FL Mortgage Laws
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What does the S.A.F.E. Act stand for?
Secure and Fair Enforcement Act
What standards does the S.A.F.E. Act require for licensees?
- 20 hrs. pre-licensing education
- 8 hrs. annual continuing education
- Criminal background check
- Surety bond and net worth requirements
- Use of NMLS for applications and registrations
- Reporting of enforcement actions to NMLS
Where can you find the regulations for the S.A.F.E. Act?
Florida Statutes Chapter 494
Transitioning to the NMLS System
What 3 important changes begin October 1, 2010?
- 1. Current mortgage broker license will be reclassified as a loan originator license
- 2. Loan Originator License will emcompass individual brokers and loan originators
- 3. New mortgage broker license will replace old mortgage brokerage license
Expiration and compliance dates
When do mortgage broker business licenses expire?
If issued before October 1, 2010 - will expire on December 31, 2010
Expiration and compliance dates
If holder of active mortgage brokerage license issued before October 1, 2010 applies for mortgage broker license through the NMLS between October 1, 2010 and December 31, 2010, when will their mortgage brokerage business license expire?
Mortgage brokerage business license will not expire until the Office of Financial Regulation approves or denies the mortgage broker license application
Expiration and compliance dates
A mortgage broker license approved on or after October 1, 2010 is effective until when?
December 31, 2011
Expiration and compliance dates
Mortgage lender licenses issued before October 1, 2010, expire when?
December 31, 2010
Expiration and compliance dates
If holder of active mortgage lender license applies for mortgage broker license or mortgage lender license through the NMLS between October 1, 2010 and December 31, 2010, when will their active mortgage lender license expire?
Mortgage lender license does not expire until the Office of Financial Regulation approves or denies the mortgage broker license or mortgage lender license application.
Expiration and compliance dates
What happens to all Correspondent Mortgage Lender Licenses on December 31, 2010?
- All correspondent mortgage lender licenses expire on December 31, 2010 and Florida will no longer recognize a correspondent mortgage lender as a licensee.
- Correspondent mortgage lenders will need to apply for a mortgage broker or mortgage lender license.
Expiration and compliance dates
All unlicensed loan officers are required to have a mortgage broker license by when?
December 31, 2009 including the 20 hrs. of pre-licensing education
Expiration and compliance dates
In-house underwriters and processors need to do what to maintain the ability to work after what date?
Need to become licensed to maintain ability to work after October 1, 2010
Responsibilities of the Commissioner
What is the Commissioner responsible for?
- -Enforcing Chapter 494
- -Issuing mortgage lending licenses
- -Approving licensing and continuing education courses for mortgage lenders
- -Monitoring licensee behavior
- -Conducting investigations into possible violations of law
- -Disciplining licensees
What is a Branch Manager?
a licensed loan originator in charge of and responsible for the operation of the branch office of a mortgage broker or mortgage lender
What does Commission refer to?
Financial Services Commission
What does a control person do?
they possess the power to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise
What individuals are included in the term "control person"?
- -a director, general partner, or officer exercising executive responsibility, or having similar status or functions
- -a person who directly or indirectly may vote 10% or more of a class of voting securities or sell or direct the sale of 10% or more of a class of voting securities
- -in the case of a partnership, may receive upon dissolution or has contributed 10% or more of the capital
- -the trustee of a trust
- -all elect managers if the company is a Limited Liability Corporation
- -Principal loan originators
What is a loan commitment or commitment?
a statement by the lender stating the terms and conditions upon which the lender is willing to make a particular mortgage loan to a particular borrower
What does loan modification mean and what does the term not include?
- means a modification to an existing loan
- term does not include a refinancing transaction
What is loan origination fee? What must be included in the fee and who must it be paid to?
- the total compensation from any source received by a mortgage broker acting as a loan originator
- any payment for processing mortgage loan applications must be included in the fee and must be paid to the mortgage broker
What does the loan originator do?
