans. |
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FNMA & FHLMC are considered what?
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Government-sponsored enterprises
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Fee charged to lenders, then passed on to borrowers as a finance charge, to compensate for certain loan features that increase the risk
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Loan Level Price Adjustment (LLPA)
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What does GNMA stand for?
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Government National Mortgage Association
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Who owns/created GNMA?
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It is a government corporation within the HUD
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How does GNMA increase the supply of credit available for housing?
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- By guaranteeing mortgage loans made by private lenders.
- The loans are already insured by the FHA or guaranteed by the USDA or VA. - The loans are guaranteed with the full faith and credit of the US government |
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Economic Indicators
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Indicators such as GDP and CPI that influence the interest rates of long-term debt instruments
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GDP
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- Gross Domestic Product
- Measures the amount of goods/services produced in the United States |
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CPI
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- Consumer Price Index
- Measures the average change in prices of consumer goods and services |
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Rates are also affected by actions taken by ____.
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- The Federal Reserve.
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How does the Federal Reserve influence interest rates?
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- Changing its asset reserve requirements
- Change its target for the federal funds rate - Change the discount rate it charges members to borrow money from the Federal Reserve Bank - Buy/Sell government securities through its open market operations. Handled by Federal Open Market Committee (FOMC). |
4 different ways
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Prime rate
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The lowest rates lenders will charge for their best customers.
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The three devices used to secure real estate for a loan
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- Land contract
- Mortgage - Trust deed |
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Land Contract
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-The seller finances the purchase of his property for the buyer.
-The buyer makes payments to the seller until he can pay off the entire debt (usually by refinancing). -After pay-off, the seller is given a deed transferring ownership of the property -Seller keeps the legal title to the property until payoff |
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Conveyance
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-The transfer of the property, and of the deed itself, to the buyer.
-(e.g. when a buyer pays off the entire debt owned by the buyer in a land contract) |
"conveyor belt"
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Equitable Title
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-The buyer is entitled to a deed conveying the title when the (land contract) is paid off.
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Typically at closing, the seller gives the buyer the ___, and the buyer gives the lender a ___ and a ___ .
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- Seller gives buyer the deed
- Buyer gives the lender a PROMISSORY NOTE and a SECURITY INSTRUMENT |
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Security Instrument
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- Given to lender at closing, creates a lien on the property
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Soft money and Hard money loans
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- Soft money: no money is exchanged, and is instead it is financed
- Hard money: A third party lender provides actual funds for the loan. |
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Function of a promissory note
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- Promises to repay the money borrowed
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Promissory note contains:
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- Payor and payee
- Amount owed - Rate of interest and if it's fixed or adjusted -The due dates of payments -The loan terms (prepayment privilege or prepayment penalty, etc.) |
5 things
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Loan terms (on a promissory note) may include:
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- Prepayment privilege
- Prepayment penalty - Lock-in clause (prohibits prepayment) - Acceleration clause - Late payment penalty |
5 things
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Which loans do and don't have prepayment penalties?
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- Government backed loans have no prepayment penalties (e.g. FHA and VA loans)
- Conventional loans may have them |
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Lock-in clause (what is it, and where is it found?)
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-Prohibits prepayment.
- Found in the loan terms on a promissory note. |
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Acceleration clause. Where is it found?
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-Permits the lender to declare the entire balance of the loan due at once if the borrower defaults
- Found in the loan terms on a promissory note. |
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Where is the late penalty officially listed?
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- Found in the loan terms on a promissory note.
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The mortgage or trust deed
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- Secures the repayment of the promissory note.
- HYPOTHECATES the property, meaning the property is pledged as security or collateral, but the borrower retains title of possession |
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The borrower, in giving a mortgage to a lender, is called the ___.
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Mortgagor
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The Lender, in receiving a mortgage from a borrower, is called the ___.
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Mortgagee
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The borrower, in giving the trust deed to a lender, is called the ___ or___.
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Grantor or trustor
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The lender, in receiving the deed from a borrower, is called the __.
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Beneficiary.
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Due-on-sale (alienation) clause. Is found on (is a provision of) what document?
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-Allows the lender to declare the entire balance of a loan due at once; or refuse to allow another person to assume the loan if the title is transferred.
- This clause is a provision of the security instrument. |
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Defeasance Clause
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Provides for the release of the lien when the borrower pays off the debt.
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The borrower has defeated his debt
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Satisfaction or Release
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- Public record recorded to clear a mortgage lien
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Deed of reconveyance
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- Public record recorded to clear a mortgage lien
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What loans are assumable and not assumable?
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-FHA or VA loans are assumable by qualified buyers.
- FNMA & FHLMC loans depend on the contents of the mortgage documents and type of transfer. |
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The security instrument says that monthly payments should be applied in what order?
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1. Interest
2. Principal 3. Taxes and insurance if paid to the lender 4. Late charges 5. Any other amounts due 6. Additional principal reduction |
Logic:
1. Always get their "profit" first 2. Then get back the money they already "own" 3. When they get their own $, collect what they have to give to other ppl 4. Take care of the unfinished business. 5. Anything left out 6. Buyers' best interest comes last |
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Subordination Clause
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- Specifies a lean has a lower priority than another one placed on the same property
- The lien will remain subordinate in the event that the first mortgage is refinanced |
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What happens to a subordinate lien in the event of a foreclosure?
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- The loan will be removed
- Even if the foreclosure sale is not enough to pay it off - Makes it a much riskier loan - Higher risk usually means higher interest rates. |
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Piggyback Mortgage
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- A subordinate loan obtained at the same time as the primary mortgage
- Used to finance a down payment or closing costs. |
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What happens if a borrower defaults on his mortgage?
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- Lender asks court for a judicial foreclosure and a court ordered sherriff's sale to repay the debt.
- If the proceeds are insufficient, the debtor may be liable to satisfy the debt. |
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Power-of-sale provision
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- Allows a trustee to foreclose and sell the property on behalf of a lender, without a court order.
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Equitable right of redemption
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- In the event of foreclosure, an owner or person with interest in the property can pay off the debt and court costs to prevent a foreclosure sale
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Statutory right of redemption
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- After a foreclosure sale, a borrower has a redemption period where they can pay the remainder of the debt (and interest, court costs, etc) before the sheriff's deed or trustee's deed is issued.
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How Happy Gilmore got his grandma's house back, even though Shooter won the sheriff's auction.
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Right of reinstatement (and where is it listed?)
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-IF there is one, it is found int he mortgage or trust deed.
- If a borrower has defaulted, they have a period to get caught up and make the loan current, instead of going into foreclosure |
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If a lender holding the note is the highest bidder at a foreclosure sale, that property is called ____.
