Statement of Purpose The purpose of this course is to establish higher professional standards for the mortgage industry, to equip mortgage loan originators (MLOs) with the most current information necessary to generate accurate loan applications and offer proper disclosure to borrowers, and to educate loan originators concerning applicable laws and principles of sound ethical practices and consumer protections. 20-Hour SAFE Comprehensive PE Exam Preparatory Mortgage Origination Mastery Learning Objectives Section I: General Mortgage Concepts Part A: Introduction to Mortgage Lending and Mortgage Principles Objectives: In Part A of Section I the student will be introduced to the mortgage lending industry starting with a brief history and then learning about the process and cycle of a mortgage loan from origination to servicing. Part A explores the fundamentals of property rights, lien theories, basics of a mortgage lien and the various forms of warranties and tenets of real property ownership. The student will be expected to understand: •  How the lending industry has evolved and expanded homeownership over the last 100 years •  The key differences between mortgage brokers and mortgage lenders •  The concept of a mortgage •  Who the industry participants are and their roles •  The mortgage loan cycle and the players •  How capital moves from the secondary market to the primary market •  Various settlement service providers •  The three different types of property rights and how they are protected •  The two key parts of a mortgage loan •  The role of the contract and the security instrument •  Hypothecation and conveying of title •  Title theory and lien theory •  Various types of ownership and title transference •  Matching Exercise Part B: Credit Scoring, Types of Loans and Methods of Financing Objectives: The objective of Part B of Section I is for the class to learn the various types of purchase money and refinance loan options and to explore the different loan categories available to consumers. Part B also explores the basics of credit scoring to enhance the student’s understanding of how it works and the student’s responsibilities in protecting the accuracy and confidentiality of a consumer’s credit. The student will be expected to complete an end of section quiz and understand: •   How credit works and how a credit score is determined •   Credit report basics and the CRAs •   Understanding credit scoring •   Conventional loans, fixed rate terms •   Adjustable Rate Mortgages, risks, benefits and the proper application of various terms •   ARM components, caps and adjustments •   Balloon mortgages •   Government loan products •   Other Concepts and Definitions Section II: Loan Origination Part A: The Ethical Imperative of Consumer Protection, Mortgage Fraud and Identity Theft Objectives: The objective of Part A of Section II is for the class to understand the damage caused by mortgage fraud, how it’s perpetrated and what is being done to combat it. Each student will be expected to understand: •   The scope of the problem of mortgage fraud •   What mortgage fraud is and how it impacts the lending industry, communities and the nation’s economy •   The two main categories of mortgage fraud •   Fraud detection technology and new strategies to eliminate fraud •   Responsible Information Management •   Identity Theft •   Fraud Definitions •   Identity Risk Management Part B: The Loan Application and Mortgage Math Workshop Objectives: The objective of Part B is to enhance loan originator effectiveness through understanding the application process, borrower interaction, the four building blocks of mortgage loan and mortgage math mastery. In Part B the student will be expected to participate in math case study, quiz and understand: •   The Purpose of the Loan Application •   The universal loan application and its proper completion •   Principle, interest, amortization •   Simple interest and negative interest •   Total housing expense and escrows •   Equity, LTV and subordinate financing •   The loan application process and how it evolves from pre-application through full documentation •   Proper pre-call planning and setting appropriate expectations with the applicant •   How to identify the borrower’s objectives and to match the type and term of loan to the borrower’s qualifications •   Basic mortgage math including principle and interest calculations, monthly and daily interest and loan amortization •   How to calculate gross monthly income •   How to calculate front-end and back-end debt ratios, discount points and pre-paid finance charges Section III: Introduction to Federal Laws and Disclosures Objectives: The introduction to Federal Laws is a broad overview of the basics of consumer protections and the loan originator’s duties of proper disclosure, guidance and protections throughout the lending process. The learning objectives are for the student to understand the purpose of these laws, to be able to distinguish the various groupings of the federal laws and the MLO’s duties of compliance. Each student will be expected to know how these laws work together to create an umbrella of consumer protections, complete a quiz: Introduction •   The purpose and process of proper disclosure •   How to transparently inform borrowers of their rights throughout the process, the costs, terms and risks of the loan being presented •   The various housing agencies and their oversight duties The Real Estate Settlement Procedures Act (RESPA) •   The primary purpose of the original 1974 Act •   Basic definitions, timelines and restrictions •   The four RESPA disclosure periods and the MLO’s duties within each •   Section 8 prohibitions against kickbacks, unearned fees and improper fee splits •   Affiliated business arrangements •   RESPA Update •   The need and purpose of the new rules •   The history leading up to the final RESPA rule •   The six different GFE triggers •   What “Changed Circumstances” means and proper re-disclosure •   The new three-page GFE and how to complete it •   The “Binding GFE” and borrower rights •   The updated HUD-1 and 1A •   The three distinct categories of charges and tolerances •   “Average Cost Pricing” and how its used Homeowner Protection Act (HPA) •   The reason for and the purpose of HPA •   Automatic