- directly or indirectly:
- -solicits a mortgage loan
- -accepts application for mortgage loan
- -negotiates the terms or conditions of new or existing mortgage loan on behalf of borrower or lender
- -processed mortgage loan application
- -negotiates the sale of existing mortgage loan to non-institutional investor for compensation or gain
The term "loan originator" includes activities of a loan originator as that term is defined where?
the S.A.F.E. Mortgage Licensing Act of 2008
Who does the term "loan originator" not include?
- does not include an employee of a mortgage broker or mortgage lender who performs only administrative or clerical tasks.
- these tasks include quoting available interest rates, physically handling a completed application form, or transmitting a completed form to a lender on behalf of prospective borrower
What is a Lock-in agreement?
- an agreement where the lender guarantees the availability of an interest rate or specific interest rate formula for a set number of days
- the loan must be closed within that time period for the borrower to be guaranteed that rate
What does Material Change mean and what does it include?
- means a change that would be important to a borrower in making a borrowing decision
- includes: change in the interest rate that was previously offered to borrower, change in type of loan offered to borrower, or change in fees to be charged to a borrower resulting in total fees greater than $100
What is a Mortgage Broker?
a person making or servicing a mortgage loan for others, or, directly/indirectly selling or offering to sell a mortgage loan to a non-institutional investor for compensation/gain
What loans are considered to be a "Mortgage Loan"?
- -Residential loan primarily for personal, family, or household use and is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined by the Federal Truth-In-Lending Act), or for purchase of residential real estate where dwelling will be constructed
- -Loan on commercial property if borrower is an individual or lender is non-institutional investor
- -Loan on improved property consisting of 5+ dwelling units if borrower is individual or lender is non-institutional investor
What does Registered Loan Originator mean?
- Loan originator who is registered through the registry and employed by either:
- -depository institution
- -subsidiary owned and controlled by depository institution and regulated by federal banking agency
- -institution regulated by the Farm Credit Administration
What does the term "Registry" refer to?
the Nationwide Mortgage Licensing System and Registry
Substantial fault of the borrower means that the borrower did what?
- -failure to provide required info or documents to the lender or broker in a timely manner
- -provided significantly inaccurate info in application or after causing the need for further investigation by broker/lender
- -failure to produce, no later than date specified, all documents specified in commitment or closing instructions as being required for closing
- -failure to be ready, willing, or able to close the loan no later than the date specified by the lender/broker
Exemptions from Florida licensing
What are Federally Controlled Entities?
A depository institution and subsidiaries that are owned and controlled by a depository institution and regulated by the Board of Governors of the Federal Reserve System
Federally Controlled Entities are exempt from FL licensing requirements as well as depository institutions and subsidiaries regulated by who?
- Comptroller of the Currency
- Director of the Office of Thrift Supervision
- National Credit Union Administration
- Federal Deposit Insurance Corporation
- Farm Credit Administration
What agencies and associations are exempt from the Chapter?
- Federal National Mortgage Association
- The Federal Home Loan Mortgage Corporation
- Any agency of federal government; any state, county, or municipal government; or any quasi-governmental agency that acts in such capacity under specific authority of the laws of any state of United States
What kind of licensed attorneys are exempt from the Chapter?
attorneys licensed in Florida who negotiate the terms of a mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client
How does the timeshare exemption work?
if a person is involved solely in the extension of credit relating to the purchase of a timeshare plan, that person is exempt from regulation
What people are exempt from regulation under 693 part III of the Chapter under the new licensing law that applies to loan originators?
- -person acting in fiduciary capacity conferred by the authority of a court
- -person who, as seller of their own real property, receives 1 or more mortgages in a purchase money transaction
- -person who acts soley under contract as agent for federal, state, or municipal agencies solely for purpose of servicing mortgage loans
- -person who makes only nonresidential mortgage loans and sells loans only to institutional investors
- -individual making, acquiring, or selling mortgage with own funds for own investment and not hold themself out to the public as being in mortgage lending business
Loans covered by the law
What does make a mortgage loan mean?
to close a mortgage loan in a person's name, advance funds, offer to advance funds, or make a commitment to advance funds to an applicant for a mortgage loan
Loans covered by the law
What loans does mortgage loan refer to?
