RAM MORTGAGE PRESENTS STUDY MATERIAL FOR THE MORTGAGE LOAN ORIGINATOR (MLO) TEST

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RAM MORTGAGE PRESENTS STUDY MATERIAL FOR THE
MORTGAGE LOAN ORIGINATOR (MLO) TEST

• MORTGAGE LOAN BROKERS---ARE REAL ESTATE
  PROFESSIONALS ACTING AS THE INTERMEDIARY BETWEEN
  THE CONSUMER AND THE LENDER IN A MORTGAGE
  TRANSACTION.
• INSTITUTIONAL LENDERS---ARE FINANCIAL
  INSTITUTIONS THAT ARE REGULATED BY LAW. THEY
  INCLUDE COMMERCIAL BANKS, SAVINGS BANKS,
  INSURANCE COMPANIES, CREDIT UIONS, AND FINANCE
  COMPANIES , AS WELL AS GOVERNMENT CHARTERED
  COOPERATIONS SUCH AS FNMA (FANNIE MAE) AND FHLMC
  (FREDDIE MAC).

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GOVERNMENT LOAN PROGRAMS

• GNMA VA FHA
• MAX LOAN AMOUNT
• LTV 100 96.5
• DOWNPAYMENT 0 3.5
• RATIOS 0/41 36/50
• MINIMUM CREDIT SCORE 680
• DOCUMENTATION TYPE FULL FULL
• PMI/MIP 2 2.25
• OWNER OCCUPIED (O) O/NON OWNER
• /NON-OWNER (NON)

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RATIOS AND CREDIT SCORING

• PITI (TOTAL MONTHLY PAYMENT)
• FRONT END RATIO GROSS MONTHLY INCOME
• PITI ALL OTHER MONTHLY DEBTS
• BACK END RATIO GROSS MONTHLY INCOME
• CREDIT SCORES RANGE FROM 400 TO 900
• BANKRUPTCY SCORE RANGES FROM 0 TO 1300 WITH A
  HIGHER
• NUMBER INDICATING A GREATER RISK OF DEFAULT

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ABILITY TO REPAY THE LOAN

• SELF-EMPLOYED TAX RETURNS OFTEN FAIL TO REFLECT
• ACTUAL NET INCOME. IN MANY CASES A SELF-EMPLOYED
• PERSON IS ABLE TO TAKE DEDUCTIONS FOR TAX
  PURPOSES
• THAT DISTORT THE TRUE INCOME PICTURE.
• ALT-A PROGRAMS--- USES 12 TO 24 MONTHS PERSONAL
  BANK
• STATEMENTS TO SUPPORT THE INCOME STATED ON THE
  LOAN
• APPLICATION.
• STATED IS ALMOST A LOAN PRODUCT THAT IS GONE. A
  TRUE
• STATED INCOME PROGRAM IS DEFINETELY GONE.

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TYPES OF SUBPRIME LOANS

• THREE TYPES OF SUBPRIME LOANS
• 1. HARD MONEYOWNER ACCEPTS CASH FROM A LENDER
  IN
• EXCHANGE FOR A PROMISE TO PAY (NOTE)
  SECURED BY
• REAL ESTATE OWNED BY THE BORROWER.
• CHARCTERISTICS ARE SHORT TERM, HIGHER
  INTEREST
• RATE AND LOWER LOAN TO VALUE. PURCHASE
  MONEY
• LOANS ( THOSE AT TIME OF PURCHASE) ARE
  NOT
• REGARDED AS HARD MONEY LOANS.
• 2. SOFT MONEY---ARE LOANS WHERE CASH DOES NOT
• CHANGE HANDS..SUCH AS SELLER
  CARRY-BACK. THE
• SELLER GIVES TITLE IN EXCHANGE FOR A
  NOTE SECURED
• BY A DEED OF TRUST WHICH IS A LIEN
  AGAINST THE
• PROPERTY CONVEYED.

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TYPES OF SUBPRIME LOANS

• 3. EQUITY LOANS---ARE LOANS MADE BASED UPON AN
• OWNERS EQUITY IN REAL PROPERTY. EQUITY
  IS THE
• DIFFERENCE BETWEEN FAIR MARKET VALUE AND
  THE
• INDEBTEDNESS AGAINST THE PROPERTY.
• PRIVATE LENDERS----ARE PERSONS OR FIRMS WHO WISH
  TO
• RECEIVE A HIGHER RATE OF RETURN FOR THEIR SAVINGS
  THAN
• WOULD BE POSSIBLE FROM OTHER AVAILABLE
  INVESTMENTS.
• IN CALIFORNIA, PRIVATE INDIVIDUALS MAY NOT MAKE A
  LOAN
• THAT EXCEEDS 10 INTEREST OR 5 ABOVE THE SAN
• FRANCISCO FEDERAL RESERVE BANKS RATE FOR
  ADVANCES
• TO MEMBER BANKS, WHICHEVER IS GREATER. THIS IS
  CALLED
• USURY RESTRICTIONS. LOANS ARRANGED BY REAL ESTATE
  
• BROKERS ARE EXEMPT FROM USURY LIMITATIONS BUT ARE
  NOT
• WITHOUT ANY LIMITATIONS. CONTRACT LAW HOLDS THAT
  AN
• UNCONSCIONABLE CONTRACT WILL NOT BE ENFORCED BY
  THE
• COURTS.

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PRIMARY AND SECONDARY MORTGAGE MARKETS

• PRIMARY MARKETIS WHERE LOANS ARE MADE DIRECTLY
  TO
• THE BORROWER.
• SECONDARY MARKET---INVOLVES THE SALE OF EXISTING
• LOANS. MORTGAGE BROKERS USUALLY ARE NOT INVOLVED.
• MORTGAGE BANKERSDIFFER FROM MORTGAGE BROKERS IN
• THAT THEY GENERALLY ARE NOT THIRD PARTIES TO A
  LOAN.
• THEY NORMALLY FUND THE LOAN WITH THEIR OWN FUNDS.
• MORTGAGE BANKERS ARE ENGAGED IN THE PRIMARY
• MORTGAGE MARKET WHEN MAKING THE LOAN AND IN THE
• SECONDARY MARKET IN THE SALE OF THE LOAN.
  MORTGAGE
• BANKERS ARE ALSO KNOW AS MORTGAGE COMPANIES. THEY
• PRIMARILY DEAL IN RESIDENTIAL PROPERTIES.

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TWO WAYS TO SELL MORTGAGE LOANS

• TWO WAYS TO SELL A LOAN
• A. SERVICE RETAINED---MEANS THE MORTGAGE BANKER
  OR
• INSTITUTION SELLS THE LOAN BUT KEEPS
  THE SERVICING.
• B. SERVICE RELEASED---MEANS THE MORTGAGE BANKER
  OR
• INSTITUTION SELLS THE LOAN AND
  SERVICING AS WELL.
• IF A MORTGAGE BANKER OR INSTITUTION BELIEVES THAT
• INTEREST RATES WILL FALL, HE OR SHE WILL WANT TO
  HOLD AS
• LARGE A LOAN INVENTORY AS POSSIBLE.
• REASON LENDERS WANT HUGE DOLLAR PACKAGES OF
• MORTGAGES IS SO THEY CAN ISSUE MORTGAGE-BACKED
• SECURITIES. MORTGAGE WAREHOUSING IS WHERE
  MORTGAGE
• BANKERS BORROW FROM COMMERCIAL BANKS USING THEIR
• MORTGAGE INVENTORY TO OBTAIN ADDITIONAL CAPITAL
  FOR LOANS.

