The USA Patriot Act
In response to the terrorist attacks of September 11, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 also known as the USA PATRIOT Act has established ways to identify and intercept terrorist financial networks within and outside the United States of America.
For mortgage lending industry we focus in the Title III of the Patriot Act – “International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001”. Mortgage brokers are required to create a customer Identification Program (CIP), an anti-money laundering program and information sharing with financial institutions and law enforcement agencies.
To meet the CIP standards, any mortgage applicants must:
For more information regarding The USA Patriot Act, please visit:
https://www.justice.gov/archive/ll/highlights.htm
The Bank Secrecy Act
The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act and sometimes referred as the Anti-Money Laundering law (AML) or jointly as BSA/AML.
BSA requires mortgage companies in the United States to help U.S. government agencies in detecting and preventing any money laundering. The Financial Crimes Enforcement Network (FinCen) of Bureau of the Department of Treasury published rules and requirements for Residential Mortgage Lenders and Originators to have an AML and file Suspicious Activity Reports (SAR) under the BSA.
Every mortgage company has a written AML program.
It includes:
Suspicious Activity Reports (SARS)
The Compliance Officer complete the SARS. It must report transactions that are conducted or attempted through the finance company involving $5,000 or more. Suspicious activity is the trigger, application may be at any stage of the process, and transactions are reportable regardless of whether currency is involved. Any staffs should report any suspicious activities to the compliance officer. The SARS is confidential. It MUST not disclose any SARS. It must be filed within 30 days of the initial detection.
For more information regarding Bank Secrecy Act, please visit:
https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html
The Fair Housing Act
The Fair Housing Act protects people from discrimination against Race, Color, Religion, National Origin, Sex, Disability and Familial status.
We conduct our business in accordance with the Fair Housing Act’s guidelines .
For more information regarding the Fair Housing Act, please visit:
https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview
Equal Housing Lender
We conduct our business in accordance with the Federal Fair Housing Act. It prohibits discrimination in housing relation transactions based on race, color, national origin, religion, sex, familial status and disability.
For more information regarding the Equal Housing Lender, you can call 1-800-669-9777 (toll free), or 1-800-927-9275 (tdd), or
write to:
Office of Fair Housing and Equal Opportunity
Department of Housing and Urban Development
Room 5204
451 Seventh St. SW
Washington, DC 20410-2000
Or
https://www.hud.gov/program_offices/fair_housing_equal_opp/online-complaint
Fair Lending Policy
The federal fair lending laws is a combination of the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA). They prevent discrimination of residential real estate
in credit transactions.
ECOA or regulation B prohibits discriminations based on: Race, Religion, Nation Origin, Sex, Marital Status, Age, Receipt of income from public assistance program and the good faith exercise of any right under the Consumer Credit Protection Act.
The Home Mortgage Disclosure Act (HMDA) requires financial institution to provide mortgage data to the public. The data includes but not limit to Date of mortgage application, loan type (conventional, FHA or VA etc), type of properties (single family or multifamily), purpose of loan (home purchase, home improvement or refinance), owner occupancy of property (owner or non-owner occupied), the loan amount , Whether or not the application was a request for pre-approval , the type of action taken (approved, denied, withdrawn, etc.) , the date of action taken , the location (state, county, MSA and census tract) of the property , the ethnicity (Hispanic or non-Hispanic) of the borrower(s), the race of the borrower(s) , the gender of the borrower(s)
, the gross annual income of the borrower(s), if the loan was subsequently sold in the secondary market, the type of entity that purchased it , if the loan was denied, the reason why it was denied (this field is optional for entities not regulated by the Office of the Comptroller of the Currency) , rate Spread (Rate spread is a metric that assists in reporting if the rate given to the borrower is above a certain threshold of the prevailing rates at the time of the application) , if the loan is or is not subject to the Home Ownership and Equity Protection Act of 1994 and lien status of the loan (1st or 2nd lien).
The Fair Housing Act protects the buyer of a dwelling from seller discrimination. It prohibit to make unlawful to sell or negotiate with any person because of the person’s inclusion in the protected class.
