Understanding Federal Financial Crime Laws Study Guide

Mortgage Industry History and Key Roles

A brief history of mortgage loans and an overview of the roles and regulations within the mortgage industry.

• History of mortgage loans
• Sub-prime mortgages
• Mortgage meltdown
• Dodd-Frank Wall Street Reform and Consumer Protection Act
• Consumer Financial Protection Bureau (CFPB)
• Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)
• Mortgage Loan Originator (MLO)
• Mortgage brokers
• Processor
• Underwriter
• Appraiser
• Title agent
• Real estate agent
• Lender
• Investor
• Regulator
• Consumer vs. customer

• Mortgage Industry: History, Roles, and Regulations

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SAFE Act and Mortgage Regulation

The Secure and Fair Enforcement Act (SAFE Act) establishes minimum standards for the licensing of mortgage loan originators through the Nationwide Multistate Licensing System and Registry (NMLS) and various federal and state agencies.

• Secure and Fair Enforcement Act (SAFE Act)
• Nationwide Multistate Licensing System and Registry (NMLS)
• Regulation G
• Regulation H
• Mortgage Loan Originator (MLO) licensing requirements
• Pre-licensing education (PE)
• Continuing education (CE)
• Consumer Financial Protection Bureau (CFPB)
• State Authority (Commissioner)
• Mortgage Call Report (MCR)
• Surety bonds
• Net worth requirements
• Temporary authority
• Prohibited conduct
• Cease and desist orders

Mortgage Loan Origination Basics

A summary of the mortgage loan origination process and the four Cs used to determine if a borrower qualifies for a mortgage loan.

• Mortgage loan origination process
• Four Cs of mortgage qualification
• Credit
• Capacity
• Collateral
• Cash
• Credit report
• Credit pull
• Permissible purpose
• Payment history
• Public records information

Mortgage Loan Origination Capacity and Collateral

Calculations for gross monthly income, PITI payments, debt-to-income ratios, loan-to-value, and discount points.

• Gross monthly income (GMI)
• Weekly income calculation
• Overtime income calculation
• PITI payment
• Principal, interest, taxes, and insurance
• Hazard insurance
• Mortgage insurance
• Debt-to-income (DTI) ratios
• Front-end debt-to-income
• Back-end debt-to-income
• Loan-to-value (LTV)
• Combined loan-to-value (CLTV)
• High combined loan-to-value (HCLTV)
• Discount points
• Permanent buydown
• Temporary buydown
• Lender rebate
• Income documentation

Mortgage Loan Origination and Application Basics

This content explains mortgage loan origination basics including underwriting, loan repayment through amortization, and the components of the Uniform Residential Loan Application.

• Underwriting
• Automated Underwriting Systems
• Amortization
• Fully Amortizing
• Negative Amortization
• Complete Application
• Mortgage Fraud
• Tangible Net Benefit
• Co-borrower vs. Co-signer
• Borrower Information
• Financial Information
• Assets and Liabilities
• Real Estate Information
• Loan and Property Information
• Declarations
• Acknowledgments and Agreements
• Military Service
• Demographic Information

Uniform Residential Loan Application Components

Details regarding the Uniform Residential Loan Application, including Loan Originator Information, Lender Loan Information, and the Supplemental Consumer Information Form.

• Loan Originator Information
• URLA Continuation Sheet
• Lender Loan Information
• Property and Loan Information
• Title Information
• Mortgage Loan Information
• Supplemental Consumer Information Form

Mortgage Loan Closing and Third Party Services

This topic covers third party services, appraisal approaches, title processes, insurance requirements, and mortgage loan closing and settlement methods.

• Third party services
• Credit reporting
• Property inspection
• Property survey
• Appraisal
• Valuation Independence Rule
• Sales comparison approach
• Cost approach
• Income approach
• Uniform Residential Appraisal Report
• Title process
• Encumbrances
• Title insurance
• Hazard insurance
• Homeowner’s insurance
• Replacement value
• Force-placed insurance
• Flood insurance
• Closing
• Consummation

Conventional Mortgage Programs and Securitization

This topic covers conventional conforming and nonconforming loans, the securitization process through mortgage backed securities, and various default and foreclosure procedures.

