When was the Housing Economic Recovery Act enacted?

July 30, 2008

What was the purpose of the Housing Economic Recovery Act?

To facilitate the recover and revitilzation of the United States' failing residential loan housing market.

What does HERA stand for?

Housing Economic Recovery Act

What does the SAFE act stand for?

The Secure and Fair Enforcement of Mortgage Licensing Act.

When was the SAFE act enacted?

2008

What is the SAFE act a component of?

HERA

What are the two primary focuses of the SAFE act?

1) Reducing fraud 2) Enhancing consumer protections within the mortgage lending industry.

What was the system of the SAFE act designed to do?

Streamline the process of licensing mortgage professionals who do business in multiple jurisdictions.

When did the SAFE Act require all states to have loan originator licensing and registration systems placed by?

August 1, 2009. (August 1, 2010 for legislatures meeting biennially).

What is the NMLS operated by?

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.

Who will intervene if states do not meet the SAFE Act's requirements for licensing and registration?

The Department of Housing and Urban Development... the will implement a loan originator licensing system for the state.

Who is considered a loan originator? (3)

Those who take residential mortgage loan applications, assist borrowers to obtain or apply for mortgage loans, and those who negotiate residential mortgage loan terms.

Who is not considered a mortgage loan originator?

People who perform only clerical or administrative tasks in connection with loan origination. (i.e. underwriters)

When did the CA Dept. of Corporations begin using the NMLS?

January 4, 2010

What Title dictated that each state adopt mortgage licensing legislation?

Title V of HERA

In California, responsibility for MLO licensure is divided between what two entities?

Dept. of Real Estate, and the Department of Corporations/Financial Services Division.

What five sections make up the California State Law Study Guide, and how much is each section worth on the exam?

1. California Dept. of Corps and CA Dept. of Real Estate (5%) 2. California Law and Regulation Definitions (10%) 3. California License Law and Regulation (25%) 4. Compliance (50%) 5. Disciplinary Action (10%)

What does CRMLA stand for?

The California Residential Mortgage Lending Act

When was the CRMLA enacted? When did it become effective?

1994 and 1996

What was the CRMLA designed to do?

Regulate the originating and servicing of loans and mortgage banking activities.

What does the CRMLA authorize licensees to do? (6)

1. Make federally related mortgage loans 2. Make loans to finance the construction of a home. 3. Provide contract underwriting services for institutional lenders. 4. Sell the loans to institutional investors. 5. Service loans 6. Provide brokerage services to borrowers.

What was passed to comply with the SAFE Act and participate in the NMLS?

Senate Bill 36 and Assembly Bill 34

What were the purposes of Senate Bill 36 and Assembly Bill 34?

They changed state licensing, education, examination, and qualification requirements to meet those now mandated by HERA and its Secure and Fair Enforcement of Mortgage Licensing Act of 2008.

What government agencies share the responsibility for most real estate and financial services? (4)

Dept of Real Estate, Office of Real Estate Appraisers, Dept of Corporations, Dept of Financial Institutions.

Who do the Department of Corporations/Financial Services Division license and regulate?

Mortgage brokers, lenders and servicers, and MLOs.

What does CFLC stand for?

California Finance Lenders Law.

What is the DRE responsible for?

The administration and enforcement of Real Estate Law and Subdivided Lands Law.

Who are licensees considered to be under the DRE?

Real estate brokers and sales persons, prepaid rental listing services, and mineral, oil, and gas brokers.

What is the DOC/Financial Services Division responsible for?

The license and regulate mortgage brokers, lenders and servicers, and MLOs.

What does "Commissioner" refer to?

Real Estate Commissioner

Section II: California Law and Regulation Definitions (for the previous card as well)

n/a

What does "Department" mean?

Department of Real Estate in the Business and Transportation Agency.

What other terms can be used for the Department of Real Estate?

"division," "State Real Estate Division," or "Real Estate Division"

What does "Person" include?

corporation, company, and firm.

What does "Licensee" refer to?

A person, whether broker or salesman, licensed under any provisions of this part.

