Questions and Answers
What is the minimum bond amount required for loan correspondents?
Loan correspondents must maintain a surety bond for the mortgage originators sponsored by the applicant or licensee, in a form acceptable to the Department, prior to the issuance of the license from a surety company authorized to do business in this __________.
Commonwealth
What determines the bond amount for an initial license applicant?
The anticipated amount of mortgage loans originated in the first calendar year of licensing.
What is the minimum net worth mortgage lenders must establish at the time of application?
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What is the minimum number of hours required for pre-licensing education for mortgage licensees?
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A candidate must obtain a score of at least 75% to pass the pre-licensing education test.
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What is the fee for a credit report through the NMLS?
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What must licensees do in terms of providing updates about their license information?
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What is the maximum term for which licenses can be issued upon application?
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The continuing education requirements for licensees include 8 hours of NMLS-approved education annually, including __________ on PA state-specific law.
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Pre-closing fees, other than a credit report, are restricted by federal Regulation Z.
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What does the SAFE Act stand for?
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What is HERA?
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What does NMLS stand for?
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HUD is responsible for oversight of the SAFE Act.
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What is the Pennsylvania Department of Banking?
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The _____ may not engage in the mortgage loan business unless employed and supervised by a licensed mortgage broker.
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What is an Advance Fee?
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What is a penal sum?
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Define a Mortgage Lender.
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Match the following terms with their definitions:
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The Mortgage Brokers and Brokers Act was approved by the Pennsylvania General Assembly in _____.
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Licensed mortgage brokers can perform any type of lending services.
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What is a Lock-in Agreement?
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According to the Mortgage Lender Licensing Requirements, what is the minimum net worth requirement?
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Study Notes
SAFE Act and HERA
- SAFE Act: Stands for the Secure and Fair Enforcement Mortgage Licensing Act of 2008, enacted on July 30, 2008.
- HERA: Housing Economic Recovery Act also enacted on July 30, 2008, aims to enhance consumer protection and reduce fraud in mortgage lending.
NMLS and HUD
- NMLS: Nationwide Mortgage Licensing System developed for the residential mortgage industry.
- HUD: U.S. Department of Housing and Urban Development, oversees compliance with the SAFE Act.
Pennsylvania Department of Banking and DOBS
- DOBS: Refers to the Pennsylvania Department of Banking and Securities, acts as a regulatory authority overseeing financial services.
- Responsibilities include regulating banks, credit unions, and mortgage lenders and brokers.
Mortgage Loan Originators and Licensing
- Mortgage Loan Originators must be employed and supervised by licensed brokers or lenders to conduct business.
- Entities (like mortgage brokers and lenders) must be licensed to engage in the mortgage loan business.
Licensing Exemptions
- Attorneys engaged in mortgage activities without public representation are exempt from licensing.
- Nonprofit corporations promoting homeownership may also be exempt from licensing requirements.
Pennsylvania Mortgage Bankers and Brokers Act
- Original act approved in late 1989, later amended by Act 31 of 2009 to implement SAFE Act regulations.
- Requires licensing and registration of mortgage originators with NMLS.
Key Definitions in Mortgage Business
- Advance Fee: Funds requested or received by a mortgage originator during application processing.
- Penal Sum: Maximum amount surety will pay for the licensee's default obligations.
Various Mortgage Entities
- Mortgage Lender: Engages in originating and closing loans using their funds.
- Mortgage Broker: Negotiates mortgage loans for others in the primary market.
- Loan Correspondent: Originates and closes loans using funds from a wholesale lender.
Lock-in Agreements
- Lock-in Agreement: Guarantees interest rate until specified date for mortgage loans.
Licensing Process and Requirements
- Application includes business and personal details; must comply with Pennsylvania regulations.
- Annual report required by May 1st to renew licenses.
Surety Bond and Net Worth Requirements
- Surety Bond: Required for mortgage lenders and loan correspondents, varies based on expected loan volume.
- Mortgage lenders: $100k to $500k based on loan amounts.
- Loan correspondents: Minimum bond of $100k.
- Net Worth: Mortgage lenders must maintain a minimum net worth of $250,000; loan correspondents require $100,000.
Compliance Measures
- Licensees must adhere to examination guidelines and refund fees if loans are not produced within specified terms.
- Lock-in agreements must be documented in writing to ensure compliance.### Criminal Background Checks
- Licensees must submit fingerprints through NMLS for background checks.
- A separate state criminal background check is mandatory outside of NMLS.
- NMLS provides credit reports with scores on behalf of applicants.
- Fingerprints are processed automatically, allowing state regulators access to results.
Credit Report Requirements
- All licensees must authorize credit reports through NMLS.
- MLOs must complete credit report authorization regardless of past requirements.
- State regulators independently review credit information for licensed MLOs.
- No standardized credit score is enforced; states develop their own standards.
- Fee for credit report is set at $15.
Pre-Licensing Education
- MLA mandates 20 hours of pre-licensing education for mortgage licensees.
- Education hours required: 3 hours on federal law, 3 on ethics, 2 on non-traditional lending, 3 on Pennsylvania laws, and 9 electives.
Testing and Re-testing
- A minimum score of 75% is needed to pass the pre-licensing education test.
- Education and testing are approved and administered by NMLS.
- New mortgage originators must complete education and testing prior to licensing.
- MLO applicants and significant partners must pass a qualified written test developed by NMLS.
- Test content includes ethics, federal laws, fraud regulations, and fair lending practices.
Prohibition
- Licensees cannot charge fees exceeding allowed limits.
- Proceeds of mortgage loans must only be disbursed via cash, electronic transfer, or certified funds.
- False or misleading advertisements are strictly prohibited.
Prohibition - License Denial Grounds
- Licensees cannot charge consumers fees for obtaining a mortgage loan outside specified guidelines.
- Mortgage lenders may pay fees to brokers as per the provisions detailed.
Note: Prohibition - Grounds for Denying License
- Pre-closing fees, other than credit report costs, are restricted by federal regulations.
- Conditions must not be placed on consumers to contract specific insurance services.
- Mortgage brokers can’t engage in services outside their designated sponsorship requirements.
License Maintenance - Continuing Education
- Licensees must complete 8 hours of NMLS-approved continuing education annually, including 1 hour on PA state law.
- CE credit is only awarded for courses taken in the year enrolled and may not repeat courses in successive years.
License Maintenance - Duty to Update Information
- Licensees must notify DOB in writing of any information changes in applications or renewals within 10 days of awareness.
License Renewal
- Licenses can be issued for up to 14 months, contingent on application and fee payment.
- Licensees must demonstrate compliance with Chapter 61 requirements to renew.
License Renewal Fees
- Fees vary by type of licensee:
- Lenders and Loan Correspondents: $750
- Mortgage Brokers: $500 (principal), $250 (branch)
- Loan Originators: $100
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Description
This quiz covers the key components of mortgage licensing and regulation, including the SAFE Act, HERA, NMLS, and the roles of HUD and DOBS. Test your knowledge on the requirements for mortgage loan originators and the regulatory framework governing them in Pennsylvania.