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Real Estate Owned (REO)
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Options available to a lender other than foreclosure
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-Acceptance of a deed in lieu of foreclosure, releasing him from his debt.
- Forbearance, allowing borrowers in financial difficulty to delay monthly mortgage payments temporarily. |
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Forbearance
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Allows a borrower experiencing temporary financial difficulty to delay his monthly mortgage payments for a short period of time. It is often combined with other programs designed to help bring the monthly mortgage payments current after a negotiated period of time.
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Conventional Loans
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-Loans that are made by private parties
-Not guaranteed or insured by the government. |
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Conforming loans
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-Loans that conform to the guidelines for purchase by FNMA and FHLMC.
-Have a maximum loan limit, adjusted annually, for loans they will purchase. |
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Non-conforming loans.
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-Loans giving to people with satisfactory credit, but exceed loan limits.
-Also called jumbo loans. -Cannot be sold to FNMA/FHLMC -Often have higher interest rates |
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PMI
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-Private mortgage insurance
-Issued by a private mortgage insurance company |
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Benefits of PMI
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- Gives the borrower the ability to have a smaller down payment
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Methods of borrower paying for PMI
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- Pay the insurance premium at closing, as a lump some covering the life of the loan
- Pay the first year's premium at closing, then pay annual premiums as part of his mortgage payment |
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A paper Loans
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- Conforming loans
- Meet the borrower credit criteria required by FNMA/FHLMC - Basically, not a subprime loan |
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Alt-A loans
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-Subprime loans
-The borrower has less-than-prime credit -Or the borrower has a lack of supporting document -Risky |
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Factors causing a borrower to seek a subprime lender include:
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- A weak past credit performance
- A high monthly debt payment relative to income - Lack of assets other than current income to support loan payments - Self-employment or variable income - A desire to limit disclosure of his financial situation |
5 answers
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What was the pricing model used for subprime loans?
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- Risk-based pricing model
-Up-front fees and higher interest rates were based on the degree of risk posed by the subprime borrower - Higher risk = higher rates and costs |
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What happened when subprime loans were easily available?
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-Subprime lenders were irresponsible and lax in the origination and secularization of the loans.
- Actual losses to the lenders far exceeded the estimated risk. |
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Benefits of government loans
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- More liberal qualification criteria, such easier credit standards and higher LTV's
- Limit of 4% on late chargers on a payment 15 days late - Loan assumability |
3 Answers
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FHA stands for ___ and is a division of ___.
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-Federal Housing Administration
- A division of the HUD |
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Benefits to FHA loans
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- FHA insures them, protecting the lenders from any loss in a foreclosure
- As a result, the lenders can give the borrowers a higher LTV |
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How is FHA mortgage insurance charged?
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- Up-front-mortgage insurance premium (UFMIP).
-Also an annual mortgage insurance premium |
Borrower usually pays 2 different ways
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Is FHA mortgage insurance refundable?
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-The UFMIP is non-refundable
-But a portion of the UFMIP may be applied to another FHA mortgage within 3 years |
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How long must borrowers pay FHA mortgage insurance?
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-LTV less than or equal to 90%, annual MIP will be paid for the first 11 years or until the mortgage is paid off
-LTV greater than 90%, MIP will be assessed until the end of the mortgage term or until mortgage is paid of |
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What value is used to calculate LTV on an FHA loan?
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-The lesser of the purchase price or the appraised value of the home
-Divided by loan amount (before any financed UFMIP) |
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What is the most popular FHA loan program? Stats?
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-203(b) program
-1-4 family home the borrower plans to occupy (within 60 days, for at least 12 months) -DP as little as 3.5% -To get 3.5%, 580 credit score is needed. -To get 10%, 500-579 credit score is needed |
-Property stats
-Down payments -Credit scores |
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Where can the cash investment for a borrower come from on an FHA loan come from?
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- Gift from an immediate relative.
- A labor union or employer - A government agency or public entity. - A nonprofit charitable organization |
4 Answers
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Where can an FHA gift not come from?
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-From a person/entity with an who has an interest in the sale of the property (e.g. seller, real estate agent or broker, builder, associated entity)
-A gift from these people would be an inducement to buy, and therefore would have to be deducted from the sales price. |
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How much can the seller contribute towards the buyer's closing costs in an FHA loan? How is it applied?
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-Up to 6% of the purchase price.
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-What portion of the money needed to close an FHA loan can the seller NOT contribute to?
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-THe down payment
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FHA Home Equity Conversion Mortgages allow in individual to do what?
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-Convert some of the equity in his primary residence into cash to live off of, or
-Purchase a primary residence if he has the cash to pay the down payment and closing costs. |
2 answers
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Key factors of the HECM FHA mortgage
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-Borrower qualifications: Must be 62, have significant equity in the property, occupy it as his principal residence, and participate in an information session given by the approve HECM counselor
-Loan amount is based off of: Age of youngest borrower, current interest rate, The lesser of the appraised value or HECM FHA mortgage limit. Loan amount may include closing costs. -Borrower may chose a fixed or adjustable rate, and can choose if it is adjusted monthly or annually -Loan has no specified term, prepayment penalties, credit/income qualifications because there is no repayment as long as the borrower is in the house as a primary residence |
5 Things
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Borrower qualifications for an FHA HECM.
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-62 years old
-Significant equity in their property as his principal residence -Participate in a consumer information session given by approved HECM counselor |
3 Things
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Loan amount for an FHA HECM is based off of...
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-Age of the youngest borrower
-Current interest rate -Lesser of appraised value or HECM FHA mortgage limit. -Loan amount may include closing costs |
4 Things
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When is repayment due on an HECM FHA mortgage?
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When the owner...
-Dies -Permanently moves -Fails to live in the house for 12 consecutive months -Fails to pay property taxes, maintain hazard and/or flood insurance coverage, or maintain the propety |
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What is a nontraditional mortgage credit report. What type of loan is it used for?
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-Used to supplement or substitute a traditional credit report, if the borrower does not have enough lines of credit.
-Uses things like rent, utility payments, and other bills |
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What are the front and back ratios for an FHA loan?
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31/43
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What income can be grossed up for FHA qualifications? How much?
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- Sources of regular income not subject to federal taxes (e.g. certain types of disability and public assistance, Social Security Income, and military allowances).
-Child support Income -Grossed up 25% |
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Typically, how is rental income used for FHA loans qualifying?
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-75%
-Or a percentage developed by HUD's jurisdictional Homeownership Center (HOC) for vacancies and maintenance. |
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"For Your Protection: Get a Home inspection"
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-Must be given to prospective buyer at first contact, but never later than time of initial application.
