Federal Housing Administration and the Evolution of American Mortgages, Exams of Nursing

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and answers 2024-

What is a mortgage? - A written debt instrument, in which the borrower gives a lender a lien on "real property" as a security for the repayment of a loan mortgagor - borrower mortgagee - lender What is a security instrument? - secures the lien to the property What is a deed of trust? - A deed that is held by a trustee until a borrower completes repayment of a loan What was the impact of the Federal Reserve System? - It established a framework for government involvement in mortgage lending When was the Federal Reserve System established? - 1913 What is a charter? - A law passed by the government that states the mission, authority and activities of a group

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What did the Federal Reserve System establish? - A federal charter for banks that permitted them to make real estate loans What was the impact of the Federal Home Loan Bank Act? - It allowed credit unions and savings banks to finance home mortgages so they could also finance home mortgages When was the Federal Home Loan Bank Act put into effect? - 1932 What did the Banking Act of 1933 do? - Insures deposits and protects consumers against bank default Helped create the Federal Deposit Insurance Corporation in 1934 Why was the Federal Housing Administration created? - It helped the housing industry recover from the Great Depression When was the Federal Housing Administration created? - 1934

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What was the Federal Housing Administration intended to do? - To provide mortgage insurance so banks wouldn't take losses for defaults on home loans What did the creation of the Federal Housing Administration allow for lenders? - They were then able to commit more funds to home mortgage loans How did the Federal Housing Administration create modern American mortgages?

• Added quality standards Lowered down payment required Created 15-30 year loans Added amortization periods Provided mechanism for mortgage insurance What created the 30 year mortgage? - The Federal Housing Administration How did the Federal Housing Administration increase quality standards of mortgages? - It created an appraisal system that helped lenders assess risk in certain properties, increasing the likeliness for homes to hold their value over time if they were "FHA-insured"

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What is amortization? - Paying off both interest and principal amounts with each payment Who is the largest insurer of mortgages in the world today? - The Federal Housing Administration The creation of the Federal National Mortgage Association in 1938 increased the ________________ in the market and allowed for more money to become available for lenders. - liquidity When was the Federal National Mortgage Association created? - 1938 When was the US Department of Housing and Urban Development created? - 1965 What piece of legislature created the Federal Housing Administration? - The National Housing Act of 1934 What was the greatest impact of the creation of the Federal National Mortgage Association? - Created the secondary market

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What does the secondary market allow? - Allows more money to be available to lenders, and mandates fair & efficient lending practices with guidelines to be sold on its' market How did the Federal National Mortgage Association create the secondary market?

• They purchased FHA loans and sold them as securities When was the beginning of mortgage securitization? - In 1938 with the creation of the Federal National Mortgage Association What is the secondary mortgage market? - The market in which closed mortgage loans and mortgage-backed securities are bought and sold What is a mortgage-backed security? - An asset-backed security that is secured by a mortgage or a collection of mortgages What is a security? - A tradable financial asset. In this case- a debt (loan) repaid with periodic payments

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Wh at was happening in the housing market that required the US Department of Housing and Urban Development to be created? - After WWII, the housing market boomed and the demand for houses boomed What was the US Department of Housing and Urban Development established to provide? - Financial incentives to renovate and build in certain urban areas What is the Community Reinvestment Act? - A regulation implemented to monitor bank performance with lending standards, which analyzes a bank's success or failure to reach out to the lending communities it serves What is the Veteran's Administration? - Protects lenders against borrower default by insuring mortgage loans made to veterans. (Just like the FHA) What 3 factors created unlimited mortgage funds? - 1968 - FNMA was privatized and became a GSE 1968 - GNMA created to securitize government-issued mortgages (like FHA loans) 1970 - FHLMC created to work hand in hand with FNMA When was the Federal National Mortgage Association privatized? - 1968

