TOC SAFE ACT
THE SAFE ACT, 20 HOURS COMPREHENSIVE
Pre-Licensing Manual
SECTION 1 – TABLE OF CONTENTS
PAGE NO. TOPIC
i-viii Factors for Calculating Monthly Principal & Interest
SECTION 2 DEFINITIONS
2-1-39
SECTION 3 TRADITIONAL LOAN PROGRAMS
3-1 The Secondary Mortgage Market – Fannie Mae, Freddie Mac, Ginnie Mae
3-4 Automated Underwriting Systems and Credit Scoring
3-5 Progression of a Mortgage Flow Chart
3-6 Conventional Loans
3-6 30-Year Fixed Rate
3-7 20-Year Fixed Rate & 15-Year Fixed Rate
3-8 7/23 Balloon Mortgage
3-9 5/25-Year Two-Step, 7/1 & 5/1 ARMs, Interest Only LIBOR ARM
3-10 Adjustable Rate Mortgages
3-11 Adjustable Rate Mortgages – Terminology
3-14 The Buydown Loan Program
3-17 Construction-Permanent Loans
3-20 Other Miscellaneous Loan Programs
3-21 Maximum Loan-to-Value Ratios for Fannie Mae/Freddie Mac Loans
3-22 Maximum Seller Contributions for Fannie Mae/Freddie Mac Loans
SECTION 4 THE NON-TRADITIONAL MORTGAGE MARKET
4-1 The Non-Traditional Mortgage Market
4-5 Interest-Only ARM Mortgages
4-9 Payment Option, Option ARMs or Pick-a-Payment Mortgages
4-13 Adjustable Rate Mortgages (ARMs) and Hybrid ARMs
4-16 Piggyback, No Money Down, Simultaneous Second, or 80/20, 80/10/10 Loans
4-19 What Gave Rise to These New Alternative Mortgage Products?
4-21 Concerns About Underwriting These Alternative Mortgage Products
4-25 Potential Payment Shock for Consumers from These Alternative Mortgage Products
4-28 Increased Mortgage Defaults and Foreclosures from Alternative Mortgage Products
4-30 Focus Group Findings on Alternative Mortgage Products
4-31 The Characteristics of Borrowers Who Accepted These Alternative Mortgage Products
4-36 Key Concerns Over Alternative Mortgage Products
4-40 What Actions are Needed to Protect Borrowers and Lenders?
SECTION 5 UNDERSTANDING RATE SHEETS, PMI, MORTGAGE CALCULATIONS, GOOD FAITH ESTIMATE & TRUTH-IN-LENDING DISCLOSURE
5-1 Understanding Secondary Market Rate Sheets
5-4 Private Mortgage Insurance
5-14 Mortgage Calculations – Calculating Loan-to-Value and Mortgage Payments
5-17 Understanding the Good Faith Estimate
5-18 The “New” Good Faith Estimate
5-29 Completing the “Old” Good Faith Estimate Form
5-31 Good Faith Estimate – Explanation of Charges
5-36 What are Prepaids?
5-39 How to Determine the Number of Months to Escrow for Property Taxes
5-43 Requiring Particular Providers
5-44 Good Faith Estimate Tolerances and Special Information Booklet
5-47 Understanding the Truth-in-Lending Disclosure
5-48 Fees That Do Affect the APR
5-51 Fees That Do Not Affect the APR
5-57 Explanation of Items on the Truth-in-Lending Disclosure
5-59 Now Your Understand the Basics of Mortgage Calculations
SECTION 6 FEDERAL REGULATIONS AND COMPLIANCE
6-1 Federal regulations overview
6-2 The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act)
6-7 State of Georgia Special Disclosure
6-9 EQUAL CREDIT OPPORTUNITY ACT
6-9 General Overview
6-10 Counteroffer
6-10 Notice of Incompleteness
6-11 Notice of Adverse Action on Denied Applications
6-11 Copy of Appraisal
6-12 Key Provisions – General Rules Prohibiting Discrimination
6-13 Taking Applications and Gathering Information
6-14 Gathering Information
6-16 Spouse’s Signature
6-17 Designation of Name
6-17 Monitoring
6-18 Providing Copy of Uniform Residential Appraisal Report
6-18 Notification of Adverse Action
6-19 Notice of Adverse Action for Denied Loans
6-20 Timing of Notification of Adverse Action
6-21 Notice of Adverse Action for Incomplete Applications
6-21 Timing of Notifications for Notice of Incompleteness
6-21 Notice of Adverse Action for Counteroffer
6-21 Timing of Notification of Counteroffer