Our business do not discriminate any customers based on their Race, Religion, Nation Origin, Sex, Marital Status, Age, Receipt of income from public assistance program and the good faith exercise of any right under the Consumer Credit Protection Act. Our business do NOT selectively encourage or discourage or take no action any reasonable persons from applying for a mortgage loan. We do not refuse a loan, vary the terms offered including the amount, interest rate, period or type of loan, or use different standards to evaluate collateral or decide whether to extend credit. We avoid practices that have a discriminatory effect. This rule applies to all phases of our mortgage lending business. It applies even though we do not intend the policy or practice to be discriminatory and even if the policy or practice appears to be neutral. We have adopted nondiscriminatory loan underwriting standards that avoid subjective, unwritten rules that can have a discriminatory effect. We make these underwriting standards public upon request our office(s). We display the poster in a public area of each of our facilities stating that we are ascribing to the Equal Housing Act. Additionally, on all forms of advertisements, regardless of media, we include the Equal Housing Opportunity logo and/or the Equal Housing Opportunity slogan. Our scoring system is empirically derived and statistically sound and uses no prohibited basis other than age as a predictive factor. Every staffs practices fair processing and underwriting. Our business ensure the practice of Fair Lending practices are implemented with loan underwriting standards. We also review our portfolio and applications to reflect our community’s demographic characteristics.
For more information regarding the Fair Lending Policy, please refer to:
https://www.federalreserve.gov/boarddocs/supmanual/cch/fair_lend_over.pdf
Real Estate Settlement Procedures (RESPA) or Regulation X
The Real Estate Settlement Procedure Act (RESPA) of 1974 is a consumer protection statue. The purpose of RESPA is to help consumers to be a better shoppers for settlement services.
RESPA covers loans which is one of the following:
And one of the following:
Exempt from RESPA loans:
RESPA section 6, 8, 9 and 10
RESPA section 6: Mortgage servicers is obligated to correct any errors and work with home buyers if payments are not made.
RESPA section 8: No kickbacks, fee-splitting and unearned fees
RESPA section 9: Seller cannot require buyer to use a particular title company.
RESPA section 10: Limit lender require borrowers to put in escrow account for purpose of property tax, insurance and other charges. Each year: Lender must return an excess of $50 to consumer. Each month: no more than 1/12th of the annual disbursement. At closing: can only charge 1/6th of the annual disbursement.
For more information regarding RESPA, please refer to:
https://files.consumerfinance.gov/f/201503_cfpb_regulation-x-real-estate-settlement-procedures-act.pdf
Truth in Lending Act (TILA) or regulation Z
The Truth in Lending Act (TILA) of 1968 intend to help consumer the use of consumer by requiring disclosures about its terms and cost which costs related with borrowing are disclosed.
The federal Truth-in-Lending Act - or “TILA” for short – requires that borrowers receive written disclosures about important terms of credit before they are legally bound to pay the loan.
These important terms include:
Note that the TILA disclosure is often provided as part of the loan contract, so you may be given the entire contract for review when you ask for the TILA disclosure. You should review it all, paying special attention to the disclosures noted above. You should always insist on receiving and reviewing your TILA disclosure before you sign your loan contract.
For more information regarding TILA, please refer to:
https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/loan-originator-compensation-requirements-under-truth-lending-act-regulation-z/
Privacy Act
The Privacy Act of 1974 governs the collection, maintenance, use and dissemination of information about individuals that is maintained in systems of records by federal agencies. A system of records is a group of records under the control of an agency from which information is retrieved by the name of the individual or by some identifier assigned to the individual.
The Privacy Act requires that agencies give the public notice of their systems of records by publication in the Federal Register. The Privacy Act prohibits the disclosure of a record about an individual from a system of records absent the written consent of the individual, unless the disclosure is pursuant to one of twelve statutory exceptions. The Act also provides individuals with a means by which to seek access to and amendment of their records, and sets forth various agency record-keeping requirements.
For more information regarding the Privacy Act, please refer to:
https://www.justice.gov/opcl/privacy-act-1974
Qualified Mortgage
A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that you’ll be able to afford your loan.
A lender must make a good-faith effort to determine that you have the ability to repay your mortgage before you take it out. This is known as the “ability-to-repay” rule. If a lender loans you a Qualified Mortgage it means the lender met certain requirements
and it’s assumed that the lender followed the ability-to-repay rule.
Generally, the requirements for a qualified mortgage include:
https://www.consumerfinance.gov/ask-cfpb/what-is-a-qualified-mortgage-en-1789/
Ability to Repay
The ability-to-repay rule is the reasonable and good faith determination most mortgage lenders are required to make that you are able to pay back the loan.
Under the rule, lenders must generally find out, consider, and document a borrower’s income, assets, employment, credit history and monthly expenses. Lenders cannot just use an introductory or “teaser” rate to figure out if a borrower can repay a loan. For example, if a mortgage has a low interest rate that goes up in later years, the lender has to make a reasonable effort to figure out if the borrower can pay the higher interest rate too.
One way a lender can follow the ability-to-repay rule is by making a "Qualified Mortgage."