What does the term "advance fee" refer to?

a fee, regardless of form, claimed, demanded, charged, received, or collected by a licensee from a principal before fully completing each and every service the licensee contracted to perform. (basically an upfront fee)

What can a mortgage also be called?

a "Trust deed" or "deed of trust"

What is a "Real property sales contract"

An agreement where one party agrees to convey title to real property upon the satisfaction of specified conditions set forth in the contract...

How is "advertising" defined?

Any written or printed communication or oral communication made in accordance with a text or outline that has been reduced to written form, which is published for the purpose of inducing persons to purchase or use a product or service.

What must advertising include?

The NMLS #

What is an "annual audit"?

It is a certified audit of the licensee's books, records, and systems of internal control performed by an independent certified public accountant in accordance with generally accepted accounting principles and generally accepted auditing standards.

What percentage is considered "control"

10 percent.

What are considered "Federal Banking Agencies" (5)

1) the Board of Governors of the Fed 2) The Comptroller of the Currency 3) the Director of the Office of Thrift Supervision 4) the National Credit Union Administration 5) the FDIC

What does "institutional investor" mean?

1. U.S. and its territories and its agencies. (for example Fannie and Freddie). 2. Any bank, credit union, etc. 3. Many other things including corporations, people, etc.

What is an "institutional lender"

1) U.S. its cities and territories and agencies (Fannie and Freddie) 2) Any bank, credit union, etc.

What defines a "lender"

a person that 1) is an approved lender of Federal Housing Administration, VA, Farmers Home Administration (USDA), Ginnie, Fannie, and Freddie 2) directly makes mortgage loans 3) makes the credit decision in the loan transactions.

What does "makes or making residential mortgage loans" or "mortgage lending" mean?

Processing, underwriting, or as a lender using or advancing ones own funds, or making a commitment to advance one's own funds, to a loan applicant for a residential mortgage loan.

What is a mortgage loan, residential mortgage loan, or home mortgage loan limited to?

a one to four family dwelling.

What does "mortgage servicer" or "residential mortgage loan servicer" mean?

1) Approved by FHA, VA, USDA, Ginnie, Fannie, Freddie 2) Directly services or offers to service mortgage loans (basically someone who collects payments)

What does "own funds" mean?

1) cash, corporate capital, or warehouse credit lines at commercial banks, savings banks and loan associations, industrial loan companies, or other sources that are liability items on a lender's financial statements, whether secured or unsecured 2) a lender's affiliate's cash, corporate capital, or warehouse credit lines at commercial banks or other sources that are liability items on the affiliates financial statements.

What does "own funds" not include?

funds provided by a third party to fund a loan on condition that the third party will subsequently purchase.

What does "person" include?

A natural person a sole prop a corp a partnership an LLC, an association a trust a joint venture an unincorporated org. a joint stock company a govt or political subdivision of a govt. any other entity.

What does "service" or "servicing" mean?

Receiving more than three installment payments of principal, interest, or other amounts.

What does "sell" include?

Actual exchange, offer to sell, or solicitation to sell.

What can an NMLS# also be called?

A unique identifier.

What does "nontraditional mortgage product" mean?

Anything other than a 30-year fixed rate mortgage.

What does "mortgage loan originator" mean?

an individual who, for compensation of gain, or in expectation of compensation or gain, takes a residential mortgage loan app or offers or negotiates terms of a residential mortgage loan.

What does MLO not include? (4)

1) An individual who performs admin or clerical tasks. 2) A loan modification specialist. 3) People who extend credit relating to timeshare plans 4) An individual licensed as a MLO pursuant to Article 2.1 of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code and the SAFE Act.

"Registered mortgage loan originator" means any individual who is all of the following: (3)

1. Meets the definition of MLO 2. is an employee of a depository institution, a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency 3. is registered with, and maintains a unique identifier through the NMLS

What is the difference between a lender and a broker?

Lender makes and funds loans. Broker negotiates terms with the bank.

What does "finance lender" include?

Any person who is engaged in the business of making consumer loans or making commercial loans. (they lend their own money)

What do "finance lender" and "broker" not include?

basically, employees.

what does "branch office license" mean?