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What does it mean to securitize? - To convert a loan into marketable securities, typically for the purpose of raising cash by selling to other investors Why was the Government National Mortgage Association created? - To securitize government-issued mortgages (like FHA loans) When was the Government National Mortgage Association created? - 1968 GSE stands for: - government sponsored entity What do the Federal National Mortgage Association and the Government National Mortgage Association allow loans to do? - To be securitized and sold on the secondary market for profit What does the Federal Housing Finance Agency do? - Manages the FNMA (Federal National Mortgage Association) & FHLMC (Federal Home Loan Mortgage Corporation)

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What are considered "government mortgages"? - Federal Home Administration (FHA) loans Veteran's Administration (VA) loans US Dep't of Agriculture (USDA) loans Who insures government mortgages? - The Government National Mortgage Association Who insures conventional mortgages? - the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation What is a PMI? - Private mortgage insurance What caused the Great Recession of 2008 & 2009? - Subprime lending Housing bubble peak in 2006 Predatory lending

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Who developed the Nationwide Multi-State Licensing System (NMLS) and the Model Law? - The Conference of Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulation (AARMR) What was the Nationwide Multi-State Licensing System (NMLS) and Model Law developed for? - Made it harder for bad players to move across state lines to start fraud What is the NMLS? - Licensing system to coordinate, maintain licenses for Mortgage Bankers & Brokers, and to provide accountability to mortgage loan originators who previously went unnoticed with their fraud schemes When was the Dodd-Frank Wall Street Reform Act passsed? - 2010 What was the purpose of creating the Consumer Financial Protection Bureau? - Consumer complaint platform Federal level audits Interpret federal mortgage lending regulations Enforce & impose fines Stop widespread violations

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What created the Consumer Financial Protection Bureau (CFPB)? - The Dodd- Frank Wall Street Reform Act What two things define an MLO? - 1) Takes a residential mortgage loan application

2. Offers/negotiates terms of a residential mortgage loan What is real estate brokerage activity? - Any activity that involves offering or providing real estate brokerage services to the public Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property is an example of: - real estate brokerage activity Bringing together parties interested in sale, purchase, lease, rental or exchange of real property is an example of: - real estate brokerage activity Negotiating on behalf of any property is an example of: - real estate brokerage activity

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Who hires state licensed mortgage loan originators? - State licensed mortgage brokers or state licensed mortgage bankers Who hires registered mortgage loan originators? - An NMLS registered FDIC (Banks) insured institution True or false: A state licensed mortgage loan originator must be licensed if they take a residential mortgage loan application. - True True or false: A state licensed mortgage loan originator must be licensed if they offer or negotiate terms of a residential mortgage loan. - True True or false: A state licensed mortgage loan originator must be licensed if they have an expectation of compensation or gain. - True True or false: A state licensed mortgage loan originator must be licensed if they engage solely as a loan processor or underwriter. - False True or false: A state licensed mortgage loan originator must be licensed if they take a 1003 or negotiate terms. - True

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True or false: A state licensed mortgage loan originator must be licensed if they perform real estate brokerage activities not compensated by mortgage licensee. - False True or false: A state licensed mortgage loan originator must be licensed if they are solely involved in extension of credit for time shares. - False A person engaged in real estate brokerage activity must be registered or licensed as a: - real estate agent or real estate broker What is a registered mortgage loan originator? - An employee of a depository institution, Federal Banking agent or an institution regulated by the Farm Credit Administration. They are registered and maintain a unique identifier, but have no PE, CE, or Testing Who approves MLO license applications? - The state. What is an NMLS UIN? - Unique identifier number

and answers 2024-

Who assigns unique identifier numbers? - The NMLS when applying for a license Where must an NMLS ID be displayed? - On all loan applications and MLO advertising Where can consumers verify an NMLS license and company? - Consumer Access site True or false: The NMLS's job is to approve or deny license applications. - False The ______________ is a number that will identify which MLO is originating a loan by appearing on the residential loan application. - Unique identifier number (NMLS ID) Who performs clerical or support duties? - Loan processor or underwriter True or false: The loan processor or underwriter can discuss rate and terms of the loan with the borrower. - False