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CONFORMING AND NON-CONFORMING LOANS

• CONFORMING LOANS---a conforming loan is a
  mortgage loan that
• conforms to GSE (developed by FANNIE FREDDIE
  MAC) guidelines.
• NON-CONFORMING LOANSany loan not meeting
  conforming loan
• guidelines.
• PIGGY-BACK LOANS
• A. PARTICIPATING LOANS---WHERE A SINGLE LOAN IS
  DIVIDED INTO
• PARTS AND THE PARTS HAVE VARYING
  DEGREES OF RISK.
• EXAMPLE 1,000,000 LOAN
• LENDER A TAKES THE BOTTOM PORTION 700,000 AT
  9.5
• LENDER B TAKES THE TOP PROTION 300,000 AT
  12.5
• THE SECOND LENDER IS SUBORDINATE TO THE FIRST
  LENDER THUS IS
• AT GREATER RISK. THE BLENDED RATE IS 10.5.

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STATE LICENSING REQUIREMENTS

• REAL ESTATE COMMISSIONER REQUIREMENTS
• 1. REQUIRES 5 YEARS OF ACTIVE PARTICIPATION IN
  THE REAL
• ESTATE BUSINESS IN CALIFORNIA AS A
  BROKER.
• 2. CANNOT ACTIVELY ENGAGE IN THE BROKER OR
• SALESPERSON ACTIVITIES THAT ARE
  REGULATED BY THE
• DEPARTMENT OF REAL ESTATE.
• THE COMMISSIONER HAS THE POWER TO ADOPT, AMEND OR
  
• REPEAL RULES AND REGULATIONS NECESSARY FOR THE
• ENFORCEMENT OF THE REAL ESTATE LAW.
• ADMINISTRATIVE PROCEDURE ACT
• 1. INJUCTIONIS A COURT ORDER THAT FORBIDS A
  PERSON
• FROM PERFORMING OR PERMITTING AN ACT.

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STATE LICENSING REQUIREMENTS

• 2. RECEIVERWHERE IT CAN BE SHOWN TO THE COURTS
• SATISFACTION THAT
  THE VIOLATIONS OR
• THREATENED
  VIOLATIONS JEOPARDIZE FUNDS
• AND PROPERTIES OF
  OTHERS.
• IF AN AUDIT REVEALS COMMINGLING OR CONVERSION OF
  MORE
• THAN 10,000 IN TRUST FUNDS, THE COURT MAY
  PREVENT THE
• LICENSEE FROM PERFORMING ANY ACTS OR PRIVILEGES
  OF
• HIS/HER REAL ESTATE LICENSE PENDING FURTHER COURT
• ORDER. WITHIN 5 DAYS A HERAING MUST BE HELD AND
  A
• RECEIVER MAY BE APPOINTED TO EXERCISE ALL THE
  POWERS
• OF THE LICENSEE INCLUDING FILING A PETITION FOR
• BANKRUPTCY.
• 3. ORDER TO DESIST AND REFRAIN---THE ORDER SHALL
• SPECIFY THE ACTIVITY AS WELL AS THE
  FACTUAL AND LEGAL
• BASIS FOR THE ORDER. WITHIN 30 DAYS
  AFTER RECEIPT OF AN
• ORDER THE RESPONDENT MAY REQUEST A
  HEARING.
• STATUE OF LIMITATIONS IS THREE YEARS FROM
  OCCURRENCE AND HAS

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STATE LICENSING REQUIREMENTS

• STEPS IN AN ADMINISTRATIVE PROCEDURES
• 1. ACCUSATION---SHALL BE A WRITTEN STATEMENT OF
• CHARGES IN ORDINARY AND CONCISE LANGUAGE
  THE ACTS
• OR COMISSIONS WITH WHICH THE RESPONDENT
  IS
• CHARGED.
• 2. STATEMENT OF ISSUES---SHALL BE A WRITTEN
  STATEMENT
• SPECIFYING THE STATUES AND RULES WITH
  WHICH THE
• RESPONDENT MUST SHOW COMPLIANCE BY
  PRODUCING
• PROOF AT THE HEARING.
• 3. STATEMENT TO RESPONDENTSETS FORTH THE RIGHT
  TO
• REQUEST A HEARING.
• 4. NOTICE OF DEFENSE---WITHIN 15 DAYS AFTER
  SERVICE OF
• THE ACCUSATION MAY FILE WITH THE AGENCY
  HIS/HER
• DEFENSE OR DENIAL.

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STATE LICENSING REQUIREMENTS

• 5. PREHEARINGCONFERRENCE TO CLARIFY ISSUES,
  OBTAIN
• INITIAL
  RULINGS, OBJECT TO EVIDENCE,
• ETC. AS WELL
  AS TO EXPLORE SETTLEMENT
• 
  POSSIBILITIES WITHOUT THE NECESSITY OF
• A HEARING.
• 6. THE HEARINGAN ADMINISTRATIVE LAW JUDGE
  PRESIDES
• OVER THE
  HEARING.
• 7. RECONSIDERATIONTHE ACCUSED PARTY OR THE
• 
  DEPARTMENT OF REAL ESTATE CAN
• 
  ASK FOR RECONSIDERATION OF ALL
• 
  OR PART OF THE DECISION BY THE
• 
  ADMINISTRATIVE LAW JUDGE.
• 8. JUDICIAL REVIEWA LICENSEE MAY FILE A
  PETITION FOR
• 
  JUDICIAL REVIEW OF DISCIPLINARY
• 
  ACTION BEFORE THE SUPERIOR COURT.

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STATE LICENSING REQUIREMENTS

• PENALTIESTHE RESULT OF DISCIPLINARY HEARINGS CAN
  BE
• FINES, RESTITUTION,
  SUSPENSION, OR REVOCATION
• OF A LICENSE.
• THE RESTRICTED LICENSE DOES NOT GIVE A LICENSEE
  ANY
• PRIVILEGES OR AUTOMATIC RENEWAL RIGHTS.
• A PERSON MUST BE LICENSED AT THE TIME A
  COMMISSION WAS
• EARNED.
• RECOVERY ACCOUNTTHE FUND SHALL BE LIABLE FOR NO
• MORE THAN 20,000 FOR ANY SINGLE ACTION AND NO
  MORE
• THAN 100,000 FOR ANY LICENSEE. IF PAYMENT IS
  MADE FROM
• THE RECOVERY ACCOUNT, ALL LICENSES AND LICENSE
  RIGHTS
• THAT YOU HAVE UNDER THE REAL ESTATE LAW WILL BE
• AUTOMATICALLY SUSPENDED ON THE DATE OF PAYMENT
  AND CANNOT
• BE REINSTATED UNTIL THE RECOVERY ACCOUNT HAS BEEN
  
• REIMBURSED FOR THE AMOUNT PAID PLUS INTEREST AT
  THE
• PREVAILING RATE.

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STATE LICENSING REQUIREMENTS

• REAL ESTATE BROKER IS ONE WHO
• 1.SELLS OR OFFERS TO SELL, BUYS OR OFFERS TO
  BUY,
• SOLICITS PROPECTIVE SELLERS OR PURCHASERS
  OF,
• SOLICITS OR OBTAINS LISTINGS OF, OR
  NEGOTIATES THE
• PURCHASE, SALE OR EXCHANGE OF REAL ESTATE
• PROPERTY OR A BUSINESS OPPORTUNITY.
• 2.LEASES OR RENTS OR OFFERS TO LEASE OR RENT, OR
• PLACES FOR RENT, OR SOLICITS FOR
  PROSPECTIVE
• TENANTS,OR NEGOTIATES THE SALE, PURCHASE
  OR
• EXCHANGES OF LEASES ON REAL PROPERTY, OR
  ON A
• BUSINESS OPPORTUNITY, OR COLLECTS RENTS
  FROM REAL
• PROPERTY, OR IMPROVEMENTS THEREON, OR
  FROM
• BUSINESS OPPORTUNITIES.
• 3.ASSISTS OF, OFFERS TO ASSIST IN FILING AN
  APPLICATION FOR
• THE PURCHASE OR LEASE OF, OR IN LOCATING
  OR ENTERING
• UPON, LANDS OWNED BY THE STATE OR
  FEDERAL GOVERNMENT.