- Informs the buyer of the importance of a pre-purchase home inspection. -Makes clear that FHA does not insure the condition of the property, and the appraisal is intended only to assist the lender. |
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FHA Amendatory clause
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Provides that:
-The buyer is not obligated to conclude the transaction - A full refund is given of earnest money if the property is not appraised at the purchase price. |
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FHA Resale/Assumability rules:
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-Can only be assumed by an owner-occupant.
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Funding Fee
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-An up front, non-refundable fee paid at the beginning of a VA loan.
-A veteran receiving compensation for service-connected disability is exempt. |
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Factors affecting amount of funding fee...
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-First time or repeat VA borrower
-Eligibilty because of service in regular military or in the reserves or national guard. -Puts nothing down or puts at least 5% down. |
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Funding fee for a first time VA borrower, who is a veteran of the regular military.
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2.15 percent of the loan amount
(gets higher if they were a reservist or have used a VA loan previously) |
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What can the seller pay in a VA loan?
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-All of the borrower's nonrecurring closing costs and discount points, with no limit.
-Up to 4% of the sales price in seller concessions |
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Seller concessions
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-Anything of value added to the transaction for which the borrower pays no additional amount and that the seller is not customarily expected to pay.
-Include prepaid taxes/insurance, VA funding fee, payoff of existing debts, temporary buy downs, and gifts. |
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VA loans compared to other loans
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-The interest rates aren't any lower
-Seller is generally not required to make repairs -Finance chargers are not significantly lower. |
3 points
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Qualifying for a VA loan
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-Easier to qualify for VA loan
-Uses just a 41% DTI -The residual income method, which determines whether the veteran has enough income after paying his fixed debts to cover his daily living expenses and which can qualify a borrower whose ratio might exceed the 41 percent limit |
-Is it harder/easier?
-What methods? (2 of them) |
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Residual Income
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-Method for VA loan
-The residual income method, which determines whether the veteran has enough income after paying his fixed debts to cover his daily living expenses and which can qualify a borrower whose ratio might exceed the 41 percent limit |
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Assumability of VA loans
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A VA loan is assumable, even by nonveterans if the lender approves of the assumption (releases original borrower of liabilities to the VA). If loan closed before 1988, it is ass unable by anyone but original owners is still liable.
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How much of a of the loan does the VA guarantee?
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-The lesser of 25% of the loan balance or 25% of the Freddie Mac limit.
-If a home forecloses, the lender only needs to recoup 75% of the house's value to break even |
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How does a veteran get his full 25% guarantee?
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-If he has his full eligibility
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How can a veteran get his used entitlement back?
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-Sell the prior property (paying off the loan)
-A qualified veteran assumes the property and substitutes his own eligibility -The veteran has repaid the prior VA loan in full but has not disposed of the property (one time only) -An increase in the maximum entitlement amount, gives him some "remaining entitlement" |
4 ways
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Certificate of Reasonable Value
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-The VA appraisal (CRVO
-SHows the maximum amount a borrower can borrow on a VA loan. -Can borrow more, if he pays the difference in cash. -An escape clause will allow him to get his earnest money back and terminate the transaction, if the value is not enough |
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VA rules for condition of the property
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-VA is not concerned with condition of the property for the most part
-If house is older than 1978, any area with chipping paint must be inspected |
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Who makes financing available for USDA Loans?
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Rural Housing Service (RHS)
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When a borrower offers his property as security for a debt but does not give equitable title or possession to the lender, this is called
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Hypothecation
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"HYPOTHETICALLY" speaking, if I were to default then you could have my house.
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In regard to money laundering, the process of separating the criminal proceeds from their criminal origins using financial transactions in one or more accounts is called
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Layering
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The Truth in Lending Act does not include which of the following as finance charges in a residential loan transaction?
1.) Settlement/closing fees 2.) PMI 3.) Mortgage broker fees 4.) Appraisal fees |
Answer: Appraisal fees
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The Truth in Lending Act does not include which of the following as finance charges in a residential loan transaction?
1. Padding 2. Targeting 3. Redlining 4. Steering |
Answer: Steering.
(A characteristic of predatory lending) |
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If the lender determines, at any time during the life of a loan, that the property securing the loan is located in a special flood hazard area and is not covered by flood insurance, then...
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The lender may force place the insurance coverage if the borrower does not promptly purchase it.
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Regulation Z requires that an ad stating the down payment for a closed-end mortgage must include
1. a statement of the interest rates for the same loan with higher and lower down payments. 2. a statement of the interest rates for the same loan with higher and lower down payments. 3. a statement of the interest rates for the same loan with higher and lower down payments. 4. a statement of the interest rates for the same loan with higher and lower down payments. |
Answer: Terms of the repayment of the loan.
Bonus: the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate, using that term or the abbreviation "APR." |
*Bonus: What must be included on an ad using trigger terms?
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The practice of advertising an adjustable-rate mortgage as a fixed-rate mortgage is a violation that is termed ____.
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Bait and Switch
(Bait-and-switch credit promotions involve advertising a loan at very attractive terms, and then informing potential customers that the advertised loan is not available, but that a substitute is. For example, an advertisement may not present an adjustable-rate mortgage as a fixed-rate mortgage or state that a specific installment payment or a specific down payment can be arranged unless the creditor is prepared to make those arrangements.) |
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Employment and income documentation is generally valid for no more than how many months prior to the date of the mortgage note?
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Four months.
(As of Oct. 2013, FNMA requires employment and income documentation to be dated no earlier than 120 days prior to the note date for existing or new construction loans. ) |
Reword: When a lender is given income and employment documentation, how long is it good for?
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Which of the following reasons for denying an applicant a loan is a violation of fair lending laws?
1. Applicant's age is below the minimum age for executing a contract 2. Applicant's credit history includes defaults on many credit payments 3. Applicant's recent marital status may lead to a change in employment 4. Applicant's income doesn't meet the required level for repayment of the loan |
Answer: Change in marital status.
(Which of the following reasons for denying an applicant a loan is a violation of fair lending laws?) |
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TILA's mandatory reporting requirements in regard to appraisers who have not complied with the Uniform Standards of Professional Appraisal Practice apply to all of the following EXCEPT
1. Mortgage brokers 2. Title insurance companies 3. Creditors 4. Borrowers |
Answer: Borrowers
(In order to help stop appraisal fraud and deter future offenders, the Truth in Lending Act (TILA) includes a mandatory reporting requirement, requiring all covered persons to report any appraiser who they reasonably believe has not complied with the Uniform Standards of Professional Appraisal Practice or who has otherwise failed to uphold the ethical or professional standards required of all appraisers under federal or state statutes or regulations. The definition of "covered persons" includes creditors, mortgage brokers, appraisers, appraisal management companies, real estate agents, title insurance companies, and other people who provide settlement services.) |
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The minimum number of com parables needed for a residential mortgage appraisal is?