A license to engage in business at a location other than the location identified in an application.

What do "charges" include?

aggregate interest, fees, bonuses, commissions, brokerage, discounts, expenses, and other forms of costs charged, contracted for, or received by a licensee or any other person in connection with the investigating, arranging, negotiating, procuring, gauranteeing, making, servicing, collecting, and enforcing of a loan or forbearance of money, credit, goods, or things in action or any other service rendered.

What do charges not include?

1) Commissions received as a licensed insurance agent. 2) Court costs, excluding attorney's fees 3) Fees paid to a licensee for the privilege of participating in an open-end credit program. 4) other stuff.

Consumer loan means?

A loan primarily for personal, family, or household purposes with a principal amount of less than five thousand dollars.

What does "commercial loan" mean?

$5,000 or more. Use is primarily for other than personal, family, or household purposes.

What does "Fair Market Value" mean?

the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale.

What does "housing accommodation" include?

Any improved or unimproved real property that 1) is used or is intended to be used as a residence. 2) is or will be occupied by the owner, 3) contains not more than four dwelling units.

Section III: California License Law and Regulation

25% of the test

Mortgage loan originators in CA may be licensed in three different ways. What are they?

1) Companies holding a CA Finance Lenders Law license that make or broker loans secured by residential real estate. 2) Mortgage bankers licensed under the CRMLA 3) Real Estate Licensees acting as mortgage loan originators with a MLO endorsement from the DRE.

When applying through the NMLS, who is referred to as a company?

Corps and real estate brokers working as sole proprietors.

When applying through NMLS who is referred to as individuals?

brokers, broker-associates, broker/officers, and salespersons.

What is required to obtain an individual license?

1) Satisfaction of all education and exam requirements. 2) Background check. 3) Credit history

What is the initial application fee for mortgage loan originators applying for their licenses after 3/21/2010?

$100 plus a $30 NLMS system fee.

If you are no longer employed by a licensed real estate broker, what happens with your license?

You are no longer officially licensed until you find a new employer.

What entities are exempt from CRMLA licensing requirements? (12)

1) Banks, trust companies, insurance comps, and industrial loan comps. 2) Federally chartered savings and loan associations, savings banks, and federal credit unions. 3) Savings and loan associations, savings banks, and credit unions authorized to do business in CA. 4)Persons engaged solely in business, commercial, or agricultural mortgage lending. 5) Wholly owned service corps of savings and loan associations or savings banks. 6) People using their own money to make loans. 7) Federal, state, and municipal gots. 8) Pension plans making loans to their participants. 9) Persons acting in a fiduciary capacity conferred by the authority of a court. 10) Licensed CA real estate brokers 11) CA finance lenders 12) Trustees in a foreclosure proceeding.

When does a licensee applying for renewal need to submit an application?

Not more than 90 days before the expiration of the license to be renewed.

How many days do you have to notify the Department of any changes in license information or status?

5

What broker addresses need to be on file with the commissioner?

Address of principal place of business, address of each branch business office, current mailing address if different than business address.

When does the commissioner need to be noticed of an address change?

The next business day.

How much is a license fee for the real estate broker license under Section 10210 of the Code?

$300.

What is the minimum age for a real estate license?

18

Upon the termination of employment of the salesperson, how many business days does the employer have to return the license?

3

What must an applicant do to apply for a MLO license ENDORSEMENT?

Submit his or her fingerprints to the NMLS.

The applicant may be precluded from obtaining a mortgage loan originator license endorsement where his or her personal history includes what two things?

1) any liens or judgments for fraud, misrepresentation, dishonest dealing, and/or mishandling of trust funds 2) other liens, judgments, or financial professional conditions that indicate a pattern of dishonesty on the part of the applicant.

The designated officer of a corporation is responsible for maintaining and updating background information for which following individuals associated with a corporation? (4)

1) Directors 2) officers 3) subordinate officers with the responsibility of forming policy of the corp, and 4) all natural persons owning and controlling more than 10% of the corps shares.

When must endorsement renewal requirements be filed?