- -residential loan for personal, family, or household use, secured by a mortgage, deed of trust, or equivalent consensual serurity interest on a dwelling, or for the purchase of residential real estate where dwelling is to be constructed
- -loan on commercial real property if borrower is individual or lender is non-institutional investor
- -loan on improved real property consisting of 5+ dwelling units if borrower is individual or lender is non-institutional investor
What does REAL System stand for?
Regulatory Enforcement and Licensing System
what does Florida require through the REAL System?
- electronic filing of all application forms and fees
- must also be used for mortgage licensing, updating licenses, license renewal and reactivation, and quarterly reports
Where can the REAL System be accessed at?
Online filings through the REAL System will no longer be accepted starting when?
October 1, 2010
After the REAL System discontinues accepting online filings, what do applicants and licensees do?
applicants and licensees, under Chapter 494, will be required to file through the NMLS
Who does the MU4 form pertain to?
What Criminal Disclosures must an applicant disclose under oath?
- -at any time, been charged or convicted of a felony or pled guilty or no contest to a felony
- -within past 10 yrs. been charged, convicted, pled guilty or no contest to a misdemeanor, committed in any jurisdiction, that involves financial services, fraud, making of fraudulent/false statements, omissions, theft, forgery, bribery, perjury, counterfeiting, extortion or conspiracy
What does the Criminal Background Check involve?
taking fingerprints and submitting them to the FBI and other agencies with authority to complete criminal background checks, and authorizing these agencies to release info to the Dept. of Financial Regulation and NMLS
What must an applicant submit in order to apply for a mortgage broker license?
- application form through NMLS
- $525 application fee ($415 for the application and $100 for the Trust Fund)
- designate a principal loan originator
- submit fingerprints
- authorize a credit report
When should you expect a decision on Mortgage Broker Licenses?
90 days from date of application
The Commissioner will deny a Mortgage Broker License if the applicant is the subject of a pending felony criminal prosecution that involves what?
- Breach of Trust
- Money Laundering
- Any other unmoral act
How much is the Mortgage Broker License Exam fee?
How much is the Mortgage Broker License Branch Office Fee?
A mortgage broker license applicant is considered not to have exercised financial responsibility if they have shown a disregard for their personal finances. This includes....?
- Current outstanding judgements, except from medical bills
- Tax liens
- Foreclosures within last 3 yrs.
- Pattern of seriously delinquent accounts in last 7 yrs.
If the Commissioner denies an application for a mortgage broker license, the applicant has the right to a hearing within how many days?
Under a new law, mortgage lenders are required to be licensed under Florida law. What date will this law be effective?
October 1, 2010
What must a mortgage lender license application include?
- designated qualified principal loan originator
- nonrefundable $500 application fee and nonrefundable $100 guaranty trust
- fingerprints for each of the applicant's control person
- financial audit report from most recent fiscal year
- authorize NMLS to obtain credit report on control person
- any other documents requested such as criminal histories or prior disciplinary actions
What are the net worth requirements for mortgage lender applicants?
- $63,000 if applicant is not seeking a servicing endorsement
- $250,000 if applicant is seeking a servicing endorsement
The Office may not issue an applicant a mortgage lender license for what reasons?
- violation of any provision of the Chapter
- Criminal prosecutions involving fraud, dishonesty, breach of trust, money laundering, or any unmoral act
- Mortgage lender license revoked in another jurisdiction
- designation of a control person who has had loan originator license revoked in any jurisdiction
- Lack of financial responsibility
What must a licensed loan originator do to be able to engage in mortgage lending activities?
must have employment with a licensed mortgage lender, or with an exempt individual or entity
A licensed loan originator can abandon their non-active status and begin working as a loan originator after doing what?
- securing employment as a loan originator
- notify Department of Financial Regulations, in writing, that they have secured employment with a licensed mortgage lender or an exempt employer
- Submit notarized statement from new employer to Department of Financial Regulations, stating that the loan originator is an employee
In order to waive the borrower's right to receive notice, the borrower must do what in writing?