termination •   Termination by request The Truth In Lending Act (TILA) •   The main purpose of TILA •   Timelines and proper disclosure of the TIL •   Annual Percentage Rate, APR •   The finance charge •   The amount financed •   The total of payments •   How consumers can use the TIL to comparison shop and compare various offers •   Regulation Z’s credit advertising policy •   TILA Update The Fair Lending Laws o Interagency Policy Statement on Discrimination in Lending o Equal Credit Opportunity Act (ECOA) o Fair Housing Act (FHA) o Home Mortgage Disclosure Act (HMDA) The Gramm-Leach-Bliley Act: Privacy & Information Protections (GLBA) •   Protections of non-public, personal information (NPI) •   The privacy policy and the MLO’s duties •   The safeguards rule and how to protect a consumer’s NPI •   Pre-text calling and how to defend against it The Telemarketing Sales Rule (TSR) •   The privacy and sanctity of the home •   Rules regarding telephone access to consumers •   Opt-out rights and the Do-Not-Call Registry •   Scrubbing and the internal Do-Not-Call Registry The USA PATRIOT Act (USAPA) •   The purpose of the Patriot Act •   The MLO’s role with the CIP procedures •   The SDN list and proper reporting The National Flood Insurance Act (NFIA) •   The purpose of flood certification •   Lender’s rights and borrower’s duties regarding flood insurance •   Various other notices and disclosures for proper protections Section IV: Federal Laws - Our New Duties Part A: The SAFE Act Objectives: The learning objectives for Part A of Section Four are to know how to register with the NMLS, obtain and maintain a state license, interact with the NMLS and the proper usage of the unique identifier. Each student will be expected to fully understand: •   The two categories of loan originators •   The purpose of the SAFE Act •   The NMLS & R •   Various key definitions and who needs licensing and who requires only registration •   How to access and register with the NMLS •   State licensing, background checks, education requirements •   Testing and proper reporting to the NMLS •   Renewal and CE •   Obtaining the “unique identifier” and its proper use Part B: The Fair Credit Reporting Act and the Red Flags Rule Objectives: The learning objectives for part C of Section IV are to under stand the FCRA and a originator’s duties in regard to managing and preventing credit fraud. •   The purpose of FCRA •   The FACT Act •   The FACT Act disposal rule •   The Red Flags Rule •   26 Red Flags Guidelines •   Reconciling Addresses Part C: Federal Law Flash Review and Quiz Objectives: In Part C of Section IV we will review the Federal Laws for the purposes of test preparation and complete an in-class quiz. •   Group 1: Early Disclosure Laws •   Group 2: The Fair Lending Laws •   Group 3: Privacy Protection Laws Section V: Nontraditional Mortgage Products Objectives: the learning objectives of Section V are to know how the nontraditional mortgage market evolved, how it is being reformed and to update the student on the latest changes regarding various government sponsored loans. The student will be expected to understand: •   The history and evolution of the traditional and nontraditional mortgage product marketplace •   The rise and fall of nontraditional products and the disappearance of sub-prime products •   Various types of nontraditional products •   How FHA revolutionized housing and lending •   The latest updates on FHA lending •   How USDA loans create balance and access to housing •   Various benefits of USDA loans for consumers •   The new training requirements for USDA lending •   The unique advantages of VA loans •   Loan Products Review Section VI: Ethics and Consumer Protections Objectives: The learning objectives of part A of Section VI are to comprehend the failures of our mortgage industry, explore the new responsibilities the industry must embrace, differentiate between what ethics is and what it is not to improve ethical decision making, adopt new standards of responsible lending and incorporate new duties of care into daily origination practices. Also, students will learn about the two main types of mortgage fraud and learn some mortgage fraud indicators. The student will be expected to participate in discussion, answer personal ethical questions, resolve an ethical dilemma, recognize mortgage fraud and understand: •   What ethics is and what it is not •   Ethical decision-making and how to use ethical guides for consistent behavior •   The attributes and characteristics of an ethical lending culture •   The New Responsibility Era and the MLO’s four standards of sustainable lending •   The MLO’s new duties of care and how to adopt them into daily practice to build a “responsible lending culture” •   Ethical Sales and Marketing •   RESPA’s Kickback Provisions and YSP •   The GLBA, Privacy Policy, Opt-Out Rights and Pretext Calling •   TILA and Ethical Advertising •   ECOA: Similarly situated borrowers and required disclosures •   ECOA and HOEPA: Appraisers and the Appraisal •   Ethics and Fraud Detection Section VII: The Path from Processing to Funding Part A: Processing and the Appraisal Objectives: The learning objectives for Part A of Section Seven are to know the verification process when preparing the loan file for underwriting, how the appraisal is completed and how to effectively present the loan to the underwriter. Each student will be expected to understand: •   The importance of the loan processor’s role •   Proper verification of loan documentation •   The recent changes to appraisal report forms •   How the appraiser approaches the subject property •   The appraiser declarations and attestation Part B: Underwriting, Closing and Final Quiz Objectives: The learning objectives for Part B of Section Seven are to know the basics of underwriting, the two major automated underwriting engines, the basics of conventional loan underwriting and how the closing, recordation and funding process lead to homeownership. Every student will be expected to complete a final quiz and understand: •   The underwriting process •   Automated and manual underwriting •   Expanded underwriting criteria •   FNMA underwriting standards •   Various loan commitments and contingencies •   Closing and recordation •   Completing the final quiz