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STATE LICENSING REQUIREMENTS

• 4.SOLICITS BORROWERS OR LENDERS FOR OR
  NEGOTIATES
• LOANS OR COLLECTS PAYMENTS OR PERFORMS
  SERVICES
• FOR BORROWERS OR LENDERS OR NOTE OWNERS
  IN
• CONNECTION WITH LOANS SECURED DIRECTLY OR
• COLLATERALLY BY LIENS ON REAL PROPERTY OR
  ON A
• BUSINESS OPPORTUNITY.
• 5. SELLS OR OFFERS TO SELL, BUYS OR OFFERS TO
  BUY, OR
• EXCHANGES A REAL PROPERTY SALES
  CONTRACT, OR A
• PROMISSORY NOTE SECURED DIRECTLY OR
• COLLATERALLY BY A LIEN ON REAL PROPERTY
  OR ON A
• BUSINESS OPPORTUNITY, AND PERFORMS
  SERVICES FOR
• THE HOLDERS THEREOF.
• THE PRIMARY PURPOSE OF LICENSING REAL BROKERS IS
  TO
• PROTECT THE PUBLIC. ALL LICENSEES ARE REQUIRED TO
  BE
• FINGERPRINTED.

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STATE LICENSING REQUIREMENTS

• AN APPLICANT MUST BE 18 YEARS OF AGE. THEY NEED
  NOT BE A
• RESIDENT OF CALIFORNIA. LICENSE APPLICANTS MUST
  BE
• HONEST AND TRUTHFUL. CONVICTION OF A CRIME THAT
  IS
• EITHER A FELONY OR INVOLVES MORAL TURPITUDE MAY
• RESULT IN DENIAL OF A LICENSE.
• A MINIMUM OF TWO YEARS FULL-TIME EXPERIENCE IS
  REQUIRED
• AS A REAL ESTATE SALESPERSON TO APPLY FOR A
  BROKERS
• LICENSE.
• A FOUR-YEAR DEGREE FROM AN ACCREDITED COLLEGE
• EXEMPTS THE APPLICANT FROM THE EXPERIENCE
  REQUIREMENT.
• GRADUATES OF AN ACCREDITED LAW SCHOOL ARE EXEMPT
  FROM
• THE EXPERIENCE AND EDUCATION REQUIREMENTS.
• PERSONS HAVING AA DEGREE NEED ONLY HAVE ONE YEAR
• EXPERIENCE AS A SALES PERSON TO APPLY FOR A
  BROKERS LICENSE.

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STATE LICENSING REQUIREMENTS

• THERE IS NO PARTNERSHIP LICENSE ALTHOUGH A BROKER
  CAN
• BE A PARTNER WITH ANOTHER BROKER.
• A CORPORATION CAN BE LICENSED AS A BROKER.
• THE DESIGNATED BROKER FOR THE CORPORATION IS
• RESPONSIBLE FOR THE SUPERVISION AND CONTROL OF
  THE
• ACTIVITIES CONDUCTED ON BEHALF OF THE CORPORATION
  BY
• ALL OTHER OFFICERS AND EMPLOYEES SO AS TO ENSURE
  FULL
• COMPLIANCE WITH THE LAW.
• A REAL ESTATE SALESPERSON IS LICENSED BY DRE TO
  WORK
• UNDER THE SUPERVISION OF A LICENSED BROKER.

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STATE LICENSING REQUIREMENTS

• LICENSING REQUIREMENTS FOR A REAL ESTATE
  SALESPERSON
• INCLUDE
• MUST BE AT LEAST 18 YEARS OLD
• MUST BE HONEST AND TRUTHFUL
• FOR A 4 YEAR RENEWABLE LICENSE AN APPLICANT
  MUST
• PASS A COLLEGE-LEVEL REAL ESTATE COURSE, A
  REAL
• ESTATE PRACTICE COURSE, AND OTHER BROKER
  APPROVED
• COURSE.
• APPLICANT MUST SUBMIT AN APPLICATION (FORM RE
  400A)
• TO TAKE THE EXAMINATION. MUST PASS STATE
  EXAM WITH
• A MINIMUM SCORE OF 70.

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DEPARTMENT OF CORPORATION LICENSING

• PERSONAL PROPERTY BROKERS--- INCLUDES ALL PERSONS
• ENGAGED IN LENDING MONEY AND TAKING AS SECURITY
  ANY
• CONTRACT OR OBLIGATION THAT COULD RESULT IN THE
• FORFEITURE OF RIGHTS IN OR TO PERSONAL PROPERTY.
• 1995 THE PERSONAL PROPERTY BROKERS LAW, CONSUMER
• FINANCE LENDERS LAW, THE COMMERCIAL FINANCE
  LENDERS
• LAW WERE CONSOLIDATED INTO THE CALIFORNIA FINANCE
  
• LENDERS LAW.
• CFL---IS ANY PERSON LICENSED UNDER THIS LAW WHO
  MAKE OR
• BROKER LOANS SECURED BY PERSONAL PROPERTY, OR A
• COMBINATION OF REAL AND PERSONAL PROPERTY. REAL
• PROPERTY SECURED LOANS MUST BE FOR OVER 5,000.

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DEPARTMENT OF CORPORATION LICENSING

• A CFL CAN BE LICENSED AS A LENDER, A BROKER, OR
  BOTH.
• A CFL BROKER MAY ONLY BROKER LOANS TO A DIRECT
  LENDER
• LICENSED UNDER THE CALIFORNIA FINANCE LENDERS LAW
  BY
• THE DEPARTMENT OF CORPORATIONS. BROKERING OF A
  LOAN
• SECURED BY REAL PROPERTY TO ANY OTHER LENDER SUCH
  AS
• A BANK, SAVINGS BANK, OR THRIFT AND LOAN IS NOT
• AUTHORIZED.
• CRITERIA FOR FUNDING CFL LOANS
• 1. APPROVAL NOT CONSISTANT WITH AN INSTITUTIONAL
  .
• LENDERS APPROVAL CRITERIA.
• 2. LICENSEE MUST BE THE BENEFICIARY ON THE
  PROMISSORY NOTE.
• 3. LICENSEE MUST USE THEIR OWN FUNDS TO MAKE THE
  LOAN.

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DEPARTMENT OF CORPORATION LICENSING

• A CFL LICENSEE MAY BE AN INDIVIDUAL,
  PARTNERSHIP, CORPORATION,
• JOINT VENTURE, ASSOCIATION, JOINT STOCK COMPANY,
  TRUST,
• GOVERNMENT ENTITY, OR POLITICAL SUBDIVISION OF A
  GOVERNMENT
• PERSON OR GROUP.
• NO EXAMINAMTION IS REQUIRED FOR A CFL LICENSE.
  EVERY LOCATION
• AT WHICH ACFL LICENSE WISHES TO CONDUCT BUSINESS
  MUST BE
• LICENSED.
• APPLICANTS MUST
• 1. HAVE NET WORTH OF 25,000
• 2. PAY A 200 APPLICATION FEE AND A 100
  INVESTIGATION FEE
• 3. PROVIDE AND MAINTAIN A 25,000 SURETY BOND.
• 4. FILE AN ANNUAL FINANCIAL AND STATISTICAL
  REPORT FOR THE
• PRIOR CALENDAR YEAR
• 5. CALIFORNIA RESIDENTIAL MORTGAGE LOAN REPORT
  MUST BE
• SUBMITTED BY MARCH 31 OF EACH YEAR FOR
  THE PRIOR CALENDAR YEAR