For more information regarding Ability-to-Repay, please refer to:
https://www.consumerfinance.gov/ask-cfpb/what-is-the-ability-to-repay-rule-why-is-it-important-to-me-en-1787/
Texas Finance code: Chapter 342: Consumer Loans
Please refer to:
https://statutes.capitol.texas.gov/Docs/FI/htm/FI.342.htm
Texas Office of Consumer Credit Commissioner (OCCC)
Title 7, Chapter 83, Texas Administrative Code
Please refer to:
https://texreg.sos.state.tx.us/public/readtac$ext.ViewTAC?tac_view=5&ti=7&pt=5&ch=83&sch=A
Federal Statues and Rules
Please refer to:
https://www.govinfo.gov/
In response to the terrorist attacks of September 11, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 also known as the USA PATRIOT Act has established ways to identify and intercept terrorist financial networks within and outside the United States of America.
For mortgage lending industry we focus in the Title III of the Patriot Act – “International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001”. Mortgage brokers are required to create a customer Identification Program (CIP), an anti-money laundering program and information sharing with financial institutions and law enforcement agencies.
To meet the CIP standards, any mortgage applicants must:
- Collect name, birthday, address and identification number (SSN or TIN, passport number or alien identification card number for any non-U.S. citizens).
- Verify the collected information such as SSN or TIN, , passport number or alien identification card number for any non-U.S. citizens. Additional documents may be needed.
- Maintain records of all information for any customers’ identity and keep records for 5 years after the paid off date of the mortgage
- Compare the customer’s identity to any list of known or suspected terrorists or any known terrorist organizations.
- Verbally or written notification that identity verification is necessary to open any new accounts.
For more information regarding The USA Patriot Act, please visit:
https://www.justice.gov/archive/ll/highlights.htm
The Bank Secrecy Act
The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act and sometimes referred as the Anti-Money Laundering law (AML) or jointly as BSA/AML.
BSA requires mortgage companies in the United States to help U.S. government agencies in detecting and preventing any money laundering. The Financial Crimes Enforcement Network (FinCen) of Bureau of the Department of Treasury published rules and requirements for Residential Mortgage Lenders and Originators to have an AML and file Suspicious Activity Reports (SAR) under the BSA.
Every mortgage company has a written AML program.
It includes:
- Designation and naming of a compliance officer and ensure that the AML program is implemented effectively and updated, appropriate persons are educated and trained.
- Establishing policies and procedures for preventing and collecting reportable information, identifying reportable events and suspicious activity reports (SAR).
- Establish employee training program with both on-board and annual training.
- Independent testing – does not need to be annual but must be based on size and complexity of the financial institution (mortgage broker business)
Suspicious Activity Reports (SARS)
The Compliance Officer complete the SARS. It must report transactions that are conducted or attempted through the finance company involving $5,000 or more. Suspicious activity is the trigger, application may be at any stage of the process, and transactions are reportable regardless of whether currency is involved. Any staffs should report any suspicious activities to the compliance officer. The SARS is confidential. It MUST not disclose any SARS. It must be filed within 30 days of the initial detection.
For more information regarding Bank Secrecy Act, please visit:
https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html
The Fair Housing Act
The Fair Housing Act protects people from discrimination against Race, Color, Religion, National Origin, Sex, Disability and Familial status.
We conduct our business in accordance with the Fair Housing Act’s guidelines .
For more information regarding the Fair Housing Act, please visit:
https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview
Equal Housing Lender
We conduct our business in accordance with the Federal Fair Housing Act. It prohibits discrimination in housing relation transactions based on race, color, national origin, religion, sex, familial status and disability.
For more information regarding the Equal Housing Lender, you can call 1-800-669-9777 (toll free), or 1-800-927-9275 (tdd), or
write to:
Office of Fair Housing and Equal Opportunity
Department of Housing and Urban Development
Room 5204
451 Seventh St. SW
Washington, DC 20410-2000
Or
https://www.hud.gov/program_offices/fair_housing_equal_opp/online-complaint
Fair Lending Policy
The federal fair lending laws is a combination of the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA). They prevent discrimination of residential real estate
in credit transactions.
ECOA or regulation B prohibits discriminations based on: Race, Religion, Nation Origin, Sex, Marital Status, Age, Receipt of income from public assistance program and the good faith exercise of any right under the Consumer Credit Protection Act.