- provide the licensee with a dated written statement that describes the personal finance emergency
- waive the right to receive the notice
- bear the borrower's signature
- is not on a printed form prepared by licensee for the purpose of such a waiver
When may a borrower waive the right to receive notice of a material change?
when the borrower determines that the extension of credit is needed to meet a bona fide financial emergency and the right to receive notice would delay the closing of the mortgage loan
When brokering loans to non-institutional investors, when should each mortgage be recorded?
before being delivered to the non-institutional investor
Brokering loans to non-institutional investors
Each mortgage and assignment must be recorded as soon as practical, but no later than how many days?
30 business days after the date of closing
A person acting as a mortgage broker has control over how much money from a non-institutional investor?
Because the Office has the authority to require production of documents, what must each licensee maintain?
all books, accounts, records, and documents necessary to determine the licensee's compliance with the Chapter
Where must all records be maintained?
at the principal place of business designated on the license unless the Office has authorized the maintenance of the records at a different location
How long must records be kept for?
all records, including receipts for expenses paid by licensee on behalf of borrower and each closing statement signed by a borrower, must be kept for atleast 3 years after the date of original entry
Because of verbal assurances or enticing advertisements, what may consumers not realize until the time of closing or even afterwards?
the mortgage loan they have is not the loan that they thought they were getting
What does the Federal Trade Commission Act prohibit and what does it require?
- prohibits advertising that is untruthful, deceptive, or unfair
- requires advertisers to have evidence to back up their claims
Why was the Truth-in-Lending Act designed?
to clarify and regulate the standards for advertising credit and loan services
With advertising, it is a violation of the Chapter to advertise that an applicant will have unqualified access to credit without disclosing what material limitations on the availability of credit exist. Such material limitations include what?
- percentage of down payment required
- that a higher rate or points could be required
- that restrictions as to the maximum principal amount of the loan offered could apply
When working in the mortgage brokerage business, it is unlawful for any person to act as a mortgage broker, loan originator, or mortgage lender in Florida without what?
a current, active license issued by the Office
What is it unlawful for any person licensed under Florida mortgage laws to do?
- employ any device, scheme, or artifice to defraud
- engage in any fraud upon any person in connection with purchase or sale of any mortgage loan
- obtain property by fraud, willful misrepresentation of a future act, or false promise
- conceal, or cover up a material fact
- make any false/fraudulent statement representation
- make or use any false writing or document
It is unlawful for any person licensed under Florida mortgage laws to violate what law?
the Mortgage Broker & Mortgage Lenders Chapter of the Financial Institutions law
It is unlawful for any person licensed under Florida mortgage laws to pay a fee or commission related to a mortgage loan transaction to any person or entity other than who?
- a mortgage broker
- a mortgage lender
- a person exempt from licensure under the Chapter
It is unlawful for any person licensed under Florida mortgage laws to record a mortgage brokerage agreement or any other document which purports to enforce the terms of the agreement unless what?
unless that document has been rendered by a court of competent jurisdiction
Anyone licensed under Florida mortgage laws is prohibited from using the name or logo of a financial institution for marketing or soliciting customers unless it is used with written consent of the financial institution. With written consent, how must the name or logo be used?
in a manner that would lead a reasonable person to believe that the material or solicitation originated from, was endorsed by, is related to or the responsibility of the financial institution or its affiliates or subsidiaries
If, in a mortgage transaction, a licensee has a conflict of interest, the licensee is required to provide what disclosures in writing to the borrower?
- nature of the relationship, ownership, or financial interest between the provider of products, services or businessm and the licensee making the referral
- estimated charge or range of charge generally made by such a provider
- financial benefit to the licensee as a result of the conflict
- that alternative sources may be chosen by the borrower
A licensee has a conflict of interest in what situations?
- licensee/licensee's relative provides borrower with additional products/services
- licensee/relative owns/controls/holds with power to vote/holds proxies representing, 10% or more of equity securities or other beneficial interest in the person providing the additional products or services or in the licensee
- holding company holds/controls.....10% or more equity securities or beneficial interest in both licensee and person providing additional products or services
- 1+ persons or a relative, sits as an officer or director for both the licensee and the person providing the additional products or services, or just for the person providing additional products or services
As used in conflicts of interest, "relative", whether by full or half blood or by adoption refers to who?