• Securitization
• Mortgage backed securities (MBS)
• Freddie Mac
• Agency MBSs
• Non-agency MBSs
• Reconveyance
• Deed of Reconveyance
• Satisfaction of Mortgage
• Due on Sale Clause
• Refinance
• Default
• Acceleration Notice
• Forbearance
• Loan modification
• Foreclosure
• Redemption
• Lien theory
• Title theory
• Judicial foreclosure
• Non-judicial foreclosure

Conventional and Non-Conventional Mortgage Programs

This content explains conventional mortgage insurance and non-conventional government mortgage programs including FHA, VA, and USDA.

• Conventional mortgages
• Private Mortgage Insurance (PMI)
• Homeowners Protection Act (HPA)
• Non-conventional mortgage loans
• Federal Housing Administration (FHA)
• Department of Veteran Affairs (VA)
• United States Department of Agriculture (USDA)
• FHA loan products
• Home Equity Conversion Mortgage (HECM)
• Mortgage Insurance Premium (MIP)

VA and USDA Non-Conventional Mortgage Programs

Non-conventional mortgage programs including Department of Veteran Affairs (VA) and U.S. Department of Agriculture (USDA) loans provide specific benefits, eligibility requirements, and qualifying standards.

• VA mortgage loans
• Certificate of Eligibility
• VA loan products
• Interest Rate Reduction Refinance Loan (IRRRL)
• VA Energy Efficient Mortgage (EEM)
• VA funding fee
• VA entitlement
• Certificate of Reasonable Value (CRV)
• USDA mortgage loans
• Section 502 Direct Housing Loan Program
• Single Family Housing Guaranteed Loan Program
• Rural area requirements
• Debt-to-income (DTI) ratios
• Seller concessions

Non-Conventional and Common Mortgage Products

This content covers various mortgage products including closed-end and open-end loans, adjustable rate mortgages, and specialized financing options.

• USDA Guarantee Fee and Annual Fee
• Closed-end mortgages
• Open-end mortgages
• Fixed-rate mortgages
• Adjustable rate mortgages (ARM)
• Hybrid ARMs
• Margin and Index
• Interest rate caps
• Home Equity Loan (HEL)
• Balloon mortgages
• Graduated payment mortgages (GPM)
• Reverse Mortgages
• Home Equity Lines of Credit
• Construction loans
• Bridge loans
• Piggyback loans
• Sub-prime mortgages
• Jumbo mortgages
• Alt-A mortgages
• Subordinate/junior loans

Federal Consumer Contact Laws

• Fair Credit Reporting Act (FCRA)
• Fair and Accurate Credit Transactions Act (FACTA)
• Disposal Rule
• Red Flags Rule
• Regulation P
• FTC Safeguards Rule
• Pretexting
• Do Not Call laws
• Telephone Consumer Protection Act (TCPA)
• E-SIGN Act
• Mortgage Acts and Practices (MAP)
• Regulation N

Federal Financial Crime Laws and Regulations

This section covers financial crime laws including the USA PATRIOT Act and the Bank Secrecy Act (BSA) or Anti-Money Laundering (AML) law.

• USA PATRIOT Act
• Bank Secrecy Act (BSA)
• Anti-Money Laundering (AML)
• Money laundering
• Customer identification program (CIP)
• Financial Crimes Enforcement Network (FinCEN)
• Currency Transaction Report (CTR)
• Report of International Transportation of Currency or Monetary Instruments (CMIR)
• Suspicious Activity Report (SAR)
• Report of Foreign Bank and Financial Accounts (FBAR)

• Federal Financial Crime Laws and Regulations

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Federal Anti-Discrimination and Disclosure Laws

This section covers the Equal Credit Opportunity Act, the Fair Housing Act, and the Home Mortgage Disclosure Act regarding lending practices and consumer protections.