The Home Mortgage Disclosure Act (HMDA) requires financial institution to provide mortgage data to the public. The data includes but not limit to Date of mortgage application, loan type (conventional, FHA or VA etc), type of properties (single family or multifamily), purpose of loan (home purchase, home improvement or refinance), owner occupancy of property (owner or non-owner occupied), the loan amount , Whether or not the application was a request for pre-approval , the type of action taken (approved, denied, withdrawn, etc.) , the date of action taken , the location (state, county, MSA and census tract) of the property , the ethnicity (Hispanic or non-Hispanic) of the borrower(s), the race of the borrower(s) , the gender of the borrower(s)
, the gross annual income of the borrower(s), if the loan was subsequently sold in the secondary market, the type of entity that purchased it , if the loan was denied, the reason why it was denied (this field is optional for entities not regulated by the Office of the Comptroller of the Currency) , rate Spread (Rate spread is a metric that assists in reporting if the rate given to the borrower is above a certain threshold of the prevailing rates at the time of the application) , if the loan is or is not subject to the Home Ownership and Equity Protection Act of 1994 and lien status of the loan (1st or 2nd lien).
The Fair Housing Act protects the buyer of a dwelling from seller discrimination. It prohibit to make unlawful to sell or negotiate with any person because of the person’s inclusion in the protected class.
Our business do not discriminate any customers based on their Race, Religion, Nation Origin, Sex, Marital Status, Age, Receipt of income from public assistance program and the good faith exercise of any right under the Consumer Credit Protection Act. Our business do NOT selectively encourage or discourage or take no action any reasonable persons from applying for a mortgage loan. We do not refuse a loan, vary the terms offered including the amount, interest rate, period or type of loan, or use different standards to evaluate collateral or decide whether to extend credit. We avoid practices that have a discriminatory effect. This rule applies to all phases of our mortgage lending business. It applies even though we do not intend the policy or practice to be discriminatory and even if the policy or practice appears to be neutral. We have adopted nondiscriminatory loan underwriting standards that avoid subjective, unwritten rules that can have a discriminatory effect. We make these underwriting standards public upon request our office(s). We display the poster in a public area of each of our facilities stating that we are ascribing to the Equal Housing Act. Additionally, on all forms of advertisements, regardless of media, we include the Equal Housing Opportunity logo and/or the Equal Housing Opportunity slogan. Our scoring system is empirically derived and statistically sound and uses no prohibited basis other than age as a predictive factor. Every staffs practices fair processing and underwriting. Our business ensure the practice of Fair Lending practices are implemented with loan underwriting standards. We also review our portfolio and applications to reflect our community’s demographic characteristics.
For more information regarding the Fair Lending Policy, please refer to:
https://www.federalreserve.gov/boarddocs/supmanual/cch/fair_lend_over.pdf
Real Estate Settlement Procedures (RESPA) or Regulation X
The Real Estate Settlement Procedure Act (RESPA) of 1974 is a consumer protection statue. The purpose of RESPA is to help consumers to be a better shoppers for settlement services.
RESPA covers loans which is one of the following:
- A one-to-four family dwelling.
- A manufactured home to be built or attached using the loan
And one of the following:
- Lender, creditor and dealer loans
- Federal government insured loans
- Loans intend to be sold on the secondary market such as Fannie Mae (FNMA) , Freddie Mac (FHLMC) or by the original lender
- Reverse mortgage
- Land contract, installment sales contracts or contract for deeds if the contract is funded by a lender, dealer or contract subject to regulation.
Exempt from RESPA loans:
- Parcel of 25 acres or more
- Temporary loans such as construction loans
- Commercial, business or agricultural loans
- Vacant land
- Assumption of existing mortgages which without lender approval persons as borrowers
- Loan conversions of any federally related mortgage loans
- Secondary market transactions or a bona fide transfer of a loan in the secondary market.
RESPA section 6, 8, 9 and 10
RESPA section 6: Mortgage servicers is obligated to correct any errors and work with home buyers if payments are not made.
RESPA section 8: No kickbacks, fee-splitting and unearned fees
RESPA section 9: Seller cannot require buyer to use a particular title company.
RESPA section 10: Limit lender require borrowers to put in escrow account for purpose of property tax, insurance and other charges. Each year: Lender must return an excess of $50 to consumer. Each month: no more than 1/12th of the annual disbursement. At closing: can only charge 1/6th of the annual disbursement.
For more information regarding RESPA, please refer to:
https://files.consumerfinance.gov/f/201503_cfpb_regulation-x-real-estate-settlement-procedures-act.pdf
Truth in Lending Act (TILA) or regulation Z
The Truth in Lending Act (TILA) of 1968 intend to help consumer the use of consumer by requiring disclosures about its terms and cost which costs related with borrowing are disclosed.
The federal Truth-in-Lending Act - or “TILA” for short – requires that borrowers receive written disclosures about important terms of credit before they are legally bound to pay the loan.