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Answer: Three
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Which of the following in an ad for residential mortgage financing would trigger additional disclosures?
1. "5.75% APR" 2. "Affordable payments" 3. "VA financing available" 4. "5% down payment" |
A: 5% down payment
(An advertisement must disclose a number of other credit terms if it contains a trigger term. A trigger term is the amount or percentage of any down payment; the number of payments or period of repayment; the amount of any payment; or the amount of any finance charge. If an ad shows only a rate stated as the APR, no other credit information need be included because the APR is not a trigger term. This question applies to Module 8 - Federal Truth in Lending Act Part 2.) |
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Which of the following is true of a promissory mortgage note?
1.It gives a lender a promise to repay the money borrowed with interest. 2.It gives a lender a promise to repay the money borrowed with interest. 3.It is recorded. 4.It creates a lien on the property securing the debt. |
Answer: It gives a lender a promise to repay the money borrowed with interest.
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In a mortgage transaction subject to RESPA that is secured by the consumer's dwelling, a TILA Disclosure must be delivered or mailed within three business days after receipt of a written application and no later than
1.the fifth business day before the transaction is consummated. 2.the date the transaction is consummated. 3.the seventh business day before the transaction is consummated. 4.three business days before the transaction is consummated. |
Answer: three business days before the transaction is consummated.
(In a mortgage transaction subject to the RESPA that is secured by the consumer's dwelling, other than a home equity line of credit, a TIL Disclosure must be delivered or mailed within three business days (i.e., days on which the creditor's offices are open to the public for carrying on substantially all of its business functions) after receipt of a written application and no later than the seventh business day before the transaction is consummated.) |
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According to TILA, a variation up to what amount is permitted for the annual percentage rate in a regular fixed-rate mortgage transaction?
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1/8%
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TILA provides that the APR advertised for a mortgage loan can deviate from the actual rate being offered to customers by?
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0%
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When a TIL Disclosure is mailed, the applicant is considered to have received it
1.on the day of mailing. 2. three calendar days after the mailing. 3. three business days after the mailing. |
Answer: Three calendar days after the mailing.
(If the TIL Disclosure is mailed, the consumer is considered to have received it after three business days. (In this case, a business day is defined as any day but Sunday or federal holidays.) |
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Which of the following determines whether flood insurance is required for a particular property?
1. FEMA 2. The appraiser 3. The title company 4. The lender |
A:The lender
(FEMA produces the maps showing the floodplains, but it does not determine whether a particular property is in a floodplain. The lender is charged with the responsibility for making this determination. It may do so directly or pay for a third party to do the work.) |
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An Alt-A loan is?
1. Is a loan made to a borrower with less than prime credit or lack of supporting documentation. 2. Has the same risk as a prime loan, but without documentation. 3. Is a jumbo loan made to a borrower with prime credit. 4. Is a conforming loan. |
Answer: Is a loan made to a borrower with less than prime credit or lack of supporting documentation.
(The term "Alt-A" comes from alternative documentation (low or no documentation) for an A-paper borrower. Later, low-doc loans to borrowers with less than "A" credit were also considered Alt-A. Although Alt-A loans can be considered to be subprime, they are not another name for subprime loans. The credit of an Alt-A borrower is better than that of a subprime borrower, but lack of documentation makes him riskier than the prime borrower.) |
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The statement, "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application," is required by
1.Regulation Z on TILA disclosures and redisclosures. 2.RESPA for all GFEs. 3.ECOA on every loan application. 4.Regulation Z only on corrected TILA disclosures. |
Answer: Regulation Z on TILA disclosures and redisclosures.
(TILA disclosures and redisclosures must contain the following statement: "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.") |
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In a loan transaction involving a mortgage broker, then?
1. the mortgage broker is responsible for ascertaining whether the GFE has been provided. 2. the lender is responsible for ascertaining whether the GFE has been provided. 3. the GFE must be provided by the lender. 4. the GFE must be provided by the mortgage broker. |
Answer: The lender is responsible for ascertaining whether the GFE has been provided.
(In the case of a loan transaction involving a mortgage broker, the GFE may be provided by either the lender or the mortgage broker. However, the lender is responsible for ascertaining whether the GFE has been provided.) |
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In order to discourage appraisal fraud caused by loan originator pressure, the Federal Housing Administration discourages flipping by determining that a property resold within __ days from the last sale is not eligible for FHA financing.?
1. 90 2. 60 3. 120 4. 360 |
Answer: 90 days
(In order to discourage appraisal fraud caused by loan originator pressure, the Federal Housing Administration discourages flipping by determining that a property resold within 90 days from the last sale is not eligible for FHA financing. However, to encourage investors to buy, fix up and quickly resell foreclosed properties, this restriction is currently being waived if the transaction is arm's length and if the sales price exceeds the owner's acquisition cost by 20 percent, there is adequate justification for the price increase, and a property inspection takes place.) |
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The borrower is obtaining a loan to purchase a new home. Settlement is anticipated to occur 90 calendar days from the time the GFE is provided. The loan originator may provide the initial GFE with a disclosure that he may issue a revised GFE any time up until?
1. 60 calendar days prior to closing. 2. five business days prior to closing. 3. 30 calendar days prior to closing. 4. three business days prior to closing. |
Answer: 60 calendar days prior to closing.
(For a new home purchase where settlement is anticipated to occur more than 60 calendar days from the time the GFE is provided, the loan originator may provide the initial GFE with a clear and conspicuous disclosure stating that at any time up until 60 calendar days prior to closing, he may issue a revised GFE.) |
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The section of the Uniform Residential Loan Application titled, "Information for Government Monitoring Purposes"
1. must note the applicant's sex, race and ethnicity, based on the lender's visual observation or the applicant's surname if the applicant refuses to provide the information. 2. is included to aid the federal government in monitoring compliance with the Fair Lending Act. 3. is mandatory, to assure compliance with federal laws. 4. is required to be completed only if the applicant is in a protected class. |
Answer: must note the applicant's sex, race and ethnicity, based on the lender's visual observation or the applicant's surname if the applicant refuses to provide the information.
