Texas Mortgage Laws

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Texas Mortgage Laws
2013-05-22 17:38:13
texas mortgage law

Flash cards for Texas Mortgage Law
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  1. Two agencies with oversight responsibilities related to the mortgage industry
    The Texas Department of Savings and Mortgage Lending (SML)

    Texas Office of Consumer Credit Commissioner (OCCC)
  2. Who oversees SML and OCCC?
    The Finance Commission of Texas
  3. Who is the Head of the Department?
    The Commissioner
  4. What is the Mortgage Industry Advisory Committee?
    Made up of 6 members, this Committee assists the Commissioner in regulation of mortgage professionals.
  5. The Texas Department of Savings and Mortgage Lending (SML)
    • Oversees:
    • -Mortgage Banker Registration
    • -Mortgage Company License
    • -Financial Services Company Registration

  6. Texas Office of Consumer Credit Commissioner (OCCC)
    -Regulates the credit industry and educates consumers/creditors

    "thereby producing a fair, lawful, and healthy credit environment for social and economic prosperity in Texas."
  7. The OCCC regulates __________.
    Consumer credit transactions and interest rates in Texas.
  8. The OCCC's primary task is _____________.
    To license and examine finance companies, home equity and junior lien mortgage lenders, payday lenders, signature loan companies, and pawnshops.
  9. The OCCC promotes _______________.
    The highest principles of professional conduct, ethis, and sensitivity to cultural diversity issues.
  10. The Commissioner is authorized to do the following:
    • -Order restitution
    • -Issue cease and desist orders
    • -Impose administrative penalties
  11. The Department may not place limits on any of the following:
    • -The duration or size of an advertisement
    • -The use of trade names in advertisments
    • -The medium a company chooses to use for an advertisment
    • -The appearance or voice of a person that is used in advertising
  12. Texas SAFE Mortgage Licensing Act
    • Requires national registration of all Residential Mortgage Loan Originators (RMLOs)
    • -For 1st and 2nd mortgage lending

    • Requires licensees to obtain a license from the OCCC
    • -For second mortgage lending only
  13. The activities that require licensure include:
    • -Giving advice to prospective borrowers concerning loan types, rates, costs, and payments.
    • -Giving advice about the maximum mortgage a prospective borrower can afford
    • -Making the decision of what lender or investor the loan will be submitted to
    • -Issuing or signing prequalification or preapproval letters
    • -Providing, discussing, or explaining required disclosures
  14. A mortgage broker must __________.
    maintain a physical location in the state of Texas in order to conduct mortgage related activity.

    Known as "brick and mortar."
  15. Mortgage Broker Licensing Act (MBLA)
    Persons required to be licensed are:

    • -Mortgage brokers (mortgage company)
    • -Residential mortgage loan officers
  16. Who is exempt from licensure under MBLA?
    • Non-profit institutions
    • Depository institutions
    • Employees of exempt entities
    • Persons making 5 or less loans within 12 consecutive months
    • A person who does not regularly engage in mortgage bussiness
    • "Exclusive Agents" - conduct business for their specific registered financial services company.
  17. Mortgage Banker Registration Act (MBRA)
    Requires a person to be registered as a MB prior to conducting mortgage business, unless they are exempt.
  18. Who is exempt from registration as a mortgage banker?
    • A licensed consumer lender
    • A person licensed as a mortgage broker under the MLBA
    • A governmental agency or employee that act within the scope of their employment
    • A federally insured bank, credit union, Farm Credit System Institution, or any of their subsidiaries
  19. Mortgage banker
    A person that makes a mortgage loan, offers, or negotiates terms of a residential mortgage loan from the person's own funds. This is a lender.
  20. Mortgage broker
    A person that receives an application for the purpose of making a mortgage loan with their own funds or funds from another.
  21. Mortgage loan company
    A person that engages in the business of residential mortgage loan origination on real property in Texas.
  22. Residential Mortgage Loan Originator (RMLO)
    A natural person, who takes, offers, or negotiates the terms of a residential mortgage loan application.
  23. Registered Mortgage Loan Originator
    Same as RMLO, except they are employed by a depository institution that is regulated by a federal banking agency or the Farm Credit Administration.
  24. Residential Mortgage Loan Officer
    A natural person who is sponsored by a licensed mortgage broker and performs the acts of a mortgage broker.

    Think of a loan officer as a loan originator that works for a broker.
  25. Loan processor
    An individual who works under the instruction of a mortgage broker or bankers performing only clerical functions.
  26. Person
    An individual, corporation, company, LLC, partnership, or association.

    A "person" in legal terms can be a living person or an entity.
  27. Property tax loan
    An advance of money secured by a special lien against property transferred from a taxing unit to the lender.
  28. Statement of ownership and location
    the document used to convert a mobile home into real property. The consumer can designate on this document whether the home is treated as a real property (fixed to land) or personal property (movable home).
  29. Homestead
    Another term commonly used in Texas for a primary residence.
  30. Homestead exemption
    Prevents the sale of a primary residence to meet the demands of certain creditors.

