NC MLO cheat sheet

SAFE Act (Title V of HERA, 2008) requires every state to license mortgage loan originators; the federal definition of an MLO is an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain.

Federal registration (NMLS) applies to MLOs employed by depository institutions and their subsidiaries; state licensing applies to MLOs at non-depository companies. Both use the same NMLS record and unique identifier.

SAFE Act minimum pre-licensure requirements: 20 hours of NMLS-approved education (3 federal law, 3 ethics, 2 nontraditional mortgage products, 12 general mortgage knowledge), a passing score on the NMLS national test with uniform state content, and a criminal history background check.

Annual continuing education is 8 hours, including at least 3 hours of federal law, 2 hours of ethics (fraud, consumer protection, fair lending), and 2 hours of nontraditional mortgage lending; the remaining hour is electable.

The SAFE MLO test is a single national exam with a uniform state component; a passing score remains valid for a limited period (currently five years) before the test must be retaken if licensure is not obtained.

Fingerprints are submitted to the FBI through NMLS for a national criminal history check, and applicants must authorize a credit report; state regulators may also require a separate state-specific test component.

Licenses renew annually through NMLS, generally by December 31; late CE and reinstatement rules differ by state, and a lapsed license bars the individual from originating until restored.

Independent contract processors and underwriters are generally not MLOs because they do not take applications or offer or negotiate loan terms with consumers; administrative and clerical staff are excluded from the definition.

RESPA Section 8 prohibits fees, kickbacks, and things of value for referrals of settlement service business; bona fide compensation for services actually performed and disclosed is permitted, and unearned fee splits are prohibited.

RESPA requires a special information booklet and a Loan Estimate within 3 business days of application; revised Loan Estimates are permitted only on valid changed-circumstance triggers, and a revised LE cannot be delivered on or after the fourth business day before consummation.

TRID timing: the Closing Disclosure must be received by the consumer at least 3 business days before consummation; if the APR increases by more than 1/8 percent (1/4 percent for irregular loans), a new 3-business-day review is required.

TILA/Regulation Z tolerances: the APR is accurate if within 1/8 of 1 percent for regular transactions and 1/4 of 1 percent for irregular transactions; the finance charge is accurate if within $100 (or $200 for certain construction loans).

ECOA/Regulation B prohibits discrimination in credit on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or good-faith exercise of rights under the Consumer Credit Protection Act.

ECOA adverse action notice must be given within 30 days of a completed application; a counteroffer may be treated as adverse action if the consumer does not accept it, and the notice must state specific reasons or disclose the right to request them.

HMDA requires covered institutions to collect and report data including ethnicity, race, sex, age, income, loan amount, property type, action taken, and rate spread; Regulation C sets institutional and loan-volume coverage thresholds.

The Fair Housing Act prohibits discrimination in the sale, rental, and financing of dwellings based on race, color, religion, sex, national origin, familial status, or disability; the Equal Credit Opportunity Act and Fair Housing Act overlap in mortgage lending.

GLBA requires financial institutions to provide privacy notices, permit opt-out of certain information sharing with nonaffiliates, and maintain safeguards for customer nonpublic personal information under the Safeguards Rule.

The North Carolina Commissioner of Banks administers the NC Mortgage Lending Act (Chapter 53, Article 19B) and licenses mortgage loan originators, mortgage brokers, mortgage lenders, and mortgage servicers through NMLS.

NC MLO licensure requires the SAFE Act education, national test with uniform state content, criminal background check, credit report authorization, and satisfaction of NC-specific requirements; the license is issued by the Commissioner and renewed annually.

The Commissioner may deny, suspend, revoke, or refuse to renew a license, issue a cease-and-desist order, impose civil money penalties, and order restitution for violations of the Mortgage Lending Act or unsafe or unsound practices.

Licensees must notify the Commissioner of changes in legal name, address, principal place of business, and control or ownership within the timeframes set by statute and rule, generally through NMLS amendments.

A mortgage loan originator may be employed by only one licensed mortgage lender or broker at a time; dual employment or unlicensed origination is a violation subject to discipline.

Surety bond, net worth, and financial responsibility requirements apply to licensed mortgage lenders and brokers; the Commissioner may require a higher bond based on the volume of business.

Licensees must respond to Commissioner inquiries and examinations, produce books and records, and permit investigation of consumer complaints; failure to cooperate is itself grounds for discipline.

NC law requires licensees to maintain a principal place of business and to keep the Commissioner informed of the location of records; the Commissioner has authority to examine affiliates and service providers relevant to mortgage activity.

NC prohibits fraudulent, deceptive, or dishonest practices in mortgage lending, including misrepresenting loan terms, falsifying documents, and concealing material facts from borrowers.

Advertising must be accurate and not misleading; required disclosures include the licensee's name as licensed and, where applicable, the NMLS unique identifier, and ads may not use the term "bank" unless legally authorized.

NC prohibits charging or collecting fees for services not actually performed and prohibits unearned fees, kickbacks, and referral fees not permitted under RESPA.