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DEPARTMENT OF CORPORATION LICENSING

• FAILURE TO PAY ANNUAL ASSESSMENT WILL RESULT IN
  REVOCATION OF
• A LICENSE.
• CRMLAAPPLIES TO ONE TO FOUR RESIDENTIAL UNITS
  AND IS
• ADMINISTERED BY THE DEPARTMENT OF CORPORATIONS.
  EXEMPT FROM
• THIS REGULATION INCLUDE
• 1. BUSINESS LENDERS (AS WELL AS AGRICULTURAL)
• 2. BANKS AND SAVINGS BANK
• 3. INSURANCE COMPANIES
• 4. CREDIT UNIONS
• 5. PRIVATE INDIVIDUALS USING THEIR OWN FUNDS
• TYPES OF LICENSES UNDER CRMLA
• 1. CRMLA LENDER---IS LIMITED TO 5 OF TOTAL
  LOANS CAN BE BROKERED
• 2. CRMLA SERVICERIS ONE WHO RECEIVES MORE THAN
  3 INSTALLMENT
• PAYMENTS OF PRINCIPAL AND INTEREST.

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DEPARTMENT OF CORPORATION LICENSING

• CRMLA REQUIREMENTS ARE
• 1. NET WORTH OF 250,000 AND MAINTAINED AT ALL
  TIMES
• 2. PROVIDE AND MAINTAIN A SURETY BOND OF 50,000
• 3. PAY 900 FILING FEE AND 100 INVESTIGATION
  FEE
• 4. NO EXAMINATION OR TEST IS REQUIRED
• 5. USE OF INDEPENDENT CONTRACTORS IS FORBIDDEN
• 6. LICENSEES NEED NOT HAVE A CALIFORNIA PLACE OF
  BUSINESS
• 7. SUBJECT TO EXAMINATION OF BOOKS AND RECORDS
  ANYTIME BUT SUCH AN EXAMINATION SHALL BE AT LEAST
  ONCE EVERY 48 MONTHS
• 8. ANNUAL REPORTS ARE DUE BY MARCH 1
• 9. AUDITED REPORT MUST BE FILED WITH THE
  COMMISSIONER WITHIN 105 DAYS OF LICENSEES FISCAL
  YEAR
• HOUSING FINANCIAL DISCRIMINATION ACT OF 1977
  REQUIRES CERTAIN
• REPORTING (SUCH AS REDLINING) FOR LOANS MADE IN
  CALIFORNIA.

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MORTGAGE LOAN ACTIVITIES REQUIRING A LICENSE

• BROKERIS A PERSON WHO, FOR A COMPENSATION OR IN
• EXPECTATION OF A COMPENSATION,
  REGARDLESS OF
• THE FORM OR TIME OF PAYMENT,
  PERFORMS ONE OF
• THE ACTS DESIGNATED BY
  BUSINESS AND
• PROFESSIONAL CODE 10131.
• THE CODE STATES FOR ANOTHER OR OTHERS FALLS
  WITHIN
• THE DEFINITION OF A BROKER.
• IN THE BUSINESS REFERS TO ACQUIRING LOANS FOR
  RESALE,
• NOT TO KEEP AS AN INVESTMENT. TO BE IN THE
  BUSINESS
• MEANS ACQUIRING 8 OR MORE REAL ESTATE LOANS IN
  ONE
• CALENDAR YEAR.
• THE REAL ESTATE COMMISSIONER REQUIRES THAT
  SOLICITATION
• MATERIAL USED BY ADVANCE FEE BROKERS BE SUBMITTED
  TO THE
• COMMISSIONER AT LEAST 10 DAYS PRIOR TO USE.

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MORTGAGE LOAN ACTIVITIES REQUIRING A LICENSE

• IT IS UNLAWFUL FOR ANY PERSON TO CLAIM, DEMAND,
  CHARGE,
• RECEIVE, COLLECT OR CONTRACT FOR AN ADVANCED FEE
  FOR
• SOLICITING LENDERS ON BEHALF OF BORROWERS.
• A BROKERS LICENSE IS REQUIRED FOR ALL DEALING
  WITH MINERIAL,
• OIL OR GAS PROPERTIES UNLESS THE PERSON IS THE
  OWNER OR HAS
• POWER OF ATTORNEY TO ACT ON BEHALF OF THE OWNER
  OR IS MINING
• FOR SUCH MINERIALS.
• SECURITIES LAW OF 1968 PUTS THE RESPONSIBILTY FOR
  BROKER
• -DEALER OR AGENT ACTIONS ON THE COMMISSIONER OF
• CORPORATIONS NOT DRE.
• LOAN CORRESPONDENT---IS A PERSON OR FIRM THAT
  ACTS FOR A
• LENDER IN ARRANGING LOANS OR THE SALE OF
  EXISTING LOANS FOR
• COMPENSATION. A PERSON IS EXEMPT FROM THIS
  LICENSING IF HE/SHE
• ACTED FOR ONE SAVINGS BANK AND UNDER A WRITTEN
  AGREEMENT. THIS DOES
• NOT APPLY TO GOVERNMENT LOANS SUCH AS VA OR FHA.

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EXEMPTIONS FROM LICENSING REQUIREMENTS

• LICENSING IS BASED ON DOING ACTS FOR OTHERS,
  EXEMPTION
• IS A PRINCIPAL WHO DEALS FOR HIM/HER SELF.
• THE STATUE REGARDING THE BUYING AND SELLING
• MORTGAGES AND TRUST DEEDS THE INDIVIDUAL OR FIRM
  IS
• EXEMPT IF SEVEN OR FEWER TRANSACTION ARE DONE IN
  ONE
• CALENDAR YEAR.
• THERE IS NO THRESHOLD NUMBER OF MINERAL, OIL, OR
  GAS
• TRANSACTIONS ALLOWED PRIOR TO THE REAL ESTATE
  BROKER
• LICENSING REQUIREMENTS.
• REAL ESTATE LAW REQUIRES THAT THE ENGAGEMENT IN
  LISTED
• ACTIVITIES BE FOR COMPENSATION. DOING ACTS
  WITHOUT
• COMPENSATION MAY EXEMPT A PERSON FROM LICENSING
• REQUIREMENTS.

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EXEMPTIONS FROM LICENSING REQUIREMENTS

• A REGULAR OFFICER OF A CORPORATION OR A GENERAL
• PARTNER OF A PARTNERSHIP CAN LEASE OR SELL REAL
• PROPERTY OWNED BY THE CORPORATION OR PARTNERSHIP
  AS
• WELL AS BUY OR LEASE REAL PROPERTY FOR THE
• PARTNERSHIP OR CORPORATION.
• AN ATTORNEY AT LAW CANNOT TAKE SALE LISTING OR
• OTHERWISE ENGAGE IN LICENSED ACTIVITIES WHEN NOT
• DIRECTLY RELATED TO ACTING IN A LEGAL CAPACITY.
• ATTORNEYS MAY NOT SHARE FEES OR DISBURSEMENTS
  DIRECTLY OR
• INDIRECTLY WITH OTHER PERSONS WHO NEGOTIATED THE
  LOAN OR
• WITH THE LENDER.
• LICENSED AND CHARTERED LENDERS ACTING UNDER STATE
  OR
• FEDERAL LICENSE OR CHARTER CAN HANDLE LOAN
• TRANSACTIONS AND SECURITIES SECURED BY REAL
  ESTATE
• EVEN THOUGH THEY ARE NOT LICENSED AS REAL ESTATE
  BROKERS.