    The homestead exemption does not prevent creditors from foreclosing on a borrower's home.

    This also refers to an exemption on the amount of property taxes paid on a primary residence.
  31. Persons Required to be Licensed/Registered
    • Mortgage brokers (mortgage loan company)
    • Mortgage bankers
    • Mortgage banker branch office
    • Residential mortgage loan officers
    • Residential mortgage loan originators
    • Independent contractors acting as a processor or underwriter (needs residential mortgage loan originator license)
  32. Activities Requiring Licensure
    Any person (business entity or natural person) that is not regulated by a state or federal bank regulatory agency such as the FDIC or NCUA and engages in consulting, negotiating, making, placing, signing prequalification or preapproval letters, determines what lender is to fund the loan, or takes a mortgage loan must be licensed.
  33. Financial Responsibility (Recovery Fund)
    The Recovery Fund is used to reimburse applicants for actual damages caused by licensed mortgage professionals.
  34. Important things to know about the recovery fund:
    • It is limited to reimbursement of out of pocket losses
    • A fee of not more than $20 must be paid by applicants upon application and renewal
    • There is a 2 year statue of limitations that applies to claims against the fund
    • A limit of $25,000 for one transaction is the max it will pay
    • A limit of $50,000 for separate transactions against a single person is the max it will pay
    • Mortgage lenders and brokers are not required to obtain a separate surety bond.
  35. Financial conduct that will count against a licensee:
    • Outstanding judgments or government liens (except those related to medical expenses)
    • Foreclosures in the past 3 years
    • Seriously delinquent accounts in the past 3 years
  36. Background Check and Fingerprints (criminal check; credit report)
    Texas law requires all applicants to submit to a background check, fingerprinting, and a credit report to obtain a license.
  37. License applicants must disclose whether the applicant or any of its employees has EVER:
    • Had a license denied, suspended, or revoked by any state or federal agency at any time
    • Been subject to a settlement, consent decree, cease and desist order
    • Had regulatory or enforcement action, or fine
    • Has been required to make restitution in an amount that exceeds $20,000
  38. Pre-Licensing Education and Experience
    20 hours of pre-licensing education is required to include:

    • -3 hours on federal
    • -3 hours on ethics
    • -2 hours on lending standards for nontraditional mortgage products
  39. To be eligible for a mortgage broker license as an individual (self-employed) the applicant must have ___ years of experience in the mortgage lending industry.
  40. Individual Initial
    Fee for Residential Mortgage Loan Orignator License 
    $440 (includes $30 NMLS fee)

    Plus: $15 credit report, $39 criminal background check
  41. Individual Initial Fee for Mortgage Company Residential Mortgage Loan Orignator License
    (State Specific)

    $340 (includes $30 NMLS fee)

    Plus: $15 credit report, $39 criminal background check
  42. Company Fee for Mortgage Banker Registration
    $600 (includes $100 NMLS fee)

    (Institutions such as QL, Chase, Wells Fargo, etc.)
  43. Company Fee for Mortgage Company License
    (Specifically within State of Texas)

    $275 (includes $100 NMLS fee)
  44. Branch fee for Mortgage Banker Branch Registration
    $20 (includes $20 NMLS fee)
  45. Branch fee for Mortgage Company Branch License
    $70 (includes $20 NMLS fee)

    (Within specific state)
  46. Immediate notification is required for _____________.
    Termination of sponsorship between an originator and it's employer.
  47. 10 days prior notice is required for _______________.
    • A change in licensees address (along with $25 fee)
    • Doing business under an assumed name through the NMLS
  48. 10 days notice after action is required for ______________.
    • Notification of record location upon termination of operations
    • A change in a licensees name
  49. A mortgage loan originator license must be renewed ________ and submitted no later than _________.
    1) Annually

    2) December 31st
  50. Licensees have ____ days to renew past the renewal date and must submit ____ times the amount of the original renewal fee.
    1) 90 days

    2) 1.5
  51. Renewal fee:

    Individual: Residential Mortgage Loan Originator License
    $355 (includes $30 NMLS fee)
  52. Renewal fee:

    Individual: Mortgage Banker Residential Mortgage Loan Originator License
    $280 (includes $30 NMLS fee)
  53. All records must be updated on a "current basis" meaning within ____ days of when events occurred in the mortgage transaction log.
  54. Records must be kept for ___ years.
  55. Violations of any mortgage related act or engaging in any prohibited conduct under the law may result in the _________ of the applicants license.
  56. Licensees that do not renew prior to ____ days past the renewal date must then complete an initial application and meet all requirements of a new license.
  57. Brokers and Loan officers are prohibited from knowingly making false statements or representations of any kind, including:
    • obtaining a license
    • client communications
    • communication to the Commissioner
    • Advertising
  58. Brokers and loan officers cannot pay an ________ person for activities that would require a license.
  59. Brokers and loan officers are prohibited from refusing to cooperate with the Commissioner in regards to:
    • Record retention
    • Inspections by the department
    • Cooperation with complain investigations
  60. Brokers and Loan officers must give a copy of a __________ to the person that owns it.
  61. RMLOs are prohibited from charging a fee for _________ when a loan is not obtained.
    "best efforts"
  62. Licensees must be responsible for the ____ of their _____ or those that they sponsor.
    action, employees
  63. Licensed mortgage loan originators must display their unique identifier on:
    • Loan applications
    • Solicitations
    • Advertisements
    • Business cards
    • Websites
  64. The Department does not have the authority to limit what?
    The duration or size of an advertisement, use of trade names in advertisements, medium a company chooses to use for an advertisement, and the appearance or voice of a person that is used in advertising.
  65. Who is the regulatory authority in TX?
    The Office of Consumer Credit Commissioner and the Texas Department of Savings and Mortgage Lending.
  66. Who are a few examples of entities that are exempt from licensing?
    Persons that make 5 or fewer loans per year, non-profit organizations, depository institutions, employees of depository institutions, pension plan employees, government agencies, etc.
  67. Who is the head of the Office of Consumer Credit Commissioner and the Texas Department of Savings and Mortgage Lending?
    Both agencies have a Commissioner.
  68. How is a mortgage banker defined?
    As a person that makes a mortgage loan, offers, or negotiates terms of a residential mortgage loan from the person’s own funds. This is a lender.
  69. How is a residential mortgage loan originator defined?
    As a natural person who takes, offers or negotiates the terms of a residential mortgage loan application.
  70. Records must be kept current within how many days of an event occurring?
    Within 7 days.
  71. How many hours of ethics are required as a part of pre-licensing education?
    3 hours.
  72. Which conditions require a loan processor or underwriter to obtain a license?
    If the loan processor or underwriter negotiates mortgage terms, or is an independent contractor.
  73. What is the surety bond requirement for a banker or broker?
    There is none.
  74. How many hours of continuing education are required for a MLO?
    8 hours.
  75. If a licensee receives a notice of suspension or revocation, how many days do they have to request a hearing?
    Within 30 days of the notice of the violation.
  76. Unlicensed mortgage-related activity can result in what penalty?
    A class B misdemeanor.
  77. What is the maximum prepayment penalty on a home equity line of credit?
    Prepayment penalties are prohibited on home equity lines of credit.
  78. What can happen if a licensee does not request a hearing within the time frame allotted?
    The Commissioner will deem the order final.
  79. What is the maximum fine for a violation of a cease and desist order?
    $1,000 for each day the violation continues
  80. What must a MLO place their license number on?
    On business cards, solicitations, advertisements, websites, and loan applications.
  81. What is the late fee for late renewal of a license?
    One and a half times the amount of the original renewal fee.
  82. What happens to a license if it is not renewed by Dec. 31st?
    It expires or becomes inactive.
  83. What is the maximum payout a consumer can receive from the recovery fund?
    $25,000 max for one transaction.
  84. When must a licensee notify the Commissioner of the termination of a MLO?
  85. Who is able to charge discount points on a mortgage loan transaction?
    Only a mortgage banker (lender).
  86. A registered mortgage loan originator is employed by whom?
    A depository institution, subsidiary of a depository institution, or an institution regulated by the Farm Credit Administration.
  87. A residential mortgage loan contains a maximum of how many units?
    4 units.
  88. Who must maintain a physical office in the state of Texas?
    A mortgage broker.
  89. Which fees can be charged on a mortgage loan according to the Mortgage Broker License Act?
    An application, processing, credit report, courier service, loan commitment, appraisal, automated underwriting, and lock-in fee.
  90. Which fee can be charged for "best efforts" when a loan is not obtained?
    No fees can be charged.
  91. A consumer loan has an interest rate that exceeds?
  92. What are a few fees that can be charged on a second mortgage?
    A title examination, attorney, appraisal, credit report, title search, survey, premiums related to optional insurance products, and an administrative fee not to exceed $25 for a loan more than $1,000 ($20 for less than $1,000).
  93. A mortgage transaction log contains what information?
    The name and contact information of the borrower, date of the mortgage application, and a description of the disposition of the loan.
  94. How many members make up the Mortgage Industry Advisory Committee?
    There are 6 members.
  95. What is the primary goal of the Office of Consumer Credit Commissioner and the Texas Department of Savings and Mortgage Lending?
    Consumer protection.
  96. How long does a consumer have to claim damages from the recovery fund?
    There is a 2 year statute of limitations.
  97. When is a Special Information Booklet due to a borrower?
    Within 3 business days of the application taken.