- the person's spouse, father, mother, children, brothers, and sisters
- the father, mother, brothers, and sisters of the person's spouse
- the spouses of children, brothers, or sisters of the person
When may the Office conduct an investigation?
whenever the Office has reason to believe that a violation of the Chapter has been committed or is about to be committed
Any person who has reason to believe that a provision of the Chapter has been violated may do what?
file a written complaint with the Office setting forth details of the alleged violation
The Office may conduct examinations of any licensee or other person under the provisions of the Chapter. Where must these examinations be conducted?
at a convenient location in Florida, unless the Office determines that it is more effective or cost-efficient to perform an examination at a licensee's out-of-state location
For most examinations, if it is performed at the licensee's out-of-state location, what must the licensee pay for?
- travel expenses
- per diem at the rate provided by law for up to 30 eight-hour days, per year, for each Office examiner who participates in an examination
Information relating to an investigation or examination by the Office is confidential and exempt from the Public Records Chapter for how long?
until the investigation or examination is concluded or inactive unless it is submitted to any law enforcement or administrative agency for further investigation where it will remain confidential and exempt until that agency's investigation is cocluded or inactive
For what reason would a consumer complaint and other information relative to an investigation or examination remain confidential and exempt even after the investigation or examination has been concluded or inactive?
- it would jeopardize the integrity of another active investigation or examination
- it would reveal the name, address, telephone number, social security number, or any other identifying number or information of any complainant, customer, or account holder
- it would disclose the identity of a confidential source
- it would disclose investigative techniques or procedures
- it would reveal a trade secret as defined in the Uniform Trade Secrets Acts of the Florida Statutes
A privilege against civil liability is granted to who?
a person who furnishes information or evidence to the Office unless that person acts in bad faith or with malice in providing the information or evidence
What may the court require in any injunctive proceeding?
the attendance of any witness and the production of any books, accounts, records, or other documents and materials that appear necessary to the resolution of the application for injunction
What may the Office issue whenever it has reason to believe a person is violating, has violated, or is about to violate any provision of the Chapter, any rule or order issued under the Chapter, or any written agreement between the person and the Office
an order to cease and desist and to take corrective action
Violations of the law
- pleading no contest to a crime involving fraud, dishonest dealing, or any unmoral act
- having been convicted or found guilty of a crime involving fraud, dishonest dealing, or unmoral act
- fraud, misrepresentation, deceit, negligence, or incompetence in any mortgage financing transaction
- material misstatement of fact on an initial or renewal application
- failure to place immediately upon receipt and maintain any money entrusted to them by a person dealing with them as their mortgage broker in a segregated account of a federally insured financial institution in this state
Violations of the law
- failure to account for or deliver any property in the licensee's possession which they are not entitled to retain
- failure to disburse funds in accordance with agreements
- any misuse, misapplication, or misappropriation of personal property entrusted to their care to which they had no current property right at the time of entrustment
- having license or equivalent, to practice any profession or occupation revoked, suspended, or otherwise acted against.
- failure to comply with any order or rule made or issued under the Chapter
Violations of law
- Acting as a mortgage broker business without current, active license issued under the guidelines of the Chapter
- Failure to pay, in timely fashion, any fee, charge, or fine under the Chapter
- Failure to keep available for examination all books, accounts, or other documents required by the Chapter and the rules of the Commissioner
- Refusal to permit an investigation or examination of books and records, or refusal to comply with an Office subpoena
- Consisting and materially underestimating maximum closing costs
Violations of law
- Failure to comply with, or violation of, any other provision of the Chapter
- Commission of fraud, misrepresentation, concealment, dishonest dealing by trick, scheme, or device, or breach of trust in any business transaction in any state, nation or territory
- Aiding, assisting, or conspiring with any other person engaged in any such misconduct
- Payment for a license or permit with a check or electronic transmission of funds that is dishonored by the applicant's or licensee's financial institution
Violations of law
- Having a final judgment entered against the applicant or licensee in a civil action upon grounds of fraud, embezzlement, misrepresentation or deceit
- Having been the subject of any decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order involving a violation of any federal or state securities or commodities law or rule or regulation adopted under such law or involving a violation of any rule or regulation of any national securities, commodities, or options exchange or association
Violations of law
- Having been the subject of any injunction or adverse administrative order by a state or federal agency regulating any of the following: Banking, Insurance, Finance or small loan companies, real estate, mortgage brokers or lenders, money transmitter, other related or similar industries
- In any mortgage transaction, violating any provision of the federal Real Estate Settlement Procedure Act, the Truth-in-Lending Act, or any regulations adopted under such acts
What are some penalities that the office may impose if they find a person to be in violation of the law?
