Free NMLS SAFE Exam Flashcards

Secure and Fair Enforcement for Mortgage Licensing Act of 2008. Requires state licensing of mortgage loan originators (MLOs) and establishes minimum standards including background checks and education.

An individual who takes residential mortgage loan applications or offers/negotiates terms of residential mortgage loans for compensation. Must be licensed or registered.

Nationwide Multistate Licensing System & Registry. The database where MLOs must register, maintain licenses, and where consumers can verify MLO credentials.

A permanent number assigned to each MLO through NMLS. Must be displayed on all loan documents and business cards. Allows consumers to look up MLO history.

2010 federal law that created CFPB, reformed mortgage lending practices, established ability-to-repay requirements, and created the Qualified Mortgage standard.

Real Estate Settlement Procedures Act. Requires disclosure of settlement costs, prohibits kickbacks and referral fees, and regulates escrow account practices for federally related mortgage loans.

When a settlement service provider refers business to a company in which they have an ownership interest. Requires written disclosure to consumer and cannot require use of the affiliate.

RESPA provision making it illegal to give or receive anything of value for referrals of settlement services. Applies to all parties involved in real estate transactions.

RESPA requires servicers to notify borrowers at least 15 days before transferring servicing rights to another servicer.

RESPA limits escrow account cushions to no more than 1/6 of annual escrow payments (approximately 2 months of payments).

Truth in Lending Act. Requires lenders to disclose credit terms in a uniform manner, including APR, finance charge, and payment schedule. Implemented by Regulation Z.

The cost of credit expressed as a yearly rate, including interest and certain fees. Allows consumers to compare loans from different lenders.

The total cost of credit expressed in dollars, including interest and other charges such as origination fees and mortgage insurance premiums.

Borrower's right to cancel certain credit transactions (refinances, HELOCs) within 3 business days of closing. Does not apply to purchase money mortgages.

Home Ownership and Equity Protection Act. Provides additional protections for high-cost mortgages, including rate and fee triggers and prohibited practices.

TILA-RESPA Integrated Disclosure rule. Combined TILA and RESPA disclosures into the Loan Estimate (LE) and Closing Disclosure (CD) for most residential mortgages.

TRID form providing estimated loan terms, projected payments, and closing costs. Must be provided within 3 business days of receiving an application.

TRID form providing final loan terms and closing costs. Must be received by borrower at least 3 business days before closing.

An event that permits lenders to revise previously disclosed costs. Includes changed loan terms, borrower-requested changes, or newly discovered information.

TRID limits how much actual costs can exceed estimated costs. Zero tolerance (cannot increase), 10% cumulative tolerance, and unlimited categories.

Intentional misrepresentation, misstatement, or omission of information relied upon by an underwriter or lender to fund, purchase, or insure a loan.

Mortgage fraud committed to obtain property, typically involving misrepresentation of income, assets, or employment to qualify for a loan.

Mortgage fraud schemes designed to extract money from lenders, often involving industry insiders such as appraisers, loan officers, or real estate agents.

A person who purchases property on behalf of another to conceal the true buyer's identity or creditworthiness. A common element in mortgage fraud schemes.

Warning signs of potential mortgage fraud, including unusual sales price, multiple changes to application, inconsistent documentation, or pressure to close quickly.

A mortgage not insured or guaranteed by a government agency. May conform to Fannie Mae/Freddie Mac guidelines (conforming) or exceed limits (jumbo).

Mortgage insured by the Federal Housing Administration. Features lower down payments (3.5% minimum), more flexible credit requirements, and mortgage insurance premiums.

Mortgage guaranteed by the Department of Veterans Affairs for eligible veterans and service members. Features no down payment requirement and no monthly mortgage insurance.

Mortgage guaranteed by USDA for rural and suburban homebuyers who meet income limits. Features no down payment requirement.

Mortgage with an interest rate that changes periodically based on an index plus a margin. Includes initial fixed period and adjustment caps.

An informal estimate of how much a borrower might be able to borrow based on self-reported financial information. Not a commitment to lend.

A more formal determination of borrowing capacity based on verified income, assets, and credit. Subject to property approval and final underwriting.

The six pieces of information that trigger TRID: borrower name, income, SSN, property address, estimated property value, and loan amount sought.

An agreement guaranteeing a specific interest rate and points for a specified period while the loan is processed. Protects borrower from rate increases.

A fee charged by the lender for processing the loan application, typically expressed as a percentage of the loan amount or flat fee.

A comparison of borrower's monthly debt payments to gross monthly income. Front-end ratio includes housing costs; back-end ratio includes all debts.

Dodd-Frank requirement that lenders make a reasonable, good faith determination that a borrower can repay a mortgage loan.

A loan meeting specific Dodd-Frank criteria providing lenders with legal protection. Includes DTI limits, fee caps, and prohibition of certain risky features.

Computer software that analyzes loan applications against underwriting guidelines. Common systems include Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Product Advisor.

Positive factors that may offset weaknesses in a loan application, such as large down payment, significant cash reserves, or long employment history.

The final step in a real estate transaction where documents are signed, funds are disbursed, and title transfers. Also called settlement.

A neutral third party that holds funds and documents during the transaction and collects/disburses funds for taxes and insurance after closing.

Examination of public records to verify the seller's right to transfer ownership and to discover any liens, encumbrances, or defects in title.

The disbursement of loan proceeds by the lender. May occur at closing or shortly after, depending on state law and lender procedures.

Filing the mortgage and deed in public records to provide constructive notice of the lender's lien and the borrower's ownership.

Federal law prohibiting discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

Federal law prohibiting discrimination in housing-related transactions based on race, color, religion, national origin, sex, familial status, and disability.

Home Mortgage Disclosure Act. Requires lenders to collect and report data about mortgage applications and loans to help identify discriminatory lending patterns.

Intentional discrimination where similarly situated applicants are treated differently based on a prohibited characteristic.

Unintentional discrimination where a neutral policy disproportionately affects a protected class without a legitimate business justification.