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Who supervises and gives instructions to the loan processor or underwriter? - A licensee What is a loan processor or underwriter? - An individual who performs clerical or support duties as an employee at direction of and subject to supervision and instruction of a licensed MLO. What are clerical/support duties? - Occurs after the receipt of an application. The receipt, collection, distribution, and analysis of info common for processing/underwriting of residential mortgage loan. Communicating with the consumer to obtain info necessary for processing/underwriting of a loan. What is the ultimate purpose of the processor? - To help the process of getting the loan go smoothly from beginning to end. What is the one document the loan processor can not accept? - The initial application.

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Name three examples of "clerical or support duties." - 1) Receipt and collection of information

2. Communicating with consumer on information necessary to process loan
3. Employment verification or financial verification What is the purpose of the underwriter? - Decides whether or not the borrower qualifies for a loan and makes the final decision on approval or denial. What is the underwriter responsible for? - Analyzing the documents within a loan file and comparing to the requirements of different types of loan product guidelines to make the ultimate decision of approval or denial. Who is responsible for the approval or denial of a loan application? - The underwriter When does an underwriter or loan processor need to have an MLO license? - When they are an independent contractor What is an independent contractor? - Third-party employed, not by the company who they process/underwrite for (1099 rather than W-2)

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True or false: To be licensed as an MLO an individual must be sponsored. - True Sponsorship requests by a mortgage lender/broker to license an MLO go through who? - The NMLS How many companies can an MLO be sponsored (employed) by? - One What is a mortgage broker? - A company or firm that brings borrowers and lenders together for loan origination Who is the Third Party Organizer (middleman) in the loan process? - Mortgage brokers What entity can take loan applications and also process loans, but cannot fund or underwrite loans? - Mortgage brokers True or false: mortgage brokers can fund or underwrite loans. - False

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Typically, who does the underwriting and closing? - Mortgage lenders What is a mortgage lender? - An entity that provides the funds for a mortgage Who manages the credit and financial info reviews? - The mortgage lender Who takes the loan application and shops it around to different wholesale lenders to find the best lender? - The mortgage broker Who compensates the broker for providing an application to them? - The wholesale lender What happens once a mortgage lender funds a loan? - They will break the loan into two separate parts

1. The mortgage
2. The servicing rights

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What is a mortgage servicer? - A firm that provides servicing functions, including collecting mortgage payments, paying investors, collecting and paying borrower's taxes and insurance, managing borrower escrow accounts. Name four examples of mortgage servicing functions. - 1) Collecting mortgage payments

2. Paying investors
3. Collecting and paying borrower's taxes and insurance
4. Managing borrower escrow accounts Who can originate, process, underwrite and fund loans? - The mortgage lender What is the difference between a mortgage broker and a mortgage lender? - They can both originate and process loans, but the broker cannot fund or underwrite loans What happens when an MLO moves from one company to another? - Their license is suspended and they cannot originate loans until they are sponsored by the new lender/employer.

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Who uses the secondary market and the servicer? - The lender Who are the major 3 players on the secondary market? - 1) The Federal National Mortgage Association (FNMA)

2. The Federal Home Loan Mortgage Corporation (FHLMC)
3. The Government National Mortgage Association (GNMA) What are mortgage-backed securities? - A type of asset-backed security that is secured by a mortgage or a collection of mortgages ____________________ are a type of asset-backed security that is secured by a mortgage or collection of mortgages. - Mortgage-backed securities Where do mortgage-backed securities come from? - A group of individuals will purchase mortgages then will package them into a security that investors can buy and sell on the secondary market. What is a government sponsored entity? - An entity that provides liquidity to the market by purchasing mortgages and mortgage-backed securities and selling them on the secondary market.

