NMLS 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 unearned fee splits; payments must be for goods or services actually performed and reasonably related to value.

Loan Estimate timing

A creditor must deliver or place in the mail the Loan Estimate no later than three business days after receiving a consumer's mortgage application, and the consumer must receive it in time to shop.

Closing Disclosure timing

The consumer must receive the Closing Disclosure at least three business days before loan consummation, allowing time to review final terms and compare them with the Loan Estimate.

Changed circumstance

An event beyond the creditor's control, new information about the borrower, or revised information affecting settlement charges that permits a revised Loan Estimate if delivered within three business days of learning of it.

ECOA prohibited bases

Regulation B bars discrimination based on race, color, religion, national origin, sex, marital status, age, public assistance income, or good-faith exercise of rights under the Consumer Credit Protection Act.

HOEPA high-cost triggers

A loan becomes a high-cost mortgage when points and fees exceed a set percentage of the loan amount, the APR exceeds the average prime offer rate by a margin, or prepayment penalties exceed limits.

Flood insurance mandate

The Flood Disaster Protection Act requires flood insurance for improved structures in Special Flood Hazard Areas securing federally related loans, and notice must be given before closing.

Conforming versus jumbo

Conforming conventional loans fall within Fannie Mae and Freddie Mac loan limits and are eligible for sale to those entities; jumbo loans exceed the limits and are held or sold privately.

FHA mortgage insurance

FHA-insured loans require an upfront mortgage insurance premium that may be financed plus annual premiums, which supports lower down payments and more flexible credit standards.

VA funding fee

A fee charged on VA-guaranteed loans that funds the program, typically financed into the loan and waived for veterans with service-connected disabilities or surviving spouses.

Amortization payment formula

For a fixed-rate loan, payment equals P times r(1+r)^n divided by (1+r)^n minus 1, where P is principal, r is the monthly rate, and n is the payment count.

Annual percentage rate

The APR expresses the yearly cost of credit, including certain finance charges and fees, as a rate; it generally exceeds the note rate when borrower-paid fees are included.

Loan-to-value ratio

LTV equals the loan amount divided by the property's appraised value or sales price, whichever is used under program rules, and drives mortgage insurance and pricing decisions.

Escrow cushion limit

RESPA limits the required escrow cushion to no more than one-sixth of the total annual escrow payments, capping the extra amount a servicer may collect.

Pre-qualification versus pre-approval

Pre-qualification estimates borrowing capacity from stated information, while pre-approval relies on verified income, assets, and credit and carries more weight with sellers.

Debt-to-income ratio

DTI equals total monthly debt obligations divided by gross monthly income; it is a core ability-to-repay measure and a factor in qualified mortgage eligibility.

Appraisal copy timing

The borrower must receive a copy of the appraisal promptly and no later than three business days before closing, unless the borrower waives that timing requirement.

Adverse action notice

When an application is denied or terms are unfavorable, the creditor must send notice within thirty days of the completed decision stating reasons or the right to request them.

Rate lock agreement

A rate lock sets the interest rate for a specified period and states any lock fee; extensions may add cost and must be disclosed to the borrower.

Tolerance categories

Regulation Z groups closing costs into zero, ten percent, and unlimited tolerance categories, and creditors must refund amounts exceeding permitted tolerance limits.

Dual compensation restriction

Loan originator compensation rules generally prohibit an originator from receiving payment from both the consumer and a third party on the same transaction.

Steering prohibition

Originators may not steer consumers to loans that are higher cost or less favorable in order to increase compensation, regardless of whether the consumer qualifies for better terms.

GLBA privacy safeguards

The Gramm-Leach-Bliley Act requires financial institutions to safeguard nonpublic personal information, provide privacy notices, and honor opt-out rights for certain sharing.

Mortgage fraud elements

Falsifying income, assets, occupancy, or property value on a mortgage application constitutes fraud and can lead to criminal charges, license revocation, and loan repurchase demands.

Redlining definition

Redlining is the practice of denying or varying loan terms based on the racial or ethnic composition of a neighborhood, violating fair lending and fair housing laws.

Disclosure of conflicts

Originators must disclose relationships or financial interests that could influence loan placement, and must avoid undisclosed referral fees or gifts tied to settlement service providers.

NMLS role

The Nationwide Multistate Licensing System is the central registry and licensing platform, but each state enforces its own mortgage licensing act, rules, and examinations.

State SAFE implementation

States implement the SAFE Act through their own licensing statutes, setting pre-licensure education hours, testing, continuing education, and renewal requirements that licensees must meet.

License renewal requirements

Renewal typically requires annual fees, continuing education, surety bond maintenance, and timely reporting of changes to control, address, or legal name under state rules.

Unique identifier use

The NMLS unique identifier must appear on loan documents and advertising where state law requires it, allowing consumers to verify an originator's licensing status.

State advertising rules

State mortgage laws may require advertising to disclose the licensee's name and license number and prohibit misleading, unsubstantiated, or deceptive claims about loan terms.

Record retention rules

States set minimum periods for retaining loan files and records, and licensees must comply with the stricter of state or federal requirements when both apply to the same records.