These important terms include:
- Annual Percentage Rate: the APR is the cost of credit expressed as a yearly rate in a percentage;
- Finance Charge: cost of credit expressed as a dollar amount (this is the total amount of interest and certain fees you will pay over the life of the loan if you make every payment when due);
- Amount Financed: the dollar amount of credit provided to you (this is normally the amount you are borrowing);
- Total of Payments: the sum of all the payments that you will have made at the end of the loan (this includes repayment of the principal amount of the loan plus all of the finance charges)
Note that the TILA disclosure is often provided as part of the loan contract, so you may be given the entire contract for review when you ask for the TILA disclosure. You should review it all, paying special attention to the disclosures noted above. You should always insist on receiving and reviewing your TILA disclosure before you sign your loan contract.
For more information regarding TILA, please refer to:
https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/loan-originator-compensation-requirements-under-truth-lending-act-regulation-z/
Privacy Act
The Privacy Act of 1974 governs the collection, maintenance, use and dissemination of information about individuals that is maintained in systems of records by federal agencies. A system of records is a group of records under the control of an agency from which information is retrieved by the name of the individual or by some identifier assigned to the individual.
The Privacy Act requires that agencies give the public notice of their systems of records by publication in the Federal Register. The Privacy Act prohibits the disclosure of a record about an individual from a system of records absent the written consent of the individual, unless the disclosure is pursuant to one of twelve statutory exceptions. The Act also provides individuals with a means by which to seek access to and amendment of their records, and sets forth various agency record-keeping requirements.
For more information regarding the Privacy Act, please refer to:
https://www.justice.gov/opcl/privacy-act-1974
Qualified Mortgage
A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that you’ll be able to afford your loan.
A lender must make a good-faith effort to determine that you have the ability to repay your mortgage before you take it out. This is known as the “ability-to-repay” rule. If a lender loans you a Qualified Mortgage it means the lender met certain requirements
and it’s assumed that the lender followed the ability-to-repay rule.
Generally, the requirements for a qualified mortgage include:
- Certain risky loan features are not permitted, such as:
- An “interest-only” period, when you pay only the interest without paying down the principal, which is the amount of money you borrowed.
- "Negative amortization,” which can allow your loan principal to increase over time, even though you’re making payments.
- "Balloon payments,” which are larger-than-usual payments at the end of a loan term. The loan term is the length of time over which your loan should be paid back. Note that balloon payments are allowed under certain conditions for loans made by small lenders.
- Loan terms that are longer than 30 years.
- A limit on how much of your income can go towards your debt, including your mortgage and all other monthly debt payments. This is also known as the debt-to-income ratio.
- No excess upfront points and fees. If you get a Qualified Mortgage, there are limits on the amount of certain up-front points and fees your lender can charge. These limits will depend on the size of your loan. Not all charges, like the cost of a FHA insurance premiums, for example, are included in this limit. If the points and fees exceed the threshold, then the loan can’t be a Qualified Mortgage.
- Certain legal protections for lenders. Your lender gets certain legal protections when showing that it made sure you had the ability to repay your loan. Even with these protections, you may still be able to challenge your lender in court if you believe it did not make sure you had the ability to repay your loan.
https://www.consumerfinance.gov/ask-cfpb/what-is-a-qualified-mortgage-en-1789/
Ability to Repay
The ability-to-repay rule is the reasonable and good faith determination most mortgage lenders are required to make that you are able to pay back the loan.
Under the rule, lenders must generally find out, consider, and document a borrower’s income, assets, employment, credit history and monthly expenses. Lenders cannot just use an introductory or “teaser” rate to figure out if a borrower can repay a loan. For example, if a mortgage has a low interest rate that goes up in later years, the lender has to make a reasonable effort to figure out if the borrower can pay the higher interest rate too.
One way a lender can follow the ability-to-repay rule is by making a "Qualified Mortgage."
For more information regarding Ability-to-Repay, please refer to:
https://www.consumerfinance.gov/ask-cfpb/what-is-the-ability-to-repay-rule-why-is-it-important-to-me-en-1787/
Texas Finance code: Chapter 342: Consumer Loans
Please refer to:
https://statutes.capitol.texas.gov/Docs/FI/htm/FI.342.htm
Texas Office of Consumer Credit Commissioner (OCCC)
Title 7, Chapter 83, Texas Administrative Code
Please refer to:
https://texreg.sos.state.tx.us/public/readtac$ext.ViewTAC?tac_view=5&ti=7&pt=5&ch=83&sch=A
Federal Statues and Rules
Please refer to:
https://www.govinfo.gov/