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Government sponsored entities only purchase what types of loans? - Conventional Give two examples of government sponsored entities. - 1) The Federal National Mortgage Association (FNMA)

2. The Federal Home Loan Mortgage Corporation (FHLMC) What is a government owned entity? - An entity that provides liquidity to the market by purchasing mortgages and mortgage-backed securities and selling them on the secondary market (just like a GSE) but only purchases government loans. Give 3 examples of government loans. - 1) Federal Housing Administration loans (FHA)
3. Veteran's Administration loans (VA)
4. US Department of Agriculture loans (USDA) Give an example of a government owned entity. - The Government National Mortgage Association (GNMA)

and answers 2024-2025

Explain the three stages of the mortgage loan life cycle. - 1) A qualified borrower decides to obtain a mortgage loan.

2. Primary market: The borrower goes to the lender/broker, and the lender originates the loan.
3. Secondary market: The lender replenishes their cash/funds by selling the loan to an investor (like FNMA or FHLMC). What entities have the power to regulate the mortgage industry? - Regulatory authorities Who has the power to investigate, impose penalties, provide supervision or a combination of all three? - Regulatory authorities What is a state regulatory authority? - An entity responsible for the supervision and enforcement of state laws regarding the mortgage industry Who is the state of Florida's regulatory agency? - FL Office of Financial Regulation Who is the federal regulatory agency? - The Consumer Financial Protection Bureau

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What did the creation of the Consumer Financial Protection Bureau increase? - Increased the oversight and regulatory authority of the mortgage industry Since inception, the Consumer Financial Protection Bureau has collected how much in fines and penalties? - Hundreds of millions of dollars Millions of dollars that the Consumer Financial Protection Bureau has collected has been deallocated to: - compensation to victims and for financial literacy education What is federal-regulatory authority? - Enforces federal law Who is the federal government's primary enforcer and supervisor of the mortgage industry? - The Consumer Financial Protection Bureau (CFPB) What is the fundamental law that regulates the licensing process and responsibilities of MLOs? - The SAFE Act of 2008 What Act was passed around the same time regulators developed the NMLS and created Model Law? - The SAFE Act of 2008

and answers 2024-2025

Model Law gave each state: - a template to use to create its own SAFE Act Who licenses MLOs and non-financial companies? - State regulatory authorities True or false: You can get a federal MLO license. - False The first step in obtaining an MLO license is: - the application. What is the name of an application for an MLO license? - An MU4 What is an MU4? - The application for an MLO license When submitting an application, what must be completed? - 1) MU4

2. Fingerprints
3. Background check
4. Credit check

and answers 2024-2025

The second step in obtaining an MLO license is: - education & testing The SAFE Act requires ________ hours of pre-licensing education. - 20 How long after taking pre-licensing education does an individual have to pass the National Test? - 3 years What piece of legislature requires 20-hours of pre-licensing education? - The SAFE Act of 2008 Give a breakdown of the 20-hour Pre-Licensing Education requirements and topics. - Federal Law & Regulation - 3 hours Ethics, fraud, consumer protection, and fair lending - 3 hours Nontraditional mortgages - 2 hours Electives dictated by state - 12 True or false: States may require more education than the 20 hour pre-licensing education. - True

and answers 2024-2025

All pre-licensing education courses are reviewed and approved by what entity? - The NMLS What is the state of Florida's pre-licensing education requirement? - 20 hours total, 2 hours of which are state specific The National Component Test includes the _____________ Test. - The Uniform State Content Test (UST) What are the topics covered in the National Component Test? - Federal Laws And Regulations Ethics, Fraud, Consumer Protection and Fair Lending issues Nontraditional Mortgage products Prohibited Conduct Per 2016 policy, the 20 hours of pre-licensing education must be retaken to be eligible for the license if: - 1) Fail to acquire license within 3 years of taking 20 hours PLE

2. Fail to acquire license within 3 years of last date of licensure