• Equal Credit Opportunity Act (ECOA)
• Regulation B
• Prohibited factors of discrimination
• Overt evidence
• Disparate treatment
• Disparate impact
• Adverse Action Notice
• ECOA Valuation Rule
• Notice of Right to Receive an Appraisal
• Notice of Action Taken
• Fair Housing Act (FHA)
• Redlining
• Blockbusting
• Home Mortgage Disclosure Act (HMDA)
• Regulation C
• Loan/Application Register (L/AR)

• Federal Anti-Discrimination and Disclosure Laws in Mortgages

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Federal Laws: HMDA and RESPA

This topic covers the Home Mortgage Disclosure Act and the Real Estate Settlement Procedures Act, including their purposes, governing rules, required disclosures, and penalties.

• Home Mortgage Disclosure Act (HMDA)
• Regulation C
• Real Estate Settlement Procedures Act (RESPA)
• Regulation X
• Settlement services
• RESPA Section 6: Servicing
• RESPA Section 8: Referrals and kickbacks
• RESPA Section 9: Title Agent
• RESPA Section 10: Escrow
• Mortgage Servicing Disclosure Statement (MSDS)
• Notice of Transfer Statement (NTS)
• Initial and Annual Escrow Statements
• Homeownership Counseling Organizations List
• Good Faith Estimate (GFE)
• HUD-1 Settlement Statement

Truth in Lending Act and Regulation Z

The Truth in Lending Act (TILA) ensures consumers make informed decisions regarding consumer credit through standardized disclosures, advertising requirements, and finance charge regulations.

• Truth in Lending Act (TILA)
• Regulation Z
• Consumer Credit
• Finance Charge
• Annual Percentage Rate (APR)
• Simple Interest Rate
• Trigger Terms
• Mortgage Disclosure Improvement Act (MDIA)
• Intent to Proceed
• Waiting Periods
• Right of Rescission
• APR Tolerances
• Change in Circumstance
• Higher Priced Mortgage Loans (HPML)
• Ability to Repay and Qualified Mortgages

Truth in Lending Act Important Sections

This topic covers important sections of TILA including HOEPA, HPML, the Loan Originator Rule, Valuation Independence, Qualified Mortgages, and Ability to Repay.

• High-cost loans
• Higher-Priced Mortgage Loans (HPML)
• Loan Originator Rule
• Valuation Independence
• Qualified Mortgages (QM)
• Ability to Repay (ATR)
• Rebuttable presumption QM
• Safe harbor QM
• Seasoned QMs
• Small creditor QMs
• Non-qualified mortgages (Non-QM)
• TILA disclosures
• Loan Estimate (LE)
• Closing Disclosure (CD)
• HOEPA Disclosure (Covered Loan Notice)
• Notice of Right to Cancel (Right to Rescind)
• Home loan toolkit
• Adjustable Rate Mortgage (ARM) disclosures
• Initial Interest Rate Adjustment Disclosure

Mortgage Disclosures and TRID Requirements

• Closing Disclosures
• Ongoing Disclosures
• Initial Disclosures
• Loan Estimate
• Closing Disclosure
• RESPA
• Good Faith Estimate (GFE)
• Initial Truth in Lending statement (Initial TIL)
• HUD-1 Settlement Statement
• Final Truth in Lending statement (Final TIL)
• Know Before You Owe Rule (KBYO)
• Dodd-Frank Act

Understanding the Loan Estimate Document

The Loan Estimate is a three-page document containing an estimate of credit terms, closing costs, and essential information related to the loan.