(This section is included to aid the federal government in monitoring compliance with the EQUAL CREDIT OPPORTUNITY ACT. Because supplying this information is strictly voluntary, an applicant who does not wish to do so should check the box provided to indicate his decision. If an applicant does not provide this information, federal regulations require the loan originator to note the applicant's sex and race on the form, based on the loan originator's visual observation or the applicant's surname) |
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Examples of prohibited misleading advertising include any comparisons between any rate or payment that will be available for a period less than _________; and any actual or hypothetical rate or payment.
1. the full length of the mortgage credit product 2. two years 3. three years 4. one year |
Answer: the full length of the mortgage credit product
( It is a violation of the advertising regulations for any person to make a material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product. This includes any comparisons between any rate or payment that will be available for a period less than the full length of the mortgage credit product; and any actual or hypothetical rate or payment.) |
Think: ARM advertised as fixed is illegal.
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All of the following are nontraditional loan products EXCEPT
1. interest-only 30-year mortgage loans. 2. Interest-only ARMs. 3. Hybrid ARMs. 4. reverse mortgages. |
Answer: interest-only 30-year mortgage loans.
(The SAFE Act defines a nontraditional loan as any loan product other than a 30-year fixed mortgage. All ARMs have rates that are adjustable. A reverse mortgage does not have a 30-year loan term and may have either a fixed rate or adjustable rate of interest. An interest-only loan would be a traditional loan under the SAFE Act definition if it had a fixed rate and a 30-year term, even though the period of interest-only payments would be only five, 10 or 15 years.) |
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Within how many business days of receiving a mortgage loan application must a loan originator provide the applicant with the Special Information Booklet?
1. Six 2. Three 3. One 4. Five |
Answer: Three
(RESPA requires that a loan originator provide the borrower with a special information booklet prepared by HUD, along with a GFE, at the time of receipt of a mortgage loan application or within three business days of receipt.) |
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Foreclosure is initiated on a consumer's principal dwelling that secures a credit obligation. At this time, the finance charge and other disclosures affected by the finance charge are considered accurate if they are above the amount required to be disclosed or if they are understated by no more than
1. $100 2. $35 3. $50 4. $200 |
Answer: $35
(After the initiation of foreclosure on a consumer's principal dwelling that secures the credit obligation, the finance charge and other disclosures affected by the finance charge are considered accurate if they are understated by no more than $35 or are greater than the amount required to be disclosed. ) |
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A loan secured by vacant or unimproved property is covered under RESPA only if
1. any construction is financed separately. 2. the loan proceeds will be used to construct or place a structure or a manufactured home on the real property within two years from the date of the settlement of the loan. 3. None of these, as the property must be improved with a dwelling 4. the loan proceeds are to be used to purchase only the land. |
Answer: 2
(A loan secured by vacant or unimproved property is covered under RESPA if a structure or a manufactured home will be constructed or placed on the real property using the loan proceeds within two years from the date of the settlement of the loan. RESPA does not apply to an extension of credit primarily for business, commercial or agricultural purposes.) |
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An originating lender may be required to return the SRP.
1. if the borrower is late on any payment within the first six months. 2. if the borrower repays the loan anytime prior to its maturity. 3. if the borrower defaults within the first three months. 4. if the index rate increases more than 2% in any year. |
Answer: if the borrower defaults within the first three months.
(A repurchase agreement may provide that the originating lender must return the service release premium if the borrower defaults within a specified period or pays off the loan within a specified period.) |
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The Statement on Subprime Mortgage Lending provides that stated-income and reduced-documentation loans should be accepted only if there are documented mitigating factors. All of these could be considered mitigating factors EXCEPT
1.favorable payment performance. 2. a higher interest rate that will cover additional anticipated losses. 3. stable financial condition. 4. substantial verified and documented liquid reserves or assets. |
Answer: a higher interest rate that will cover additional anticipated losses.
(The Subprime Statement says that stated-income and reduced-documentation loans should not be accepted unless there are documented mitigating factors that clearly minimize the need for such verification, such as the borrower having a favorable payment performance and a financial condition that has not deteriorated or the borrower having substantial verified and documented liquid reserves or assets that demonstrate repayment capacity. A higher interest rate, charged to cover additional anticipated losses, is not considered an acceptable mitigating factor. This question applies to Module 13 - Nontraditional Product Guidance.) |
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ECOA and Regulation B provide that, for qualifying purposes, a creditor cannot ask an applicant about which of the following?
1. Residency 2. Income 3. Race or sex 4. Age |
Answer: Race or sex
(ECOA and Regulation B provide that a creditor cannot ask an applicant about race, color, religion, national origin or sex of an applicant, except for monitoring purposes.) |
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RESPA does not require lender disclosures of closing costs and procedures for which of the following home loans?
1. Home purchase loans from a lender 2. Home equity loans 3. FHA loans 4. Temporary construction loans |
A: Temporary construction loans
(RESPA applies to transactions involving federally related mortgage loans, including loans secured by a first or subordinate lien on residential property, such as home purchase loans; refinances; home equity loans; home equity lines of credit; reverse mortgages; and FHA, VA and conventional loans. However, a construction loan may be subject to the law if it is used as, or may be converted to, permanent financing by the same lender; the lender issues a commitment for permanent financing; the loan is used to finance a transfer of title to the first user; or the loan is for a term of two years or more, unless it is to a bona fide builder.) |
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Which of the most common types of fraud typically relates to loan documentation?
1. Income representation 2. Occupancy, employment and income misrepresentation 3. Employment misrerepresentaton 4. Occupancy misrepresentation |
Answer: Occupancy, employment and income misrepresentation
(The most common types of fraud (occupancy, employment and income misrepresentations) relate to loan documentation. In serving the interests of a lender, a loan originator should be alert to typical inconsistencies (red flags) in a loan package, which can indicate possible misrepresentations in the data received.) |
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All of the following are required disclosures under the Truth in Lending Act EXCEPT
1. interest rate. 2. loan fees. 3. title charges. 4. points. |
Answer: Title charges
(Loan costs must be disclosed under TILA and Regulation Z. Title charges are closing costs disclosed under RESPA and Regulation X.) |
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The Truth in Lending Act requires disclosure to an applicant of
1. interest rates offered by the same lender to other borrowers. 2. interest rates offered by other lenders. 3. his credit score. 4. discount points to be paid to the lender. |
Answer: Discount points
(Discount points are a finance charge, and must be disclosed. The other items have nothing to do with a TILA disclosure.) |
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The Truth in Lending Act provides that a lender refinancing a residential property must give the borrower
1. a copy of the TIL Disclosure for the initial loan. 2. a new TIL Disclosure for the new loan. 3. a new TIL Disclosure only if it is requested. 4. nothing, as the law does not apply to refinancing. |
Answer: a new TIL Disclosure for the new loan.