6-22 Penalties for Non-Compliance
6-22 Record Retention Requirements
6-23 Most Dangerous Violations
6-24-28 ECOA Disclosures
6-29 REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
6-29 General Overview
6-29 Good Faith Estimate & Settlement Costs Booklet
6-30 Mortgage Servicing Transfer Disclosure
6-30 Computer Loan Origination (CLO) Fee Disclosure
6-31 Controlled Business Arrangement Disclosure
6-31 Requiring Particular Providers
6-32 Initial Escrow Account Statement
6-32 Prohibition Against Kickbacks and Unearned Fees
6-33 Transactions Covered
6-33 Transactions Not Covered
6-34 Good Faith Estimate
6-37 Good Faith Estimate Tolerances
6-37 Requiring Particular Providers
6-39 Special Information Booklet & Mortgage Servicing Transfer Disclosure
6-42 HUD-1/1A Settlement Statement
6-42 One Day Advance Inspection of HUD-1/1A
6-42 Record Keeping
6-43 Prohibition Against Kickbacks and Unearned Fees
6-47 Controlled Business Arrangements, CLOs, and Escrow Disclosure at Closing
6-48 Annual Escrow Account Statement
6-48 Limit on Amount of Escrow Account Funds
6-49 Other RESPA Restrictions
6-50 Penalties for Non-Compliance with RESPA
6-51-62 RESPA Disclosures
6-63 TRUTH-IN-LENDING
6-63 Mortgage Disclosure Improvements Act – Changes to TILA, Requirements to Give Consumers Disclosures Early
6-66 Right of Rescission
6-68 Truth-in-Lending in Advertising
6-68 Revisions in Truth-in-Lending to Improve Mortgage Advertising
6-72 Sample Truth-in-Lending Disclosure
6-73 Notice of Right to Cancel
6-74 The Home Ownership and Equity Protection Act (Section 32 Loans)
6-75 Disclosures
6-76 Limitations
6-77 Prohibited Acts and Practices
6-78 Requirements for Reverse Mortgages
6-79 Projected Total Cost of Credit
6-80 Section 32 Loan Worksheet
6-81 Section 32 Disclosure
6-82 Rules for Protections Covering Higher-Priced Mortgage Loans
6-88 Homeowners Protection Act Governing Cancelation of PMI
6-85-87 PMI Disclosures
6-88 Flood Disaster Protection Act
6-90 Adjustable Rate Mortgages
6-92 Federal Regulations Regarding Advertising
6-93 Fair Credit Reporting Act
6-94 Federal Privacy Law – Gramm-Leach-Bliley Act
6-97 Right to Financial Privacy Act & Fair Housing Act
6-98 The Home Mortgage Disclosure Act (HMDA)
6-100 The USA PATRIOT Act
6-104 The Fair and Accurate Credit Transactions Act of 2003
6-107 The Fair and Accurate Credit Transactions Act – Safeguards Rule Regarding Identity Theft
6-112 Telephone Consumer Protection Act – “Do Not Call” Registry
SECTION 7 MORTGAGE FRAUD & CONSUMER PROTECTION
7-1 Overview
7-2 Mortgage Loan Fraud Reporting Trend
7-4 Appraisal Fraud
7-5 Falsification of Loan Applications
7-5 Purchase Loans Disguised as Refinances
7-5 Short-Term Investments with Guaranteed Re-Purchase
7-6 Property Flipping
7-6 Kickbacks
7-7 Silent Second
7-7 Nominee or “Straw Buyer” Loans
7-8 Fictitious or Stolen Identity
7-8 Foreclosure Schemes
7-8 Equity Skimming
7-8 Air Loans
7-9 Internet Loan Applications
7-9 Sub-Prime Loans
7-9 Material Misrepresentation/False Statements
7-10 Misrepresentation of Loan Purpose
7-11 Forged or False Documentation
7-11 Asset Rental Fraud
7-11 Debt Elimination Fraud
7-12 Other Fraudulent Activity
7-13 Mail Fraud
7-14 Wire Fraud
7-14 Bank Fraud
7-14 Conspiracy
7-14 Money Laundering
7-15 What Can a Mortgage Company Do to Detect or Prevent Fraud?
7-17 Check the Loan Documentation for Fraud
7-17 Loan Application
7-18 Credit Report & VOE
7-19 VOD & Appraisal
7-20 Sales Contract, Title Search, Payroll Checks & Invalid Social Security Numbers
7-21 Miscellaneous
7-22 Resources
7-23 Consumer Protection: What Actions are Being Taken to Protect Consumers?