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EXEMPTIONS FROM LICENSING REQUIREMENTS

• OTHERS EXEMPT FROM REQUIRED LICENSING INCLUDE
• 1. PERSONS PERFORMING CLERICAL WORK
• 2. MANAGER OF A HOTEL, MOTEL, OR AUTO AND
  TRAILER PARK
• 3. MANAGER OF AN APARTMENT BUILDING OR COMPLEX
• 4. PURCHASE, SALE OR EXCHANGE OF RADIO,
  TELEVISION, OR
• CABLE BUSINESS OPPORTUNITY NOT INVOLVING
  REAL PROPERTY
• 5. MINERAL, OIL, AND GAS TRANSACTIONS BY ORDER
  OF A COURT OF
• COMPETENT JURISDICTION
• EMPLOYEES OF PROPERTY MANAGEMENT FIRMS CAN
• 1. SHOW RENTAL UNITS
• 2. PROVIDE AND ACCEPT PREPRINTED RENTAL
  APPLICATIONS
• 3. ACCEPT DEPOSITS OR FEES FOR CREDIT CHECKS OR
• ADMINISTRATIVE COST
• 4. PROVIDE INFORMATION ABOUT RENTAL UNITS SET
  FORTH BY
• EMPLOYER
• 5. ACCEPT SIGNED LEASES AND RENTAL AGREEMENTS
• FINDERS FEES ARE LEGAL IN CALIFORNIA PROVIDING
  THE FINDER IS SIMPLY

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SUPERVISION AND LICENSING COMPLIANCE

• IN CALIFORNIA, A BROKER HAS BOTH A NEED AND
  LEGAL DUTY
• TO SUPERVISE, HIS OR HER SALESPEOPLE. BROKERS
  SHOULD
• KNOW AS MUCH ABOUT THE CHARACTER OF THEIR
• SALESPERSONS AS REASONABLY POSSIBLE.
• CORRECTIONS OF A PROBLEM AFTER THE FACT CAN BE
• EXPENSIVE AND IT MIGHT ALSO PLACE THE BROKERS
  LICENSE
• IN JEOPARDY.
• BUSINESS AND PROFESSIONAL CODE SECTION 10177(H)
• PROVIDES THAT BROKERS ARE SUBJECT TO DISCIPLINARY
• ACTION IF THEY FAIL TO EXERCISE REASONABLE
  SUPERVISION
• AND CONTROL OVER THE ACTIVITIES OF THEIR SALES
  PERSONS.

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SUPERVISION AND LICENSING COMPLIANCE

• BROKERS ARE REQUIRED TO IMMEDIATELY AND IN
  WRITING
• NOTIFY THE COMMISSIONER WHENEVER EMPLOYMENT OF A
• SALES PERSON IS STARTED OR TERMINATED.
• IF A SALESPERSON IS DISCHARGED FOR A VIOLATION
  OF THE
• REAL ESTATE LAW THAT SUBJECT THE SALESPERSON TO
• DISCIPLINARY ACTION BY THE COMMISSIONER, A
  CERTIFIED
• WRITTEN STATEMENT OF FACTS MUST BE IMMEDIATELY
• PROVIDED TO THE COMMISSIONER.
• THE COMMISSIONER CAN DENY, SUSSPEND, OR REVOKE A
  REAL
• ESTATE LICENSE OF A CORPORATE OFFICER OR AGENT
  ACTING
• UNDER ITS LICENSE WITHOUT REVOKING THE LICENSE OF
  THE
• CORPORATION.
• DEFRAUDING A FEDERALLY INSURED LENDER OR AGENCY
  IS A
• FEDERAL CRIME PUNISHABLE BY UP TO 30 YEARS
  IMPRISIONMENT AND
• UP TO ONE MILLION DOLLARS IN FINES.

32
SUPERVISION AND LICENSING COMPLIANCE

• BROKER IS NO LONGER REQUIRED TO REVIEW ,
  INITIALING, AND
• DATING ALL DOCUMENTS OF HIS/HER SALESPEOPLE
  WITHIN 5
• DAYS AFTER PREPARATION OR SIGNING, OR BEFORE
  CLOSE OF
• ESCROW WHICHEVER COMES FIRST.
• THE BROKER IS ALLOWED TO USE THE SERVICES OF
• SALESPERSONS AND OTHER BROKERS TO ASSIST IN
• ADMINISTERING SALESPERSON SUPERVISION.
• A BROKER MUST HAVE A WRITTEN CONTRACT WITH
  HIS/HER
• SALESPEOPLE.
• A BROKER MUST MAINTAIN A DEFINITE PLACE OF
  BUSINESS IN
• CALIFORNIA.
• EACH BRANCH MAINTAINED BY THE BROKER MUST HAVE A
  SEPARATE
• LICENSE.

33
SUPERVISION AND LICENSING COMPLIANCE

• A REAL ESTATE BROKER ACTING AS A SALESPERSON FOR
• ANOTHER BROKER MUST BE UNDER A WRITTEN CONTRACT
  AND
• MAY PERFORM SERVICES ON BEHALF OF THE EMPLOYING
• BROKER AT ANY LOCATION WHERE THE BROKER IS
  LICENSED.
• A FICTITIOUS NAME IS A NAME OTHER THAN THE
  SURNAME OF
• THE PRINCIPAL (S). It is also known as an assumed
  name. Fictitious
• name statements are good for 5 years and can be
  renewed.
• GUIDELINES FOR AN UNLICENSED ASSISTANT INCLUDE
• 1. PERFORMING ONLY ACTIVITIES NOT REQUIRING A
  LICENSE
• 2. COLD CALLING AND OBSERVING THE DO NOT CALL
  LIST
• 3. OPEN HOUSE MAY GREET PUBLIC, PLACE SIGNS OR
  HAND
• OUT PREPRINTED MATERIAL, PREPARE
  COMPARATIVE MARKET
• ANALYSIS, ARRANGE APPOINTMENTS, PREPARE
  AND DESIGN
• ADVERTISING,PREPARE DOCUMENTS, ARRANGE
  PICKUP OR
• MAILINGS, ACCEPT RECEIPT FOR TRUST FUNDS
  OR PRINCIPALS,
• COMMUNICAT WITH PRINCIPALS, AND REVIEW
  DOCUMENTS.

34
SUPERVISION AND LICENSING COMPLIANCE

• PROBLEMS IN TELEMARKETING LOANS INCLUDE
• 1. MISLEADING VERBEGE
• 2. COMPENSATION
• FORECLOSURE CONSULTANT LAW
• 1. REUIRES FORECLOSURE CONSULTANT CONTRACTS BE
  IN WRITING
• 2. SAFEGUARDS PUBLIC AGAINST DECEIT AND
  FINANCIAL HARDSHIPS
• 3. PERMIT RECISSION (WITHIN 3 BUSINESS DAYS) OF
  FORECLOSURE
• CONSULTANT CONTRACTS
• CIVIL CODE SECTION 2945(B) SHOW PROFESSIONAL
  EXEMPT FROM
• THESE FORECLOSURE CONSULTANT LAWS SUCH AS
  ATTORNEYS. REAL
• ESTATE BROKERS INVOLVED IN SALE OF A FORECLOSURE
  , LENDERS,
• ETC.

35
AGENCY

• AGENTIS ONE WHO ACTS FOR OR REPRESENTS ANOTHER
• CALLED THE PRINCIPAL IN DEALING WITH THIRD
  PARTIES.
• IN REAL ESTATE TRANSACTIONS THE AGENT IS THE
  BROKER
• AND THE SALESPERSON OF THE BROKER ARE SUBAGENTS
  OF
• THE PRINCIPAL.
• ANY PERSON WHO HAS THE CAPACITY TO CONTRACT CAN
  BE A
• PRINCIPAL AND APPOINT AN AGENT TO REPRESENT HIM
  OR HER.
• A PRINCIPAL IS LIABLE FOR ACTS OF THE AGENT
  ACTING WITHIN
• THE SCOPE OF THE AGENCY.
• COMPENSATION TO THE AGENT IS NOT A FACTOR IN
• DETERMINING IF AN AGENCY EXISTS.