(The law does apply. Because the request is for a new loan, a new disclosure must be provided. ) |
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In regard to fund transfers, all of the following would be considered red flags indicating possible illegal activity EXCEPT
1. transfers in odd amounts. 2. transfer activity to a bank in a different U.S. state. 3. transfers to a financial secrecy haven like the Cayman Islands. 4. repetitive transfer activities. |
Answer: transfer activity to a bank in a different U.S. state.
(Red flags are suspicious activities that indicate possible illegal or unscrupulous activity. They include funds transfers in large or odd amounts; to or from a financial secrecy haven or a high-risk geographic location; or repetitive, unexplained or unusual transfer activities.) |
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A licensee who takes unreasonable advantage of a consumer's lack of understanding of the material risk of a mortgage loan product would be guilty of..
1. an abusive act or practice. 2. misrepresentation 3. bait-and-switch. 4. puffing. |
Answer: an abusive act or practice.
(An abusive act or practice includes materially interfering with the ability of a consumer to understand a term or condition of a consumer financial product or service; or taking unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs or conditions of the product or service, the inability of the consumer to protect its interests in selecting or using a consumer financial product of service, or the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.) |
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A home builder advertises that it will finance the homes it builds. What additional information must be in the ad in order to comply with the Truth in Lending Act?
1. The repayment period 2. None 3. The annual percentage rate 4. The down payment amount |
Answer: None
(No triggering term in included in the builder's ad, so no credit terms need to be included.) |
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A loan originator who provides a revised GFE must retain documentation for the reason he had to provide a new GFE for at least
1.two years after settlement. 2. two years after providing the GFE. 3. three years after providing the GFE. 4. three years after settlement. |
Answer: Three years after settlement
( A loan originator may provide a revised GFE only if he documents the reason he had to provide a new GFE and retains the documentation for at least three years after settlement.) |
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Before providing the GFE, it will be assumed that the loan originator has collected all of the following information EXCEPT
1. The borrower's net monthly income. 2. an estimate of the value of the property. 3. the borrower's Social Security number. 4. the property address. |
Answer: The borrower's net monthly income. *should have been GROSS income
(Before providing the GFE, it will be assumed that the loan originator has collected at least the six items of information specified in the regulation: the borrower's name, his Social Security number, his gross monthly income, the property address, an estimate of the value of the property and the amount of the mortgage loan sought. Net monthly income is not the same as gross monthly income.) |
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The primary purpose of the Truth in Lending Act is to
1.limit consumer interest rates. 2. limit settlement costs. 3. ensure consumers are given disclosures of credit terms. 4. ensure equal credit opportunity. |
Answer: ensure consumers are given disclosures of credit terms.
(The primary purpose of TILA is to assure that creditors provide accurate and truthful information to consumers relating to the cost and terms of the credit being offered so that they can more easily compare various credit offers.) |
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Which document advises the consumer not to provide false information in relation to his loan application?
1. The ECOA adverse action notice 2. The initial TIL Disclosure 3. The HUD special information booklet 4. The GFE |
Answer: The HUD special information booklet
(The special information booklet (HUD's Settlement Cost Booklet) gives the consumer key information about the home-buying and loan process. It includes a "Do" list and a "Don't" list. The "Don't" list advises the consumer not to provide false documentation; fake co-borrowers; change tax returns; or overstate assets, length of employment or income.) |
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When must loan applicants receive an adverse action notice if they cannot qualify for a loan?
1. Within 60 days of loan application 2. Within 15 days of loan application 3. Within 30 days of loan application 4. Within 90 days of loan application |
Answer: 30 Days
() |
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ECOA requires that
1. every applicant must be granted some type of loan. 2. an applicant must be given notification of the status of his loan application within 30 days. 3. an incomplete loan application must be discarded. 4. an applicant has the right to know whether an application was accepted or rejected within 60 days of filing a complete application. |
Answer: an applicant must be given notification of the status of his loan application within 30 days.
(ECOA gives an applicant the right to receive notification of an incomplete application with reasonable time to respond and the right to know whether the application was accepted or rejected within 30 days of filing a complete application.) |
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The "principal-agent problem" refers to
1. issues of agency in real estate which may end up affecting the mortgage transaction. 2. the relative lack of consequences for a lender's agent in the mortgage transaction. 3. lack of sufficient supervision of mortgage loan originators. 4. conflicts of interest between mortgage lenders and mortgage brokers. |
Answer: lack of consequences for a lender's agent in the mortgage transaction.
(Unlike the borrower or the lender, the mortgage broker and mortgage loan originator have no long-term interest in the performance of a loan. The relative lack of consequences for a lender's agent subjects the mortgage delivery system to what economists and political scientists call the principal-agent problem.) |
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Under the Bank Secrecy Act, each institution must develop a written _________ compliance program, which must be approved by the institution's board of directors.
1. anti-terrorist financing 2. anti-discrimination 3. anti-trust-account-fraud 4. anti-money-laundering |
Answer: Anti-money-laundering
(Under the Bank Secrecy Act, each institution must develop a written anti-money-laundering compliance program, which must be approved by the institution's board of directors.) |
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The ARM index based on the interest expenses on savings deposits reported by member savings banks in the Federal Home Loan Bank System's 11th District is
1. the COFI. 2. the LIBOR. 3. the Treasury yield index. 4. the CMT. |
Answer: The COFI
(COFI is the acronym for the 11th District Monthly Weighted Average Cost of Funds Index. The COFI is computed from the actual interest expenses on savings and borrowings reported for a given month by Arizona, California and Nevada savings institutions that are members of the Federal Home Loan Bank of San Francisco.) |
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Under the rules for the Do-Not-Call Registry, a mortgage broker may make an unsolicited call to a client or customer with whom he has established a business relationship for up to how many months after his last transaction?
1. 18 2. 3 3. 6 4. 24 |
Answer: 18 months
( Under the rules for the Do-Not-Call Registry, a mortgage broker may make an unsolicited call to a client or customer with whom he has established a business relationship for up to 18 months after his last transaction) |
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The main methods of money laundering...
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-Placement
-Layering -Integration |
3 of them
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Placement
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-Money laundering technique
-The process of introducing unlawful proceeds into the financial system (e.g., loan balances quickly reduced by multiple cash payments under reporting thresholds). |
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Layering
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the process of separating the criminal proceeds from their criminal
origins using financial transactions in one or more accounts (e.g., negotiable instruments used to purchase other negotiable instruments; the deposit of cash followed by a transfer of funds in almost the same amount to other accounts). |
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Integration
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The process of combining criminal proceeds with legal funds to provide legitimate ownership.
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Red Flags
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Red flags are suspicious activities that indicate possible illegal or unscrupulous activity
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What are some common red flags?