7-24 Michigan’s Consumer Mortgage Protection Act is a Model to Follow
SECTION 8 ETHICS AND FAIR LENDING IN THE MORTGAGE INDUSTRY
8-1 Definition of Ethics
8-6 Mortgage Bankers Association of America Cannons of Ethics and Standards of Practice
8-8 National Association of Mortgage Brokers Code of Ethics
8-9 National Association of Mortgage Brokers Best Business Practices Guidelines
8-10 Ethical Business Practices Versus Laws and Regulations
8-11 Laws and Ethics in Advertising
8-11 Prohibited Acts or Practices in Mortgage Advertisements
8-12 Ethical Issues on Quoting Rates
8-13 Ethical Issues Relating to Future Rate Increases
8-14 Restrictions on Kickbacks and Unearned Fees
8-18 The Unethical Practice of Loan Originators Processing Their Own Loans
8-18 Unethical Practices with Controlled Business Arrangements
8-21 Non-Discrimination When Taking the Loan Application
8-26 Ethics Regarding Locking In the Interest Rate
8-27 Ethics Regarding the Collection of Yield Spread Premium
8-28 You Must Disclose All Fees Collected
8-28 Ethics Regarding Charging an Application Fee
8-29 The Unethical Practice of Charging Excessive Fees and Rates
8-31 Loan Flipping
8-31 New Rules for Higher Priced Mortgage Loans
8-33 Home Improvement Contractor Schemes
8-34 Ethics Regarding Confidentiality
8-35 Identity Theft Compliance
8-36 Ethics Regarding the Pulling of a Credit Report
8-37 Unethical Practices Regarding Falsified Loan Documentation
8-38 Unethical Practices Regarding Verifying Funds to Close
8-39 Unethical Practices Relating to Appraisals
8-41 Ethical Practices in the Mortgage Industry – Let’s Sum It Up
SECTION 9 GUIDELINES FOR TAKING A DETAILED LOAN APPLICATION
9-1 Importance of Taking a Detailed Loan Application
9-2 Learn Your Loan Programs
9-3 Get Organized
9-5 The Pre-Application Interview
9-9 Additional Information Checklist
9-12 The Face-to-Face Interview
9-13 Step #1 – Review the Sales Contract
9-22 Step #2 – Discuss Available Loan Programs
9-22 Step #3 – Prepare a Good Faith Estimate and Truth-in-Lending Disclosure
9-24 Step #4 – Determine That the Borrowers Meet Qualifying Ratios
9-27 How Much House Can I Afford Worksheet
9-29 Step #5 – What to Do When Ratios are Too High
9-31 Step #6 – Get a Lock-In Agreement Signed
9-33 Completing the Uniform Residential Loan Application
9-41 Sources of Down Payment and Settlement Costs
9-48 Borrower Information
9-50 Employment Information
9-52 Sources of Monthly Income
9-59 Assets and Liabilities – Assets
9-62 Assets and Liabilities – Liabilities
9-65 Schedule of Real Estate Owned
9-66 Credit Under Any Other Name
9-67 Details of Transaction
9-68 Declarations – Judgments, Collection Accounts, Bankruptcy, Foreclosure, etc.
9-72 U. S. Citizen – Permanent or Non-Permanent Resident Alien
9-75 Information for Government Monitoring Purposes
9-77 Get All Required Disclosures Signed
9-79 Let’s Sum It Up...
SECTION 10 PROCESSING THE LOAN
10-1 5 Documents Required in Processing a Loan
10-3 Ordering the Loan Documents
10-4 Ordering the Flood Certification
10-6 Ordering the Appraisal
10-8 Ordering the Credit Report
10-9 What is a Credit Bureau?
10-9 Limited and Automatic Subscribers
10-10 What is a Consumer Reporting Agency?
10-10 What is a Factual Credit Report?
10-13 Codes Used by Credit Bureaus
10-14 Important Information to Remember About Credit Reports
10-14 Review the Following Areas on a Credit Report Carefully
10-16 Different Types of Mortgage Credit Reports
10-20 What is Credit Scoring?
10-25 Sample Credit Report
10-33 Review the Credit Report Carefully
10-34 Documentation Requirements
10-35 Verification of Employment and Income
10-51 Verifying Funds to Close
10-61 Reviewing the Uniform Residential Appraisal Report
10-81 Submitting the Loan Package
10-82 Uniform Underwriting and Transmittal Summary
10-87 Typical Order for Submission
SECTION 11 CONVENTIONAL REFINANCE TRANSACTIONS
11-1 Conventional Refinance Transactions
11-1 Limited Cash-Out Transactions
11-3 Cash-Out Refinance Transactions
11-4 Maximum Loan-to-Value Guidelines for Refinance Transactions
11-5 Calculating the Loan Amount for Refinance Transactions
11-6 Case Study for a Rate & Term Limited Cash-Out Refinance
11-10 Case Study for a Cash-Out Refinance Transaction
11-14 Refinance Transactions – Documentation Needed