36
AGENCY

• EMPLOYEE---IS A PERSON WHO WORKS UNDER THE
  DIRECTION
• AND CONTROL OF ANOTHER.
• AN AGENT GENERALLY HAS MORE DISCRETION THAN AN
• EMPLOYEE, WHO MUST FOLLOW THE DIRECTIONS OF AN
• EMPLOYER IN THE ACCOMPLISHMENT OF A TASK.
• BECAUSE A BROKER HAS A SUPERVISORY DUTY AS TO HIS
  OR
• HER SALESPEOPLE, THE DRE CONSIDERS REAL ESTATE
• SALESPERSONS TO BE EMPLOYEES OF THEIR BROKER (AS
  WELL
• AS SUBAGENT OF THE PRINCIPAL).
• INDEPENDENT CONTRACTOR---IS A PERSON HIRED TO
  PERFORM
• A TASK. UNLIKE AN AGENT OR EMPLOYEE, THE
  INDEPENDENT
• CONTRACTOR IS NOT SUBJECT TO THE DIRECTION OF AN
  EMPLOYER OR
• PRINCIPAL. THEY ARE CONTRACTED FOR RESULTS.

37
AGENCY

• THE INDEPENDENT CONTRACTOR DOES NOT HAVE THE
  DUTIES
• OF AN AGENT TO THE PERSON HIRING THE INDEPENDENT
• CONTRACTOR, NOR IS THAT PERSON GENERALLY LIABLE
  FOR
• WRONGFUL ACTS OF THE INDEPENDENT CONTRACTOR.
• AN INDEPENDENT CONTRACTOR IS RESPONSIBLE FOR
  HIS/HER
• OWN SOCIAL SECURITY AND INCOME TAXES AND EMPLOYEE
  
• CONTRIBUTIONS TO SOCIAL SECURITY, AS WELL AS PAY
  THE
• EMPLOYERS SOCIAL SECURITY CONTRIBUTIONS.
• IN CALIFORNIA, THE BROKER MUST HAVE A WRITTEN
• RELATIONSHIP CONTRACT WITH SALESPERSONS. BY STATE
  LAW
• THE REAL ESTATE BROKER IS AN AGENT AND
  AGENCY-TYPE
• DUTIES ARE MANDATED.

38
AGENCY

• TWO BASIC TYPES OF AGENTS
• 1. SPECIAL AGENTHAS THE LIMITED AUTHORITY SET
  FORTH
• IN THE AGENCY AGREEMENT. A REAL ESTATE
  AGENT IS
• USUALLY A SPECIAL AGENT EMPLOYED BY A
  PRINCIPAL TO
• PERFORM A SPECIFIC TASK.
• 2. GENERAL AGENTHAS BROAD AUTHORITY TO PERFORM
• THE TASKS NECESSARY TO CARRY OUT AN
  ENDEAVOR.
• POWER OF ATTORNEYIS A WRITTEN INSTRUMENT
• AUTHORIZING THE AGENT KNOWN AS ATTORNEY IN FACT
  TO ACT
• FOR THE PRINCIPAL AS SET FORTH IN THE INSTRUMENT.
• MOST POWERS OF ATTORNEY ARE SPECIAL OR LIMITED
  POWERS
• AUTHORIZING SPECIFIC ACTS. AN ALL-INCLUSIVE POWER
  OF
• ATTORNEY WOULD ALLOW THE ATTORNEY IN FACT TO DO
  ANY
• ACT THE PRINCIPAL COULD DO.

39
AGENCY

• WAYS AGENCIES CAN BE CREATED
• 1. EXPRESS AGENCYCREATED BY A VERBAL OR WRITTEN
  
• AGREEMENT. THE EQUAL-DIGNITIES RULE
  STIPULATES
• THAT IF AN ACT MUST BE IN WRITING
  BECAUSE OF THE
• STATUE OF FRAUDS, THEN AN AGENCY
  AGREEMENT TO
• ENTER SUCH A CONTRACT MUST ALSO BE IN
  WRITING.
• 2. AGENCY BY IMPLICATIONIS CREATED BY THE
  ACTIONS OF
• THE PARTIES. OSTENSIBLE AGENCY IS AN
  AGENCY BY
• IMPLICATION WHERE NO AGENCY WAS ACTUALLY
• INTENDED BY THE PARTIES, BUT A THIRD
  PARTY CAN RELY
• ON THE AGENCY.
• 3. AGENCY BY ESTOPPELPROHIBITS THE PRINCIPAL
  FROM
• DENYING THAT A PERSON IS HIS/HER AGENT
  IF THE
• PRINCIPAL HAS MISLED ANOTHER TO HIS/HER
  PREJUDICE
• INTO BELIEVING THAT A PERSON IS THE
  AGENT.

40
AGENCY

• 4. AGENCY BY RATIFICATION---IS FORMED WHEN A
  PRINCIPAL
• ACCEPTS THE BENEFITS OF AN UNAUTHORIZED
  PERSON,
• NOT AUTHORIZED TO ACT AS AN AGENT, OR AN
  ACT BY AN
• AGENT BEYOND THE AGENTS AUTHORITY. BY
  ACCEPTING
• THE BENEFITS OF AN AGREEMENT, THE
  PRINCIPAL RATIFIES
• THE CONTRACT.
• THE CIVIL CODE ALLOWS A PERSON TO RESCIND OR VOID
  HIS OR
• HER RATIFICATION IF THE RATIFICATION WAS MADE
  WITH FALSE
• OR IMPERFECT KNOWLEDGE AS TO THE FACTS.
• AUTHORITY OF AGENTS
• 1. EXPRESS AUTHORITYAUTHORITY THAT HAS BEEN
  STATED
• 
  VERBALLY OR IN WRITING.

41
AGENCY

• 2. IMPLIED AUTHORITY---IT IS UNDERSTOOD BUT NOT
  STATED
• FOR THE AGENT TO PERFORM ACTS NECESSARY
  TO
• PROPERLY PERFORM THEIR EXPRESS
  AUTHORITY.
• 3. CUSTOMARYAUTHORITY---IS BASED ON THE AGENTS
• POSITION. A GENERAL MANAGER OF A REAL
  ESTATE
• OFFICE WOULD HAVE THE CUSTOMERY
  AUTHORITY TO
• CONTRACT FOR OFFICE SUPPLIES.
• UNDISCLOSED AGENCY
• 1. SECRET AGENT---IS ONE WHO APPEARS TO BE
  ACTING AS A
• 
  PRINCIPAL. A THIRD PARTY DEALING WITH
• A SECRET
  AGENT MAY USE PERSONAL
• SETOFFS
  AGAINST MONIES DUE THE
• AGENT.
  THE PERSON WHO WOULD
• BENEFIT
  BY THE EXISTENCE OF THE AGENCY HAS
• THE DUTY
  OF PROOF AS TO THE EXISTENCE OF
• THAT
  AGENCY.

42
AGENCY

• FIDUCIARY DUTY INCLUDES
• 1. LOYALTY
• 2. OBEDIENCE
• 3. CONFIDENTIALITY
• 4. FULL DISCLOSURE
• 5. DUE DILIGENCE
• 6. ACCOUNTABILITY
• 7. COMPLETE HONESTY
• DELEGATION OF DUTIES---UNLESS PROVIDED IN THE
  AGENCY
• AGREEMENT, AN AGENT CANNOT DELEGATE AGENCY DUTIES
  TO
• ANOTHER.
• IF THE BROKER HAS A PERSONAL INTEREST IN THE LOAN
  OR IF
• IT INVOLVES A RELATIVE, CLOSE ASSOCIATE OR FRIEND
  THIS
• RELATIONSHIP SHOULD BE MADE KNOW TO THE PARTIES.