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-Providing insufficient or suspicious information
-Efforts to avoid reporting or record keeping requirements -Fund transfers (Large/odd amounts; or from a financial secrecy haven like Camen Islands). -Repetitive / unexplained / unusual transfer activities -Activity inconsistent with the customer's business -Unusual or unexplained lending activity (aloansecuredbypledgedassetsheldbyathirdpartyunrelatedtotheborrower; aloanmadefor,orpaidonbehalfof,athirdpartywithnoreasonable explanation; or useofacertificateofdeposit,purchasedusinganunknownsourceoffunds,to secure a loan.) - An employee who exhibits a lavish lifestyle not supported by his salary; fails to follow established policies and procedures; or is reluctant to take vacation. -unusual or suspicious customer activity. |
8 of them
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Red flags for identifying possible terrorist financing activity include:
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-activity inconsistent with a customer’s business (e.g., a customer’s stated
occupation is not commensurate with the type or level of business activity). -Unusual or suspicious transfer activities -unusual or suspicious transactions |
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Fund transfers that could be red flags for terrorist financing:
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-transfers that are ordered in amounts designed to avoid triggering identification or reporting requirements;
-transfers that do not identify the originator or person on whose behalf the transaction is occurring; or -the use of personal, business or nonprofit accounts to funnel money to a small number of foreign beneficiaries. |
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Transactions that could be red flags for terrorist financing:
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-transactions involving foreign currency exchanges followed by funds
transfers to higher-risk locations; -transactions involving the movement of funds to or from higher-risk locations where there appears to be no logical business reason for the person to be dealing with those locations; or -banks from higher-risk locations opening accounts. |
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Bank Secrecy Act
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-(1970) designed to prevent financial institutions in the United States from being used to launder money.
-rovisions of the BSA require recordkeeping and the reporting of specific transactions that have a higher risk of being used to launder money, evade taxes and aid in other criminal activities. |
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Required reports for the BSA include:
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-the Currency Transaction Report (CTR, IRS form 4789).
-the Report of International Transportation of Currency or Monetary Instruments (MIR, IRS form 4790). -the Report of Foreign Bank and Financial Accounts (FBAR, IRS form TD F 90-22.1). |
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CTR (What is it and what act does it have to do with?)
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Currency transaction report. Associated with Bank Secrecy Act.
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When and by who was the BSA amended?
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In 2001, by the Patriot Act.
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The goals of the BSA include
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-Preventing/detecting money laundering and financing of criminal activity.
-Documenting large currency transactions -Improving reporting and aiding in the investigating of financial crimes |
3 Answers
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Minimum requirements a financial institution must meet, for the BSA
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-Internal controls and metrics to ensure compliance
-Independent auditing of compliance -Designation of staff responsible for managing compliance -Staff training for compliance |
4 Answers
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Provision of the BSA: Report to ___ on a ___ any currency transaction exceeding ____.
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-Report to FinCEN on a CTR any transaction larger than %10,000.
-*single transaction or a structured currency transaction |
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Provision of the BSA: Record specific, large ___ purchases between $___ and $____. Purchases exceeding ____ require a ___. Records must be provided when ___.
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record specific, large negotiable instrument purchases. Financial institutions must record single or structured cash purchases of negotiable instruments between $3,000 and $10,000. (Purchases that exceed $10,000 would require a CTR.) These records must be provided to FinCEN upon request.
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Provision of BSA: Report ____ activity and transactions using a ____.
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Report suspicious activity and transactions to FinCEN using a Suspicious Activity Report (SAR).
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BSA provision: For wire transfers?
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record large wire transfers that exceed $3,000, regardless of whether it is the initiating, intermediary or receiving institution. When requested, institutions must provide these records to FinCEN.
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BSA Provision: Financial institutions are prohibited from establishing, maintaing, administering or managing a _____?
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-Foreign Shell Bank (a foreign bank without a physical presence in any country).
-Covered institutions must also ensure that the accounts they maintain for foreign banks are not being used by that foreign bank to indirectly serve any foreign shell bank |
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FBO
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Foreign Banking Organization
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BSA Provision: Financial Institutions must cooperate in the event of a ____.
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money laundering or suspicious activity investigations and any FinCEN requests for information related to such investigations.
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BSA Provision: Must implement a ___ ____ ____.
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Customer Identification Program
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CIP?
What does it require procedures for? |
Customer Identification Program.
-verifying customer identities; -maintaining verification records; -cross-checking customer identities with government lists for known or suspected terrorists or terrorist organizations; -distributing CIP notices to customers; and -working with third-party financial institutions to meet CIP requirements. |
Has to do with a BSA provision.
5 Things |
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Penalties for an individual who violates the BSA:
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- Up to 20 years
-$500,000 in fines -Seizure of personal property, loan collateral, bank accounts or any other assets or involved property |
3 Things
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Penalties for a covered financial institution who violates the BSA:
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-Lose its institution charter
-Be fined up to $1 million -Cease-and-desist order for all of its operations |
3 Things
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Penalties for covered financial institution employee who violates the BSA:
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- Employment termination
-Be barred from the financial services industry -10 years in prison -Up to $500,000 *"Looking the other way" is also a violation |
*Violations could also include those who do what?
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USA PATRIOT ACT stands for?
Date? |
"Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism"
-2001 |
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Purpose of PATRIOT ACT?
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-PREVENT, detect, and prosecute money laundering and terrorist financing
-ENHANCE law enforcement investagatory tools; and the the requirements for, and impose special scrutiny on, high-risk customers, products and geographic locations that may be susceptible to criminal abuse. -IMPOSE requirements on all members of the financial services industry to report suspected money laundering. -STRENGTHEN measures to prevent the use of the U.S. financial system for personal gain by corrupt foreign officials and facilitate repatriation of stolen assets to the citizens of countries to whom such assets belong. |
- 5 basic 'verbs'
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USA PATRIOT ACT - Section 311
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-"Special Measures for Jurisdictions, Financial Institutions or International Transactions of Primary Money Laundering Concern"
- Enhances requirements for correspondent accounts. - (his includes requiring verification and information collection similar to that for domestic customers, as well as establishing guidelines for the opening or maintenance of U.S. correspondent or payable-through accounts (also known as “pass- through” or “pass-by” accounts) for foreign banking institutions.) |
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Correspondent account:
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As defined by Patriot Act: an account established to...
-receive deposits from, or make payments on behalf of, a foreign financial institution; or -handle other financial transactions related to such an institution. |
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Payable-through account
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As defined by US Patriot Act: a checking account, generally marketed to foreign banks, that allows such banks to offer their customers access to the U.S. banking system.