• Loan Estimate
• Loan Terms
• Projected Payments
• Costs at Closing
• Loan Costs
• Origination Costs
• Services You Cannot Shop For
• Services You Can Shop For
• Other Costs
• Taxes and Other Government Fees
• Prepaids
• Initial Escrow Payment at Closing
• Calculating Cash to Close
• Comparisons
• Annual Percentage Rate (APR)
• Total Interest Percentage (TIP)
• Other Considerations
• Confirm Receipt
• Intent to Proceed
• Fee Tolerances

Understanding the Closing Disclosure

The Closing Disclosure provides a breakdown of Calculating Cash to Close and Summaries of Transactions to show what has changed from the Loan Estimate.

• Closing Disclosure
• Calculating Cash to Close
• Summaries of Transactions
• Borrower’s Transaction
• Seller’s Transaction
• Loan Estimate
• Seller credits
• Legal tolerances

Closing Disclosure Loan and Other Costs

The Closing Disclosure provides a breakdown and itemization of Loan Costs and Other Costs, including services the borrower can shop for.

• Closing Disclosure
• Loan Costs
• Other Costs
• Origination Charges
• Services Borrower Did Not Shop For
• Services Borrower Did Shop For
• Tolerances
• Settlement Service Providers
• Prepaids
• Initial Escrow Payment at Closing

Understanding Closing Disclosure Loan Disclosures

The Closing Disclosure provides loan disclosures regarding features such as assumption, demand features, negative amortization, and escrow accounts.

• Assumption
• Demand Feature
• Negative Amortization
• Escrow Account
• Partial Payments
• Late Fee
• Escrowed Property Costs
• Non-Escrowed Property Costs

Closing Disclosure Sections and Details

This document explains the sections and calculations found within a Closing Disclosure, including loan calculations, other disclosures, and contact information.

• Loan Calculations
• Total of Payments
• Finance Charge
• Amount Financed
• Annual Percentage Rate (APR)
• Total Interest Percentage (TIP)
• Other Disclosures
• Appraisal
• Refinance
• Confirm Receipt

Ethics and Fraud in Mortgage Origination

This section reviews borrower ethics and various types of mortgage fraud, including borrower fraud, industry fraud, and predatory lending.

• Borrower fraud
• Asset fraud
• Income fraud
• Bank fraud
• Occupancy fraud
• Verbal fraud
• Conspiracy
• Modified documentation
• Property flipping
• Straw buyer
• Buy and bail
• Undisclosed kickbacks
• Silent second mortgage
• Short sale fraud
• Flopping
• Non-arms length sale
• Shotgunning
• Industry fraud
• Appraisal fraud
• Bait and switch

Ethics and Responsibilities of Mortgage Loan Originators

This section introduces the challenges a mortgage loan originator faces regarding ethical behavior, responsibilities to consumers, and adhering to the law.

• ethical behavior
• mortgage loan originator responsibilities
• consumer understanding
• adhering to the law
• fairness laws
• credit report review
• interest rates
• adjustable rate mortgages
• disclosures

Mortgage and Real Estate Terminology

A glossary of terms including loan types, legal clauses, and professional roles within the mortgage industry.

• “A” Paper (Prime Loan)
• Abstractor (Abstractor of Title)
• Acceleration Clause
• Accrue (accrual)
• Action
• Actuarial Method
• Addendum
• Adjustable Rate Mortgage (ARM)
• Adjustment Date
• Administrative or Clerical Tasks
• Adverse Action
• Affidavit
• Affiliate
• Affiliated Business Arrangement
• Aggregate
• Air Loan
• Alias
• Alienation Clause
• Alimony

Mortgage and Real Estate Glossary

A comprehensive glossary defining terms related to credit, mortgage loans, real estate ownership, and financial regulations.

• Credit Risk
• Credit Score
• Creditworthiness
• Defeasance Clause
• Delinquency
• Depository Institution
• Discount Point
• Due on Demand Clause
• Due-on-Sale Clause
• Easement
• Eminent Domain
• Encumbrance
• Equal Credit Opportunity Act (ECOA)
• Equity
• Escrow Account
• Fair Credit Reporting Act (FCRA)
• Fair Housing Act
• Freddie Mac