43
AGENCY

• TERMINATION OF AGENCYBECAUSE AN AGENCY IS A
• CONSENUAL RELATIONSHIP, EITHER PRINCIPAL OR AGENT
  CAN
• UNILATERALLY TERMINATE AN AGENCY AT ANY TIME. AN
  OWNER
• CANNOT TERMINATE AN AGENCY COUPLED WITH AN
  INTEREST.
• AGENCIES FOR A SPECIFIC PERIOD OF TIME
  AUTOMATICALLY
• ENDS AT THE TIME SPECIFIED. BECAUSE AN AGENCY IS
  A
• PERSONAL RELATIONSHIP OF TRUST, THE DEATH OF
  EITHER THE
• PRINCIPAL OR AGENT AUTOMATICALLY TERMINATES THE
• AGENCY.
• OTHER REASONS FOR TERMINATION OF AGENCY
• 1. INCAPACITY
• 2. IMPOSSIBILITY OF PERFORMANCE
• 3. BANKRUPTCY
• 4. COMPLETETION OF AGENCY PERFORMANCE

44
AGENCY

• TYPES OF AGENCY RELATIONSHIPS
• 1. BORROWERS AGENT
• 2. LENDERS AGENT
• 3. DUAL AGENT
• NO MATTER WHAT AGENCY IT IS IT SHOULD BE IN
  WRITING AND
• THE APPROPRIATE DISCLOSURE SHOULD SPELLED OUT
  WHO IS
• PAYING COMPENSATION. A MORTGAGE COMPANY IS A
• PRINCIPAL TO THE TRANSACTION RATHER THAN AN
  AGENT.
• TWO MOST IMPORTANT DISCLOSURE FORMS ARE
• 1. GFE
• 2. HUD-1
• BECAUSE OF POSSIBLE AGENCY PROBLEMS, SOME BROKERS
• DECLINE TO HANDLE ESCROWS ON THEIR TRANSACTIONS
  DUE
• TO POSSIBLE REAL OR PERCEIVED CONFLICTS OF
  INTEREST.

45
DISCLOSURES IN MORTGAGE LOAN TRANSACTIONS

• TRUTH IN LENDINGIS A FEDERAL ACT WHICH WAS
  ENACTEDO
• PROMOTE THE INFORMED USE OF CREDIT BY REQUIRING
• LENDER/CREDITORS TO DISCLOSE VARIOUS TERMS AND
• CONDITIONS OF CREDIT. THE 1968 ACT WAS KNOWN AS
• REGULATION Z.
• THE PURPOSE OF THE DISCLOSURE ACT WAS TO ENABLE
• CONSUMERS TO MAKE CREDIT COMPARISONS BETWEEN
  CREDIT
• SOURCES SO THAT INFORMED DECISIONS CAN BE MADE.
• NEGATIVE AMORTIZATION---WHERE LOAN PAYMENTS DO
  NOT
• COVER THE INTEREST DUE, SO THE LOAN PRINCIPAL
  INCREASES.
• THE 1968 ACT WAS AMENDED BY THE TRUTH IN LENDING
• SIMPLIFICATION AND REFORM ACT OF 1980. EXEMPT ARE
  ALL
• THOSE EXTENDING CREDIT 4 OR LESS TIMES A YEAR.

46
DISCLOSURES IN MORTGAGE LOAN TRANSACTIONS

• TRANSACTIONS WHERE CREDIT IS EXTENDED PRIMARILY
  FOR A
• BUSINESS, COMMERCIAL, OR AGRICULTURAL PURPOSES
  WOULD
• EXEMPT FROM TRUTH IN LENDING DISCLOSURES.
• DOLLAR LIMITATION (OVER 25,000) DOES NOT APPLY
  TO LOANS
• SECURED BY REAL ESTATE, OR BY PERSONAL PROPERTY
  USED
• OR EXPECTED TO BE USED AS THE CONSUMERS
  PRINCIPAL
• RESIDENCE.
• THE AMOUNT FINANCED MUST BE SEPERATELY SET FORTH,
  THE
• TERMS FINANCE CHARGE AND ANNUAL PERCENTAGE
  RATE
• MUST BE IN LARGER OR BOLD-FACE TYPE TO STAND OUT
  FROM
• OTHER DISCLOSURES. THERE ARE 18 DISCLOSURES
  REUIRED
• BY THE TRUTH IN LENDING.

47
DISCLOSURES IN MORTGAGE LOAN TRANSACTIONS

• EXEMPT FROM THE ITEMIZATION OF THE AMOUNT
  FINANCED
• REQUIREMENT ARE TRANSACTIONS SUBJECT TO THE REAL
• ESTATE SETTLEMENT PROCEDURES ACT.
• FACTORS TO REMEMBER
• 1. POINTS PAID BY THE SELLER ARE NOT CONSIDERED
  TO BE A FINANCE CHARGE.
• 2. FEES CANNOT BE CHARGED FOR REQUIRED
  DISCLOSURES
• 3. APR---IS THE COST OF CREDIT EXPRESSED AS
  YEARLY RATE AND MUST BE WITH IN 1/8 OF ONE
  PERCENT OF THE ACTUAL ANNUAL RATE FOR A NORMAL
  TRANSACTION ALL OTHER IRREGULAR TRANSACTIONS MUST
  BE WITHIN ¼ OF ONE PERCENT.
• 4. FOR OWNER-OCCUPIED LOANS SUBJECT TO RATE
  INCREASES THE FOLLOWING MUST BE INCLUDED
• A. FACTORS THAT WOULD CAUSE INTEREST RATE TO
  INCREASE
• B. ANY LIMIT ON THE INCREASE
• C. THE EFFECT OF ANY INCREASE
• D. INCLUSION OF AN EXAMPLE OF THE PAYMENT TERMS
  AS THE
• RESULT OF THE INCREASE
• E. INCREASES WITHIN A PERIOD GREATER THAN ONE
  YEAR MUST
• DISCLOSE THE VARIABLE RATE
  FEATURE AND THAT A VARIABLE RATE
• DISCLOSURE HAS BEEN MADE.

48
DISCLOSURES IN MORTGAGE LOAN TRANSACTIONS

• DISCLOSURES MUST BE PROVIDED PRIOR TO THE
  CONSUMER
• SIGNING THE NOTE. DISCLOSURES MUST BE PROVIDED
  FOR ANY
• ADJUSTABLE RATE PROGRAMS IN WHICH THE CONSUMER
  HAS
• INDICATED INTEREST.
• THE RIGHT OF RESCISSION IS FOR THREE DAYS AFTER
  THE
• CLOSE OF ESCROW BUT THERE ARE EXEMPTIONS SUCH AS
  
• 1. PURCHASE MONEY LOANS
• 2. NO CASH-OUT REFINANCED LOANS
• 3. NON-OWNER OCCUPPIED PROPERTIES
• IN ADVERISING CONSUMER CREDIT CERTAIN TERMS MUST
  BE
• MADE AVAILABLE
• 1. RATE
• 2. ADJUSTABLE RATE
• 3. BUYDOWN RATES
• 4. TRIGGER TERMS SUCH AS LTV, MONTHLY PAYMENT,
  APR, ETC.
• CREDITORS ARE NOT CONSIDERED TO HAVE VIOLATED
  TRUTH IN LENDING

49
DISCLOSURES IN MORTGAGE LOAN TRANSACTIONS

• THE FEDERAL TRADE COMMISSION (FTC) IS CHARGED
  WITH THE
• ENFORCEMENT OF THE TRUTH IN LENDING ACT. A CIVIL
  PENALTY
• OF TWICE THE FINANCE CHARGES WITH A MINIMUM OF
  100 AND
• A MAXIMUM OF 1,000 MAY BE GRANTED.
• THE MORTGAGE LOAN DISCLOSURE STATEMENT (MLDS) IS
  NOT
• REQUIRED ON FEDERALLY RELATED LOANS.
• IF THE BORROWER FAILS TO DISCLOSE LIENS OR
• INACCURATELY PROVIDES BALANCES DUE SO A LOAN
  CANNOT
• BE FUNDED, THE BORROWER MAY BE LIABLE FOR THE
• BROKERS COMMISSION AS WELL AS COSTS INCURRED.
• NEW DISCLOSURE FORMS FOR BOTH THE BROKER AND
  LENDER
• HAVE A LOT MORE INFORMATION FOR THE CONSUMER.

