This series of articles will take you through a review of new and changing federal mortgage legislation and developments. Designed with the desire to keep consumers and practitioners abreast of the latest changes in the mortgage industry, we strive to maintain the highest level of control of our businesses and professional success.
Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974 in order to provide protection for consumers throughout the loan origination process, during closing, and after closing. RESPA assists consumers in selecting appropriate settlement services, as well as eliminating fraudulent costs associated with settlement services such as kickbacks and referral fees. RESPA deals with loans secured with mortgages on one-to four-family residential properties including most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit.
In order to maintain a firm standard of consumer protection, new RESPA regulations were published November 17, 2008, and the last of the proposed changes took effect January 1, 2010. Exposure and publicity regarding these changes has settled down so we will take a look at the shake-out in Recent RESPA Revisions and New MLO Responsibilities. This comprehensive section explains the most pertinent RESPA changes impacting the operations of the Mortgage Loan Originator (MLO). The updated statutes are located in Title 24, Section 3500 of the Code of Federal Regulations, and can be located online.
Wall Street Reform and Consumer Financial Protection Act of 2010 (“the Dodd-Frank Act“)
The Dodd-Frank Act has become a hot topic for the economy, ethics and compliance. In our section Ethical Dilemmas and their Legislative Impact on Consumer Protection, you will learn about this recent legislation and what it means for the mortgage lending business. It reviews the Final Rule on loan originator compensation, recent changes to the Home Ownership and Equity Protection Act and the new federal Bureau of Consumer Financial Protection. Ethical Dilemmas and their Legislative Impact on Consumer Protection also addresses the topic of mortgage fraud, providing information for mortgage professionals on detecting and avoiding fraudulent loan transactions.
The Redefining of Nontraditional Mortgage Products touches on the definition of nontraditional mortgage products, released in the S.A.F.E. Act of 2008. You will take a look at the marketplace using the mindset framed by the legislation and the more broad definition. It offers a review of traditional and nontraditional mortgage products as well as recent updates to FHA.
Consumer privacy is an issue with a large, supportive following. Privacy concerns are rampant in the mortgage industry with the collection and distribution of personal financial data. In the article A Borrower’s Right to Privacy, we review privacy requirements, ethics and compliance throughout each stage of the loan origination process including solicitations, completion and processing of loan applications, settlement and servicing of loans and repayment of loans.
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”)
As originally enacted, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), was passed on July 30, 2008. The new federal law gave states one year to pass legislation requiring the licensing of mortgage loan originators according to national standards and the participation of state agencies on the Nationwide Mortgage Licensing System and Registry (NMLS). The SAFE Act is designed to enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan.
Mortgage loan originators who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration, are registered. All other mortgage loan originators are licensed by the states. The SAFE Act requires state-licensed MLOs to pass a written qualified test, to complete pre-licensing education courses, and to take annual continuing education courses. The SAFE Act also requires all MLOs to submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check; and state-licensed MLOs to provide authorization for NMLS to obtain an independent credit report. The Agencies published a final rule regarding the registration requirements in July 2010.
The Wall Street Reform and Consumer Financial Protection Act of 2010 (“the Dodd-Frank Act“) transferred the authority to develop and maintain the Federal Registry from the Agencies to the Consumer Financial Protection Bureau (CFPB). The SAFE Act statute requires individual mortgage loan originators employed by “Agency-regulated” institutions to be registered with the Nationwide Mortgage Licensing System and Registry (Federal Registry), a database established previously by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the States.
Continuing Education (CE) is mandated for licensees to be aware of the new and changing federal mortgage legislation, compliance and developments. CE will keep students abreast of the latest changes in the mortgage industry, helping to maintain the highest level of ethics and control of their business and professional success.
This review meets the 8 Hour continuing education requirements for loan originators wanting to renew their license to originate loans. Successful completion of this continuing education course should result in proficiency in the following learning objectives:
- Review the requirements of RESPA and their impact on business activities of originators.
- Investigate the Good Faith Estimate and HUD-1 section-by-section.
- Consider a number of discussion scenarios and case studies related to RESPA compliance.
- Review the Final Rule on loan originator compensation issued by the Board of Governors of the Federal Reserve.
- Explore how the Final Rule affects loan origination activities on a day-to-day basis.
- Consider the requirements of federal legislation requiring determination of a borrower’s ability to repay a loan
- Study updates to the Home Ownership and Equity Protection Act (HOEPA) and discover how the Act now covers an expanded number of mortgage loans
- Learn about the new federal Bureau of Consumer Financial Protection
- Discuss the harm that fraud causes the mortgage industry
- Investigate the common types of mortgage fraud and methods mortgage loan originators can employ to identify and avoid fraud
- Review the revised definition of nontraditional mortgage products
- Examine the history of nontraditional mortgage products, including the boom in the subprime market
- Compare and contrast traditional and nontraditional mortgage products
- Study the various types and components of adjustable-rate mortgages
- Explore the basics of securitization and the role of the secondary market
- Take a quick look into government loan programs
- Review the privacy expectations in several aspects of mortgage transactions including:
- Completion and processing of loan applications
- Settlement and servicing of loans
- Repayment of loan
- Consider the facts of a fictional scenario as they relate to privacy requirements in the mortgage industry