NM MLO cheat sheet

RESPA Section 8 prohibits giving or accepting anything of value in exchange for referrals of settlement-service business; routine referral fees and fee splits for services not performed are violations.

RESPA Section 10 limits escrow account deposits to no more than 1/6 (two months) of estimated annual disbursements; a cushion beyond that requires state law or a documented deficiency.

TILA/Regulation Z: the Loan Estimate must be delivered or placed in the mail within 3 business days of application; revised disclosures must generally be delivered within 3 business days of the triggering event and received no later than 4 business days before consummation.

TRID tolerance categories: 0% tolerance for lender-chosen fees and transfer taxes (unless changed circumstances), 10% cumulative tolerance for recording fees and lender-selected third-party services, unlimited tolerance for fees the consumer can shop for and chooses.

ECOA/Regulation B prohibits discrimination on race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or good-faith exercise of rights; adverse action notices are due within 30 days of a completed application.

HMDA/Regulation C requires collection and reporting of covered loan data, including ethnicity, race, sex, age, and rate spread; the loan-origination threshold is 25 closed-end mortgage loans in each of the two preceding calendar years.

SAFE Act: MLOs must be licensed or registered, pass the NMLS national test, complete 20 hours of pre-licensure education, and complete 8 hours of annual continuing education including 3 hours of federal law, 2 hours of ethics, and 2 hours of non-traditional mortgage lending.

Flood Disaster Protection Act: regulated lenders must require flood insurance on improved structures in Special Flood Hazard Areas, provide a notice, and verify coverage before closing; the maximum NFIP limit for a 1-4 family residence is $250,000.

TILA-RESPA disclosure timing: the Closing Disclosure must be received by the consumer at least 3 business days before consummation; a changed APR beyond 1/8 of a percent (1/4 for irregular transactions) requires a new 3-business-day review.

Conventional loans are not government-insured; conforming loans meet Fannie Mae/Freddie Mac limits (2024 baseline single-unit limit $766,550; high-cost areas up to 150% of that).

FHA loans are insured by HUD: minimum 3.5% down with a 580+ credit score, 10% down with 500-579; upfront MIP of 1.75% of the base loan amount plus annual MIP.

VA loans are guaranteed by the VA: 0% down for eligible veterans with full entitlement; the VA funding fee ranges from 1.25% to 3.3% depending on down payment and first/subsequent use.

USDA Rural Development loans offer 100% financing for eligible rural properties with household income limits; they carry a 1% upfront guarantee fee and an annual fee.

Qualifying ratios: conventional guidelines commonly use 28/36 as a baseline, FHA uses 31/43, and automated underwriting (AUS) can approve higher ratios with compensating factors.

PITI = principal + interest + property taxes + homeowners insurance; total housing expense may also include HOA dues, mortgage insurance, and other escrowed items.

Loan-to-value (LTV) = loan amount / property value; combined LTV (CLTV) = (first lien + all subordinate liens) / property value.

Fixed-rate mortgages have constant principal and interest over the term; ARMs adjust per a caps structure such as 2/2/6 (initial adjustment cap / periodic cap / lifetime cap) tied to an index plus margin.

Points are prepaid interest: 1 point = 1% of the loan amount; paying points lowers the rate, and points are generally tax-deductible over the loan term for a primary residence purchase.

A complete application under Regulation B exists when the lender has the six pieces of information: borrower name, income, SSN, property address, estimated value, and loan amount.

The Loan Estimate is issued after application; the Closing Disclosure is issued before consummation. Both must reflect the same loan terms, and the CD replaces the LE at closing.

Verification order: identity and occupancy first, then income and assets, then credit and liabilities; the credit report must be re-pulled if it is older than 120 days at closing for many investors.

DTI = total monthly debt obligations (including proposed PITI) / gross monthly income; underwriters compare against AUS or program limits.

Appraisal requirements: the lender must provide a copy of the appraisal promptly and no later than 3 business days before closing; the borrower may waive the 3-day review only under specific conditions.

Rate lock: a lock agreement states the rate, term, and expiration; extensions usually cost a fee, and a float-down may be available at a cost.

Right of rescission: for refinances of a principal residence, the borrower has 3 business days after consummation to cancel; it does not apply to purchases or to business-purpose loans.

Documentation types: full documentation (pay stubs, W-2s, tax returns), stated income (limited to certain programs), and asset depletion; self-employed borrowers typically need 2 years of returns.

Disbursement and servicing: the servicer must provide an initial escrow statement and annual escrow statements; a servicing transfer requires a notice at least 15 days before the transfer date.

The SAFE Act ethics requirement covers fraud, deceptive practices, and fair lending; 2 of the 8 annual CE hours must be ethics.

Prohibited conduct includes steering borrowers to higher-cost loans for compensation, falsifying income or asset documents, and backdating disclosures.

Conflicts of interest must be disclosed; an MLO may not accept compensation from a settlement-service provider in exchange for a referral under RESPA Section 8.

Fair lending: disparate treatment is intentional discrimination; disparate impact is a neutral policy that disproportionately affects a protected class without a business necessity.

Confidentiality: nonpublic personal information is protected under the Gramm-Leach-Bliley Act; the privacy notice and opt-out rights must be provided, and data may only be shared under permitted exceptions.

Advertising rules: NMLS ID must appear on certain solicitation materials; advertisements may not use deceptive terms such as 'government approved' or guarantee approval.

Red flags of fraud include inflated appraisals, straw buyers, undisclosed second liens, and occupancy misrepresentation; the MLO must report suspected fraud to the lender.

Professional conduct: follow applicable state and federal law, keep accurate records, and never pressure a borrower to sign documents they do not understand.