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US Patriot Act: Section 312
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"Special Due Diligence for Correspondent Accounts and Private Banking Accounts:"
- |
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US Patriot Act: Section 313
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"Prohibition on U.S. Correspondent Accounts with Foreign Shell Banks"
- Prohibits and requires financial institutions to ensure they are prohibiting them. |
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US Patriot Act: Section 314
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"Cooperative Efforts to Deter Money Laundering"
- Requires information sharing with law enforcement when requested by FinCEN |
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US Patriot Act: Section 319(b)
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"Bank Records Related to Anti-Money Laundering Programs"
-authorizes the Attorney General or the Secretary of the Treasury to issue a summons or subpoena to any foreign bank that maintains a correspondent account in the United States for records related to such accounts; and -requires the maintenance of records identifying a legal agent for correspondent accounts. |
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US Patriot Act: Section 325
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"Concentration Accounts at Financial Institutions"
-Ensuring that accounts aren't used to disguise the owner of the funds moving through them |
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Concentration Account
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-an internal account established to facilitate the processing and settlement of multiple or individual customer transactions within the bank, usually on the same day.
-(also known as a “special-use,” “suspense” or “collection” account) |
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US Patriot Act: Section 326
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"Verification of Identification"
-.. of customer identities at the time an account is opened |
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US Patriot Act: Section 352
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"Anti-Money Laundering Programs"
-Requires financial institutions to create preventive programs. |
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FinCEN?
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Financial Crimes Enforcement Network
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Government Agencies who Enforce/Prevent money laundering laws and regulations?
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- U.S. Treasury
-FinCEN -The Federal Banking Agencies -OFAC |
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OFAC
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Office of Foreign Assets and Control
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(?) Financial institutions are prohibited from establishing, maintaining, administering or managing a correspondent account in the United States for or on behalf of
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Answer: Foreign shell banks
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(?) Which of the following is required to be reported by the BSA?
1. All currency transactions 2. All mortgage loans exceeding $100,000 3. Currency transactions less than $5,000 4. Currency transactions exceeding $10,000 |
Answer: Currency transactions exceeding $10,000
* Individual OR structured |
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(?) Under the Bank Secrecy Act, a financial institution must file a Suspicious Activity Report (SAR) upon the detection of criminal violations that involve insider abuse
1. in any amount. 2. in an amount over $25,000. 3. in an amount over $10,000. 4. in an amount over $5,000. |
Answer: Any amount
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What is required when a bank suspects that a $7,000 transaction is not typical for a particular customer?
1. CIP 2. AM Program 3. SAR 4. CTR |
Answer: SAR (suspicious activity report)
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(?) With respect to money laundering techniques, which is "integration"?
1. Making three $8,000 transactions at different branches on the same business day into the same account 2. Loan balances quickly reduced by multiple cash payments under reporting thresholds 3. Depositing cash and then using that cash to purchase real estate, followed by using that real estate as collateral on a loan, which is paid back with large cash payments 4. Using negotiable instruments to purchase other negotiable instruments or cash deposits followed by funds transfers in almost the same amount to other accounts |
Answer: 3
(Integration is the process of combining criminal proceeds with legal funds to provide legitimate ownership.) |
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(?) When must a Currency Transaction Report be filed?
(?) How long must a copy be retained by the institution? |
15 days following the day of the transaction, held on file for at least 5 years
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(?)Which government agency is responsible for administering BSA?
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Answer: FinCEN (Financial Crimes Enforcement Network)
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(?) With respect to money laundering techniques, what is "layering"?
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A: The process of separating the criminal proceeds from their criminal origins using financial transactions in one or more accounts
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(?) With respect to money laundering techniques, what is "placement"?
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Answer: The process of introducing unlawful proceeds into the financial system
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(?) Bellamy Bank has noted some suspicious activity in customer John James' account, including opening accounts in higher-risk locations, transactions involving foreign currency exchanges followed by funds transfers to higher-risk locations, and use of business accounts to funnel money to a small number of foreign beneficiaries. All these are red flags that might indicate...
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A: Terrorist Financing Activity
(* A reason that it might be terrorist funding, and not just money laundering, is the use of foreign currency, and transfers to high risk locations) |
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An ARM's interest rate is changed periodically, according to changes in the ___.
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Index rate
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A borrower who obtains a loan on the bases that he will be an owner-occupent must intend to live there for at least how long?
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12 months
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For purposes of completing FNMA form 1003, a first-time homebuyer is a person who is purchasing security property in which he will reside and who had no ownership interest (sole or joint) in a residential property for how long previous to purchasing the property?
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3 years
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In appraisals, adjustments are made to what?
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The comparable's (NOT the subject property)
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Interacts directly with borrower, actually makes the loans themselves.
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Retail lender
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Funds loans applied for through mortgage brokers
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Wholesale lender
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Provides for a fixed amount repay about over a fixed period
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Closed-end financing
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Borrower may repay and reborrow up to credit limit
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Open-ended financing
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Interest rate and payments don't change for set term
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Fixed-rate mortgage
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No amortization during loan terms; balloon payment.
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Interest-only mortgage
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HECM's mortgage insurance setup?
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-2 percent UFMIP
-1.25% annual MIP OR HECM Saver for smaller amounts: -Initial MIP is .01% of the maximum claim amount (i.e., appraisal value, national mortgage limit or sales price) and is collected at loan closing. -Annual MIP is 1.25%, as with standard HECM's |
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Loan origination fee on a HECM mortgage?
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-limit of 2% of the first $200,000
-Plus 1% of the value over $200,000 |
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HECM Saver
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-An initial MIP option for the purpose of lowering up-front closing costs for mortgagors who want to borrow a smaller amount than what would be available with a HECM Standard.
-Initial MIP is .01% of the maximum claim amount (i.e., appraisal value, national mortgage limit or sales price) and is collected at loan closing. -Annual MIP is 1.25%, as with standard HECM's |
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HECM Counseling
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All owners shown on the property deed (or legal representative in cases involving documented lack of competency) and a nonborrowing spouse must personally receive HECM counseling prior to entering a HECM contract.
-MUST RECEIVE A COUNSELING CERTIFICATE |
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HECM Counseling Ticket must contain
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- The counselor
- all owners shown on the property deed (or legal representative in cases involving documented lack of competency); and - the nonborrowing spouse. |
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How many HECM HUD-approved counseling agencies must a lender provide to the borrower?
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9:
- 5 within the local area and/or state of the borrower -1 within reasonable driving distance for the purpose of face-to-face counseling, and -national intermediaries awarded HECM counseling grant funds by HUD. |
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