- Revocation of a license or registration
- Suspension of license/registration subject to reinstatement upon satisfying all reasonable conditions that Office specifies
- Placement of licensee/registrant/applicant on probation for period of time and subject to reasonable conditions specified
- Issuance of a reprimand
- Imposition of a fine in an amount not exceeding $5,000 for each count or separate offense
- Denial of license or registration
- Administrative fine $1,000 per day for unlicensed person acting as licensee or licensed person conducts business at unlicensed branch office
Any person convicted of a violation of Florida's mortgage lending and brokering laws may be found guilty of a first degree felony for what reasons?
- total value of money and property unlawfully obtained exceeded $50,000
- there were five or more victims
If a mortgage transaction is made in violation of any provision of the Chapter, who is liable and who are they liable to?
the person making the transaction and every licensee, director, or officer who participated in making the transaction are jointly and severely liable to every party to the transaction in an action for damages incurred by the party or parties
For what reason will a person who participated in an unlawful transaction not be considered liable?
- if they can show they acted in good faith and without knowledge of the violation
- or if the person could not have known that the transaction was committed in violation of the Chapter
A loan origination fee is prohibited unless there is a written mortgage broker agreement between the broker and the borrower, signed and dated by the principal loan originator or the branch manager. What must be included in the agreement?
- loan originator's unique NMLS Registry number must be printed on agreement
- must describe the services to be provided by the loan originator
- must specify the amount and terms of the loan origination fee that the mortgage broker is to receive
- all fees on mortgage broker agreement must be disclosed in dollar amounts
- all loan origination fees must be paid to mortgage broker
How long must a written mortgage broker agreement be executed within when the borrower is present and when the borrower is not present?
- within 3 business days after a mortgage loan application is accepted if the borrower is present when application is accepted
- if borrower is not present, licensee must forward agreement to the borrower within 3 business days after the licensee's acceptance of the application and licensee bears the burden of proving that the borrower received and approved the agreement
The total mortgage broker fee must include all compensation for what services?
- arranging for a conditional mortgage loan commitment between a borrower and a lender
- taking application, assembling info and preparing paperwork and documentation necessary for conditional mortgage loan commitment
- reviewing, analyzing, and evaluating borrower's financial statements, income, and credit history
- incidental services utilized in arranging for and procuring conditional loan commitment, such as, courier services, express mailings, and long distance telephone charges
- premiums and other charges for insurance written in connection with a loan
When must disclosures be made?
- at the time a written mortgage agreement is executed by the borrower or forwarded to the borrower for execution
- at the time the mortgage broker accepts an application fee, credit report fee, property appraisal fee, or any other third-party fee
- not less than 3 business days before execution of the closing or settlement statement
What is the maximum fee or broker commission that can be charged on a mortgage loan exceeding $5,000?
$250 plus 10% of the entire mortgage loan
A mortgage broker who creates a contract to receive a mortgage broker fee upon receipt of a commitment must disclose what information in the mortgage broker agreement?
- identification of the margin-interest rate differential
- identification of a nationally recognized index which must be free from control of the mortgage broker or mortgage lender
- the estimated net proceeds to be paid directly to the borrower (the cash to be received by the borrower after payment of any fees, charges, debts, liens or encumbrances to perfect the lien of the new mortgage and establish the agreed-upon priority of the new mortgage
A mortgage broker who creates a contract to receive a mortgage broker fee upon receipt of a commitment must disclose what information in the mortgage broker agreement, in at least 12-point boldface type immediately above the signature line(s) for the borrower?