Between November 1 and December 31.

If a person fails to file necessary requirements to renew an endorsement, when may hey request reinstatement by?

March 1 of the following year.

Prior to businesses obtaining a license, each applicant must demonstrate the following: (3)

Approval from FHA, VA, USDA, Ginnie, Fannie, or Freddie as a lender and/or servicer A tangible net worth of at least 250K A surety bond in the amount of 50K

A MLO endorsement may be added to the following licenses: (4)

Real Estate Broker (Broker-Associate) Real Estate Corp Real Estate Salesperson Real Estate Branch

What is the minimum net worth for entities operating as a finance lender or broker who do not employ mortgage loan originators?

$25,000

The SAFE Act requires that mortgage loan originator applicants demonstrate _________ _________, ________, and _______ ________ such as to command the confidence of the community to warrant a determination that applicants will operate honestly, fairly, and effectively.

financial responsibility, character, general fitness.

How much is the criminal background check charge?

$39

How many hours of NMLS approved, pre-licensing education must be completed by all MLO applicants?

20

The 20 hours of education must include at least: (3)

3 hours of instruction on relevant federal law and regulations 3 hours of ethics 2 hours of training on lending standards for non-traditional mortgages.

To pass, applicants: (3)

must achieve a score of 75% or greater on both components. may take the test 3 consecutive times 30 days apart must wait at least six months if they do not pass on the third attempt.

How much are the tests?

National is $92. Each state is $69.

How many questions must be answered correctly on each test?

68 for national, 30 for state.

What are the 3 basic criteria for denying an application for a mortgage loan originator?

1) Prior revocation of a mortgage loan originator's license. 2) Criminal convictions 3) Unsatisfactory character or financial fitness.

What are the major crimes that warrant consideration of denial for a license? (11)

1. Fraud 2. Counterfeiting, forging 3. Willing nonpayment of taxes 4. Bribery 5. Sexually related conduct 6. Willfully violating a provision of Division 4 of the Business Professions Code of CA. 7. Willfully violating a requirement that a license be obtained from a duly constituted public authority. 8. Blackmail 9. Contempt of court 10. Repeated willful disregard of the law. 11. Two or more alcohol or drug convictions.

If any felony is committed within __ years, an applicant will be denied.

7... except for fraud.

What are the continuing education requirements for MLOs?

8 hours a year. 3 hours on relevant federal law and regulations 2 hours of ethics 2 hours of lending standards in non-traditional mortgage markets. 1 hour of electives

When do initial MLO endorsements which are approved for issuance in 2010 expire?

12/31/2011

What form do licensees use to notice the DOC/FSD of changes in their business situation? How long do they have?

MU4, 5 business days.

Section IV: Compliance

HALF of the CA test.

When in doubt, remember _______ & ________ in all mortgage lending transactions is critical.

integrity, transparency

The compliance section can be summarized in what five simple rules for the licensee?

1) Never intentionally misrepresent or conceal a material fact, term, or condition of the transaction. 2) Always use due diligence and make reasonable efforts to procure a mortgage loan on behalf of the borrower. 3) Always disburse funds in accordance with a written commitment to make a mortgage loan. 4) Never delay the closing of a mortgage loan for the purpose of increasing the interest rate or any other cost or fee. 5) Do not collect any mortgage broker fees before a conditional commitment is obtained from the lender by the mortgage broker.

What must MLO's know when it comes to non-traditional mortgage products? (4)

1) management practices 2) underwriting standards 3) control systems 4) consumer protection practices.

What do risk management practices include?

Giving primary consideration to the borrower's ability to repay the mortgage loan.

What does Section 10241(a) state about costs and expenses of making the loan.

No costs which have not been paid, incurred, or reasonably earned by the loan broker shall be charged to the borrower.

What is the NACCA

National Association of Consumer Credit Administrators

What Risk Management Practices must a real estate broker adhere to? (3)

Consider a borrowers ability to repay the mortgage loan. Ensure that a loan results in an identifiable benefit to the borrower. Fully disclose the true nature of the mortgage loan obligation.

Give an example of non-compliance.