50
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• REAL ESTATE SETTLEMENTNPROCEDURES ACT (RESPA)---
• PROVIDES CONSUMERS WITH A FAIR UNDERSTANDING OF
• SETTLEMENT COSTS SO THAT RESIDENTIAL PURCHSERS
  CAN
• SHOP FOR SETTLEMENT SERVICES AND MAKE INFORMED
• DECISIONS.
• THE PURPOSE OF THE NEW RESPA LAWS WERE TO
• 1. PROVIDE ADVANCE DISCLOSURE
• 2. ELIMINATE KICKBACKS
• 3. REDUCE IMPOUND ACCOUNTS
• 4. REFORM TITLE RECORD KEEPING
• RESPA PROHIBITS A SELLER FROM REQUIRING THE HOME
• BUYER TO USE A PARTICULAR TITLE INSURANCE
  COMPANY,
• EITHER DIRECTLY OR INDIRECTLY, AS A CONDITION OF
  SALE.

51
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• A LOAN IS CONSIDERED TO BE FEDERALLY RELATED IF
  THE
• LENDER HAS DEPOSITS THAT ARE INSURED BY AN AGENCY
  OF
• THE FEDERAL GOVERNMENT (FDIC).
• RESPA DOES NOT APPLY TO SALES OF LOANS IN THE
• SECONDARY MORTGAGE MARKET. RESPA ONLY APPLIES TO
• FIRST TRUST DEEDS AND MORTGAGES.
• EXEMPTIONS FROM RESPA
• 1.25 OR MORE ACRES
• 2. HOME IMPROVEMENT LOANS
• 3. REFINANCING
• 4. VACANT PROPERTY
• 5. ASSUMPTION
• 6. CONSTRUCTION FINANCING
• 7. NON-RESIDENTIAL PROPERTY
• 8. FIVE OR MORE UNITS
• 9. LAND OWNED BY BORROWER.

52
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• UNDER RESPA, THE LENDER IS REQUIRED TO PROVIDE A
  GOOD
• FAITH ESTIMATE (GFE) OF LOAN COSTS, AS WELL AS
  A
• SETTLEMENT COSTS BOOKLET TO THE BORROWER, WITHIN
• THREE DAYS OF THE LOAN APPLICATION.
• THE BORROWER HAS THE RIGHT TO SEE THE UNIFORM
• SETTLEMENT STATEMENT ON THE BUSINESS DAY PRIOR TO
  THE
• DAY OF SETTLEMENT. LENDERS MUST KEEP A COPY FOR
  TWO
• YEARS.
• GFE IS TO BE BASED ON THE LENDERS PAST
  EXPERIENCE IN
• THE AREA. THE LENDER SHALL ALSO DISCLOSE TO THE
• BORROWER WHETHER THE LOAN CAN BE ASSIGNED AND THE
• FACT THAT THE RIGHT TO SERVICE THE LOAN MAY BE
• TRANSFERRED.

53
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• PERSONS WHO GIVE OR RECEIVE KICKBACKS OR
  REFERRAL
• FEES CAN BE HELD BOTH CIVILLY AND CRIMINALLY
  LIABLE WITH
• PENALTIES UP TO 10,000 IN FINES AS WELL AS UP TO
  ONE YEAR
• IN IMPRISONMENT.
• THE SECTION IN RESPA CONCERNING KICKBACKS IS
  COMMONLY
• KNOWN AS SECTION 8.
• HUD HAS NOT BEEN ENFORCING ANTI-KICKBACKS
  REGULATIONS
• BECAUSE OF CONFUSION IN THE INDUSTRY, MUCH OF
  WHICH
• WAS GENERATED BY HUD.
• CALIFORNIA REAL ESTATE BROKERS WHO ARE EXEMPT
  FROM
• LICENSURE AS ESCROW AGENTS MAY NOT COMPENSATE
  THEIR
• SALESPEOPLE FOR REFERRING CLIENTS TO THE BROKERS
• ESCROW SERVICES.

54
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• CONTROLLED BUSINESS ARRANGEMENT (CBA)ALLOW ONE-
• STOP SHOPPING WHERE PURCHASE LOANS AND SERVICE
• PROVIDERS MAY ALL BE OBTAINED FROM THE SAME
  SOURCE
• THROUGH AFFILIATIONS.
• IN ORDER FOR AN ORGANIZATION TO BE A BONA FIDE
  CBA
• 1. VENTURE MUST BE REALISTICALLY CAPITALIZED
• 2. MUST HAVE ITS OWN EMPLOYEES
• 3. MUST MANAGE ITS OWN AFFAIRS
• 4. MUST HAVE AN OFFICE AND PAY FAIR MARKET RENT
• 5. MUST PROVIDE THE FUNCTIONS OF A BUSINESS OF
  ITS TYPE
• 6. MUST BEAR SIMILAR RISKS AS WOULD SIMILAR
  BUSINESSES
• 7. MUST NOT SUBCONTRACT SERVICES IT WOULD DO
  ITSELF
• 8. IT SENDS BUSINESS EXCLUSIVELY TO ONE VENTURER
• 9. IT COMPETES FOR BUSINESS FROM OTHER THAN A
  VENTURER

55
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• LENDER CAN CHOOSE AMONG EIGHT CREDIT REPORTING
• COMPANIES FOR CREDIT REPORTS. CREDIT REPORTS
• INFORMATION FROM AT LEAST TWO OF THREE DATABASES.
• NO CHARGE OR FEE CAN BE CHARGED TO THE CONSUMER
  FOR
• ANY DISCLOSURE MANDATED BY RESPA.
• ADJUSTABLE RATE MORTGAGES ARE MADE UP OF
• 1. INDEX
• 2. MARGIN
• 3. CAPS
• 4. ADJUSTMENT PERIOD(S)
• 5. INITIAL RATE (TEASER RATE)

56
ADDITIONAL MORTGAGE LOAN DISCLOSURES

• SELLER CARRY-BACK---WHILE NOT A CONTRACT IS OFTEN
  AN
• ATTACHMENT TO THE PURCHASE CONTRACT AND MUST
• INCLUDE ALL REQUIRED DISCLOSURES REGARDING THE
  NOTE.
• HOUSING AND COMMUNITY DEVELOPMENT ACTIS BASED ON
• THE PREMISE THAT EVERY AMERICAN IS ENTITLED TO
  DECENT
• HOUSING. COUNSELING MAKES PERSONS AWARE OF THE
• FINANCIAL REQUIREMENTS, PURCHASE PROGRAMS
  AVAILABLE,
• AS WELL AS BENEFITS ASSOCIATED WITH
  HOMEOWNERSHIP.
• HOME MORTGAGE DISCLOSURE ACT---IS A FEDERAL ACT
  WITH
• THE PURPOSE OF ELIMINATING REDLINING.