You are entering into a contract with a mortgage broker to obtain a bona fide mortgage loan commitment under the same terms and conditions as stated hereinabove or in a separate executed good faith estimate form. If the mortgage broker obtains a bona fide commitment under the same terms and conditions, you will be obligated to pay the mortgage broker fees, including, but not limited to, a mortgage broker fee, even if you choose not to complete the loan transaction. If the provisions of s.494.00421, Florida Statutes, are not met, the mortgage broker fee can only be earned upon the funding of the mortgage loan. The borrower may contact the Department of Financial Services, Tallahassee,Florida, regarding any complaints that the borrower may have against the mortgage broker or the mortgage brokerage business. The telephone number of the department is:
What is predatory lending?
abusive lending practices
The Florida Fair Lending Act requires lenders to disclose certain facts about the loan at least 3 days prior to closing a deal. What must this disclosure inform the borrower of?
- a mortgage will be placed on the borrower's home, and they could lose the home in the event of foreclosure
- interest rates and terms can vary, depending on the lender or broker
- borrowers should consider consulting a HUD approved credit counseling agency or a financial advisor regarding financing of their home
- debt consolidation can be a useful tool if the borrower does not take on additional short-term debts
- loan applicants do not have to accept the loan, even though they have filled out an application
What did Florida adopt to address risks associated with the growing use of mortgage products that allow borrowers to defer payment of principal and sometimes interest?
the Guidance on Nontraditional Mortgage Product Risks
What does affiliate mean?
any company that controls, is controlled by, or is in common control with another company
What does annual percentage rate (APR) mean?
the annual percentage rate for a loan calculated by the Federal Reserve Board
What does borrower mean?
any natural person obligated to repay a loan. includes, but is not limited to, a co-borrower, co-signor, or guarantor
What does bridge loan refer to?
a loan with a maturity of less than 18 months that only requires the payment of interest until the entire unpaid balance is due and payable
What does high-cost home loan refer to?
a consumer credit transaction that is secured by the consumer's principal dwelling, other than a residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open ended credit plan if: APR at consummation of transaction will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceeding the month in which the application for the extension of credit is received by the creditor or, the total points and fees payable by the consumer at or before closing will exceed the greater of either 8% of the total loan amount or $400
For what reasons may a lender making a high-cost loan include in the loan contract a prepayment fee or penalty, for up to the first 36 months after the date of consummation of the loan?
- the borrower has also been offered a choice of another product without a prepayment penalty
- the borrower has been given, at least 3 business days prior to the loan consummation, a written disclosure of the terms of the prepayment fee or penalty by the lender, including the benefit the borrower will receive for accepting the prepayment fee or penalty through either a reduced interest rate on the loan or reduced points or fees
What is prohibited with a high-cost home loan as far as prepayment penalities?
high-cost home loan may not contain terms that require a borrower to pay a prepayment penalty for paying all or part of the loan principal before the date on which the payment is due
A high-cost home loan may not provide for a higher interest rate after default on the loan. However, what does this prohibition not apply to?
does not apply to interest rate changes in a variable rate loan if they are otherwise consistent with the provisions of the loan documents
The prohibition on balloon payments in a high-cost home loan does not apply when?
the payment schedule is adjusted to account for the seasonal or irregular income of the borrower or if the loan is a bridge loan
The prohibition on prepaid payments with a high-cost home loan means what?
loan may not include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower
A lender making a high-cost home loan must not engage in any pattern or practice of extending high-cost home loans to borrowers based upon what?
the borrowers collateral without regard to the borrowers ability to repay the loan. ability to repay includes the borrowers current and expected income, current obligations, and employment
A lender must not make any payments to a contractor under a home improvement contract from amounts of a high-cost home loan other than what?
- in a payment made directly to the borrower or jointly to the borrower and the contractor
- to a third party escrow agent per a written agreement signed by the borrower, the lender, and the contractor prior to the date of payment
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