A couple wants a $30,000 fixed rate loan for a home they say they will live in permanently. The MLO steers the couple to a variable rate loan with a balloon payment because he will get higher commission.

How long a brokers required to obtain an approval on record?

3 years.

What does the term "negotiation" as used in section 10133.1(c) of the Code NOT include? (4)

Any activities described as follows: 1. Preparing and designing advertising relating to loan transactions. 2. Distributing, circulating, using, or publishing preprinted brochures, flyers, etc. 3. Providing written factual info about loan terms. A non-licensed person may not provide counseling advice. 4. Notifying a borrower of the info needed in order to complete a loan app without providing advice. 5. 11 more non-significant options.

Under CRMLA, what is the application fee for a company?

$1,000

What is the purpose of the Approved Borrower Disclosure Statement?

aiding real estate licensees in providing the disclosure of material information to prospective borrowers in a uniform and effective manner.

What are the Approved Borrower Disclosure Statement forms?

RE 882 and RE 883

What is the purpose of the Approved Borrower Disclosure Statement for Nontraditional and Subprime Mortgage products?

Aid real estate licensees in providing the disclosure of material information in a uniform manner to prospective borrowers.

What does a "nontraditional mortgage product" not include? (aside from fixed rate loans)

reverse mortgages and helocs.

California real estate and mortgage brokers may _________ submit advertising materials for the DRE approval.

voluntarily

The use of the words ________, ________, ________, ________, ________, ________, or other similar words or phrases that describe or characterize the security of lenders' or purchasers' funds will not be approved for publication by the commish.

guaranteed, insured, bonded, sure, safe, sound

The use of terms in the _______ or ________ degree are not allowed for advertising. (i.e. saying "we have the best rates in town)

comparative, superlative

If a specific installment in repayment of a loan (i.e. 30 years) is mentioned in an advertisement, what else needs to be disclosed?

1. Principal amount 2. Simple annual interest rate 3. APR 4. Number, amount, and period of payments scheduled to date of maturity. 5. Balance due at maturity if not fully amortized.

All advertising materials that describe services requiring licensure must also include one of what two things?

NMLS ID# or eight digit real estate license ID#

What materials are considered to be first point of contact with consumers?

Business cards, stationary, websites, promotional or advertising fliers, brochures, email and regular mail, leaflets, and any marketing material designed to solicit the creation of a professional relationship.

What sections of the Code are administered when the commissioner takes such action as is appropriate to prevent or halt the publication of advertising that is false.

Section 10232.1 and 10235 of the Code

What happens when sections 10232.1 and 10235 of the Code are administered?

What sections of the Code are administered when the commissioner takes such action as is appropriate to prevent or halt the publication of advertising that is false.

If an adjustable rate, interest only or payment-option loan is advertised, what other information needs to be given?

1. Principal amount 2. Term of loan 3. Initial interest rate 4. Number of months the initial rate will be in affect. 5. Fully-indexed interest rate. 6. Maximum interest rate. 7. An explanation of the difference between the payment rate, initial interest rate and fully indexed rate. 8. APR 9. How often the interest rate and payments can change. 10. Maximum periodic change in the interest rate and payments. 11. Number of months and percentage of original loan amount after which minimum payments will not be accepted. 12. Monthly payment based on the maximum interest rate. 13. Statement of prepayment penalty, if necessary. 14. Statement of balloon payment, if necessary.

What solicitation materials that are intended to be the first point of contact with consumer must disclose a license ID#?

1. Business cards. 2. Stationery 3. Websites owned, controlled, and/or maintained by the soliciting real estate licensee.

How long do brokers who are responsible for trust funk bank accounts have to place funds into a neutral escrow depository?

3 days.

What must go into the trust account?

Appraisal deposits among other things.

What must the annual report for a trust fund bank account include?

1) A balance sheet of trust funds held by the broker as of the last day of the fiscal year. 2) Statements of receipts and disbursements of trust funds and changes in cash for the fiscal year. 3) A schedule of trust fund liability balances showing each open beneficiary account in connection with trust funds received in carrying on the activities described.