The NC Mortgage Lending Act restricts prepayment penalties and prohibits certain high-cost loan terms and practices, including making a loan without a reasonable expectation of repayment based on the borrower's ability to repay.

Licensees may not conduct business under a name other than the licensed name without approval, and must not use false, misleading, or deceptive trade names in advertising or solicitation.

NC law prohibits influencing or attempting to influence a real estate appraiser's independent judgment, and prohibits coercion of borrowers into using affiliated settlement service providers without required disclosures.

The NC Unfair and Deceptive Trade Practices Act (Chapter 75) can apply to mortgage conduct, allowing consumer remedies including actual damages, treble damages for willful violations, and attorney fees.

NC requires disclosure of the licensee's identity and contact information and provides consumers a route to file complaints with the Commissioner of Banks; licensees must not discourage or retaliate against complainants.

State law prohibits unlicensed mortgage activity and the use of any device or scheme to evade licensing, including structuring transactions or using an unlicensed entity to originate or negotiate loans.

NC MLOs must act with good faith and fair dealing, place the borrower's interests in accurate disclosure above compensation, and refrain from directing borrowers to loan products that are unsuitable given their disclosed financial situation.

Licensees must keep complete records of each mortgage loan transaction, including the application, disclosures, credit documents, closing documents, and correspondence, for the period required by statute and rule (commonly three years from the date of the loan or the final payment).

Records must be maintained at the licensed principal place of business or another location approved by the Commissioner and must be made available for examination on request.

The Commissioner conducts examinations and investigations; examiners may review files, interview staff, and require written responses, and findings can result in a report of examination and corrective action.

MLOs must safeguard borrower nonpublic personal information consistent with GLBA and NC privacy requirements, and must not disclose borrower information except as authorized or required by law.

Loan files must accurately reflect the borrower's stated income, assets, and obligations; altering or backdating documents, or signing a borrower's name without authorization, is prohibited.

Adverse action and withdrawal files must be documented with the reasons for the action and retained, and HMDA-reportable data must be collected and reported accurately.

MLOs must complete required continuing education annually and retain certificates; failure to meet CE or education requirements can result in license expiration or non-renewal.

Qualified Mortgage (QM) under Regulation Z generally requires consideration of the consumer's ability to repay, limits on points and fees (generally 3 percent of the loan amount, with higher thresholds for smaller loans), and limits on risky features such as negative amortization.

Ability-to-repay (ATR) under Regulation Z requires consideration of eight underwriting factors, including income, assets, employment, monthly payment on the loan, payments on other debts, and debt-to-income ratio or residual income.

Standard underwriting ratios: front-end housing ratio compares housing payment to gross monthly income; back-end DTI compares total monthly obligations to gross monthly income; conventional guidelines commonly use 28/36 or higher with compensating factors.

Loan-to-value (LTV) equals loan amount divided by appraised value or purchase price, whichever is lower; combined LTV (CLTV) includes subordinate liens, and high-LTV loans typically require mortgage insurance.

FHA loans are insured by HUD and generally permit lower down payments and credit scores than conventional loans; VA loans are guaranteed by the Department of Veterans Affairs and generally require no down payment for eligible veterans.

Fixed-rate mortgages have constant principal and interest payments; adjustable-rate mortgages have an initial fixed period, then adjust based on an index plus margin, subject to periodic and lifetime caps.

The Loan Estimate must be delivered within 3 business days of application and discloses the loan terms, projected payments, closing cost details, and APR; the Closing Disclosure reflects final terms and must be received 3 business days before consummation.

Escrow accounts for taxes and insurance are governed by RESPA Section 10, which limits the cushion to one-sixth of annual disbursements and requires annual escrow account statements.

Self-employed borrowers typically document income with two years of tax returns, and underwriters may require a year-to-date profit and loss statement and business returns to establish stable, continuing income.

Fair lending prohibits disparate treatment (intentional differential treatment based on a protected class) and disparate impact (neutral policies with unjustified discriminatory effect) under ECOA and the Fair Housing Act.

Steering borrowers to different products, terms, or fees based on a protected characteristic is prohibited; pricing exceptions must be documented and applied consistently under written policy.

Referral sources and marketing may not target or exclude consumers based on protected classes, and marketing materials must include the Equal Housing Opportunity logotype where required.

Redlining, discouraging applicants, and varying the level of assistance provided to applicants based on protected class are prohibited practices subject to enforcement by HUD, the CFPB, and the Department of Justice.

Disparate impact analysis compares approval rates, pricing, and denial reasons across protected groups; unexplained disparities can trigger regulatory scrutiny even without evidence of intent.

Conflicts of interest must be disclosed and managed; MLOs should not accept undisclosed gifts or things of value from settlement service providers that could influence referrals.

Ethical origination requires accurate documentation, no falsification of income or assets, and no pressure on appraisers to reach a predetermined value.

Whistleblower and complaint protections prohibit retaliation against employees or consumers who report discriminatory or unlawful lending practices.

Fair lending examination reviews include comparative file reviews, denial reason analysis, and assessment of the institution's fair lending compliance management system.