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NMLS EXAM STUDY GUIDE
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NMLS EXAM STUDY GUIDE
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NMLS EXAM STUDY GUIDEAcceleration Clause - Answers -Allows lenders to demand payment in full if the
borrower defaults on the loan (can be construed as predatory lending)
Alienation Clause (Due on Sale Clause) - Answers -Says you must repay your
mortgage if you sell your home to a new owner (loan is not assumable)
Appraiser Independance Requirements replaced HVCC - Answers -home valuation
code of conduct
Mortgage Loan Originator Definition - Answers -Someone who for compensation or gain
or expectation thereof: takes a residential mortgage loan application or offers or
negotiates terms of a residential mortgage loan
Independent Contractor - Answers -May not engage in residential mortgage loan
activities as a loan processor or underwriter unless state licensed
Unique Identifier - Answers -*Required by the SAFE Act for all state licensed MLO's or
federally registered MLO's employed by a depository institution regulated by a federal
banking agency or regulated by the Farm Credit Admin.
*Required on all mktg materials, applications, required disclosures & business cards
FINRA Financial Industry Regulatory Authority - Answers -Built and maintains the online
NMLS system
RESPA (X) Real Estate Settlement Procedures Act 0f 1974 - Answers -*Enforced by
HUD
*Intended to help consumers become better shoppers for settlement services and
eliminate unnecessary increases in the costs of certain settlement services
MLO License Not Required - Answers -*Purely administrative or clerical tasks for a
licensee
*Only performing real estate brokerage work
*Time share credit work
*Loan processor or underwriter who does not represent to the public that they perform
MLO work
Federal Banking Agencies - Answers -The Board of Gov.'s of the Fed. Reserve System,
Comptroller of the Currency, Dir. of the Office of Thrift Supervision, National Credit
Union Administration and the FDIC.
Depository Institution - Answers -Any bank or savings assoc. including credit union
,Non-Traditional Mortgage Product - Answers -Any mortgage product other than a 30 yr
fixed rate
Residential Mortgage Loan - Answers -Any loan primarily for personal, family or
household use that is secured by a mortgage, deed of trust or other equivalent
consensual security interest on a dwelling or residential real estate upon which a
dwelling is constructed or is intended to be constructed a dwelling
MLO Licensing Requirements - Answers -* Submit to a background check
*Provide personal history
*Provide authorization for a credit report
*Never had MLO license revoked
*No conviction or pled nolo contendere for a felony during past 7 yrs preceeding date of
application
*No fraud, breach of trust, or money laundering ever
*A pardon is not a conviction
MLO personal financial responsibility - Answers -No:
*Current outstanding judgments
*Current outstanding tax liens
*Foreclosures in the past 3 years
*Pattern of seriously delinquent accounts in past 3 yrs
MLO pre-licensing education - Answers -Federal Law & regulation (3 hours)
Ethics (3 hours)
Nontraditional mortgage products (2 hours)
Electives (12 hours)
MLO Exam - Answers -Federal Mortgage related laws 35%
General Mortgage knowledge 25%
MLO activities 25%
Ethics 15%
Fail 3 times then must wait 6 months
MLO License renewal requirements - Answers -Federal Law & regulation (3 hours)
Ethics (2 hours)
Nontraditional mortgage products (2 hours)
Electives (1 hours)
Due on Demand Clause - Answers -(Considered a predatory practice) The lender can
demand repayment of the loan in full at anytime for any reason
HOEPA - Answers -Home Ownership and Equity Protection Act (Reg Z Sec 32)
Amends TILA
,Nonrecourse Agreement - Answers -Loan agreement under which the collateral
securing a loan is the unltimate source of repayment, and the lender cannot hold the
borrower personably liable in the event of default. Lender can seize (and sell) the
collateral but cannot seize non-pledged asset or property.
ReConveyance - Answers -Method in which a lein is removed from a property when
payment is made in full.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 - Answers -
Purpose is to promote the financial stability of US by improving accountability and
transparency in the financial system. Created the Consumer Financial Protection
Bureau. Changed MLO compensation rules
Housing and Economic Recovery Act (HERA) of 2008 - Answers -Signed by GW Bush.
Est. national minimum standards for mortgage training, including prelicensing and
annual continuing education. Also, under the SAFE Act, all MLO's must beither state-
licensed or federally registered.
SAFE Act - Secure and Fair Enforcement for Mortgage Licensing Act: part of HERA of
2008 - Answers -Requires all states to implement a MLO licensing process that meets
standards through the Nationwide Mortgage Lending System & Registry (NMLS) In CA
that compliance act is called SB - 36.
SAFE Act Objectives - Answers -*Provide uniform license applications and reporting
requirements
*Provide licensing database
*Improve flow of info to and between regulators
*Provide increased accountability and tracking of MLO's
*Streamline the licensing process
*Enhance consumer protection and support anti-fraud measures
*Provide consumers info about MLO's
*Require MLO's to act in "the best interest of the client"
*Facilitate responsible behavior in the subprime mkt
*Facilitate the collection and disbursement of consumer complaints
NMLS - Answers -Started in 2004 by the Conference of State Bank Supervisors (CSBS)
and the American Assoc. of Residential Mortgage Regulators (AARMR) They wrote
model legislation reviewed by HUD for states to follow
MLO Compensation Rules - Answers -Dodd-Frank Compensation Changes:
*Compensation can't be based different cause it is a different kind of loan
*Comp. can't be based on loan terms such as interest rate, apr or LTV
*Can't get comp. directly from consumer and another source on the same loan
*no pricing concessions
*no "point banks"
*MLO can't be penalized for GFE violations
, *Can't base comp on terms of previous transaction
Safe Harbor Loan - Answers -If the consumer is presented with loan options for each
type loan, including:
*Lowest interest rate
*Lowest total for origination
*Lowest interest rate without certain risky features
The MLO:
*Obtains options from creditors regularly worked with
*Believes in good faith the consumer qualifies
MLO Compensation Defined - Answers -*Salary, commission, bonuses, awards or
prizes
*Payments from loan proceeds are considered payments directly from consumer.
*Yield spread premium (YSP) according to RESPA is not considered payment from the
borrower
*Transactions are described as all closed-end consumer loans secured by 1 to 4 unit
residential dwelling, closed end mortgages or reverse mortgages.
MLO Compensation not allowed - Answers -*Any comp. that is based on loan terms or
conditions such as interest rate, APR, loan-to-value LTV
*Comp. received directly from the consumer and any other source for the same loan
MLO Comp can be based on these triggers - Answers -*Overall loan volume
*Long-term loan performance
*Hourly basis
*Existing/new customer
*Flat fee
*Pull-through rate ie. quality of loan files
*Legitimate business expenses
*Long-term loan performance
*Different arrangement for each MLO
RESPA - Transactions Covered - Answers -*Loans secured with a mortgage placed on
1 to 4 family residential property
*Includes most purchase loans, assumptions, refinances, property improvement loans
and equity lines of credit
*Amended in 1994 to include subordinate lien loans
RESPA - Transactions not Covered - Answers -*All cash sale
*Sale where the individual seller takes back the mortgage
*Rental property transaction
*Property of 25 acres or more
*Vacant or unimproved property (unless a dwelling will be constructed or moved on
within 2 yrs.
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