IL MLO flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

RESPA Section 8

Prohibits giving or receiving anything of value for referrals of settlement service business and prohibits fee splitting and unearned fees. Violations carry treble damages, civil penalties, and possible criminal liability.

Finance charge

The cost of credit expressed in dollars, including interest, points, broker fees, and required mortgage insurance. It excludes bona fide third-party fees such as appraisal and title when not required by the creditor.

Adverse action notice

Written notice required under ECOA and Regulation B within 30 days of a completed application when credit is denied or terms are less favorable. It must state reasons or the right to request them.

High-cost mortgage triggers

HOEPA thresholds include points and fees over 5 percent of the loan amount, a prepayment penalty beyond 36 months after closing, or an APR more than 6.5 points above APOR on a first lien.

Flood insurance requirement

For improved structures in Special Flood Hazard Areas on federally related loans, coverage must equal the lesser of the outstanding principal balance or the maximum NFIP limit, and the borrower receives notice.

HMDA reporting

Regulation C requires covered institutions to collect and report loan-level data such as loan type, purpose, occupancy, amount, rate spread, and applicant demographics, with annual submission by March 1.

SAFE Act requirements

Mortgage loan originators must register in NMLS, complete pre-licensing education, pass a qualifying test, submit fingerprints and a credit report, and complete annual continuing education to maintain registration.

Loan-to-value ratio

Loan amount divided by the lesser of the property's appraised value or the purchase price. LTV determines mortgage insurance requirements and eligibility for many loan programs.

Combined LTV

The sum of all lien balances divided by the property value. CLTV is used to evaluate subordinate financing, home equity lines, and mortgage insurance requirements on the first lien.

PITI payment

Principal, interest, property taxes, and hazard insurance combined into the monthly housing payment. When escrowed, annual tax and insurance amounts are divided by 12.

Back-end debt ratio

Total monthly obligations divided by gross monthly income. Obligations include the proposed PITI plus installment loans, revolving debt, and other mortgage payments, but generally exclude utilities and commuting costs.

Discount point

One percent of the loan amount paid at closing to reduce the interest rate. The breakeven period equals the points paid divided by the monthly payment savings.

Adjustable-rate mortgage

A loan with an initial fixed rate period that later adjusts based on an index plus margin. Periodic and lifetime caps limit how much the rate and payment can increase.

PMI termination rules

Under the Homeowners Protection Act, borrower-requested cancellation is available at 80 percent LTV and automatic termination occurs at 78 percent LTV based on the original amortization schedule.

Negative amortization

Occurs when the monthly payment is less than the interest accrued, causing unpaid interest to be added to the principal balance. The loan balance grows instead of declining.

Complete application

Under Regulation B, receipt of the borrower's name, income, Social Security number, property address, and estimated value. This starts the 30-day adverse action clock.

Loan Estimate timing

Must be delivered or mailed within 3 business days of application and received at least 7 business days before consummation. Fees cannot be collected before the borrower receives it and states intent to proceed.

Closing Disclosure timing

The borrower must receive the Closing Disclosure at least 3 business days before consummation. A revised disclosure restarts the three-day waiting period unless an exception applies.

Tolerance categories

Zero tolerance applies to lender fees and services the borrower cannot shop for; a 10 percent cumulative tolerance applies to shoppable services; prepaid interest and escrow deposits have unlimited tolerance.

Changed circumstance

An event such as a new fact, changed borrower information, or revised valuation that permits a revised Loan Estimate. It must be delivered within 3 business days and no later than 4 business days before consummation.

Appraisal delivery rule

The borrower must receive a copy of the appraisal promptly and no later than 3 days before closing. The originator must also disclose the right to obtain a copy.

NMLS unique identifier

A permanent number assigned to each registered mortgage loan originator. It must appear on loan documents and be disclosed to the borrower on the Loan Estimate and Closing Disclosure.

Steering

Directing a borrower to a loan with less favorable terms to increase the originator's compensation. It violates fair lending and SAFE Act standards even when the borrower qualifies for the loan.

Dual compensation

Receiving compensation from both the borrower and the lender on the same transaction. This is prohibited for mortgage brokers under Regulation Z.

Predatory lending indicators

Excessive fees, prepayment penalties, equity stripping, loan flipping, and lending based on equity rather than repayment ability. These practices are restricted under federal and state law.

GLBA privacy notice

Requires financial institutions to give customers a privacy notice explaining how nonpublic personal information is shared and to provide an opt-out where required.

Occupancy fraud

Misrepresenting an investment property as a primary residence to obtain a lower rate or higher LTV. It is a material misrepresentation that can trigger rescission, penalties, and criminal liability.

Fair Housing Act classes

The federal protected classes are race, color, religion, sex, national origin, familial status, and disability. Discrimination in financing or sale of housing based on these classes is prohibited.

Illinois licensing authority

The Illinois Residential Mortgage License Act of 1987 is administered by the Illinois Department of Financial and Professional Regulation, Division of Banking, which licenses and examines mortgage loan licensees.

Illinois MLO education

Illinois requires 20 hours of pre-licensing education, including 3 hours of Illinois-specific content, plus passage of the national and state tests and 8 hours of annual continuing education.

Illinois High Risk Home Loan Act

Covers high-risk home loans defined by rate and fee triggers and requires entry into the predatory lending database plus review by a certified counselor or attorney before closing.

Illinois license renewal

Illinois licenses renew annually through NMLS and expire on December 31 unless renewed. Operating without a valid license can result in fines and license revocation.