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Click Here for a Full Course Outline

  1. 1. STATE OF COLORADO DIVISION OF REAL ESTATE Mortgage Broker Pre-Licensing Education Course Content Outline Federal, State and Consumer Protection Laws: 19.5 Hours Mortgage Lending Basics and Ethics: 20.5 Hours Total Time: 40 hours Federal, State and Consumer Protection Laws = 19.5 Hours: Required Federal Law Course Time: 7.5 hrs Learning Objectives: I. Acquire a working knowledge of the basic purpose and provisions of each law and related regulations. II. For each law, know whom it protects and what responsibilities and restrictions it places on the mortgage broker. III. Know the penalties for non-compliance with these laws. IV. Attain a working knowledge of the relevant forms used in the real estate transaction. Federal Legislation I. Equal Credit Opportunity Act (ECOA) .50 hour A. Purpose B. Who ECOA applies to C. Who ECOA protects - Protected classes D. Regulation B – Requirements and restrictions i. Taking applications ii. Evaluating applications iii. Extension of credit iv. Consumer notification requirements a) Right to copy of appraisal b) Notification of adverse action v. Information for monitoring purposes E. Penalties for violation i. Pattern or practice of discrimination (DOJ) ii. Individual cases of unfair discrimination a) Office of Thrift Supervision (OTS) b) Comptroller of Currency (OCC) c) Federal Reserve Board (FRB) d) Federal Deposit Insurance Corporation (FDIC) e) National Credit Union Association (NCUA) f) Federal Trade Commission (FTC) II. Fair Credit Reporting Act (FCRA) 0.25 hr Page 1 of 18
  2. 2. A. Purpose B. Who FCRA governs C. Provisions i. Right to credit report ii. Prescreening & trigger lists iii. Right to correct inaccuracies iv. Explanatory statements v. Lender’s responsibility to disclose identity of credit bureau vi. Adverse action disclosure requirements III. Fair & Accurate Credit Transactions Act (FACT) 0.25 hr A. Amendments to and reauthorization of FCRA B. Free credit report requirements C. Mortgage lender disclosure requirements D. Identify theft provisions IV. Real Estate Settlement Procedures Act (RESPA) 1.75 hrs A. Purpose B. Loans/transactions covered C. Provisions i. Required disclosures to borrowers a) Costs of settlement b) Affiliated business arrangements c) Lender servicing and escrow requirements ii. Timing of required disclosures and who is responsible a) At time of loan application a. Information Booklet b. Good Faith Estimate c. Mortgage Servicing Disclosure Statement b) Before Closing/Settlement a. Affiliated Business Arrangements b. HUD-1 Statement of Settlement c) At Closing/Settlement a. HUD-1 completed b. Initial Escrow Statement (or within 45 days after closing) d) After Closing/Settlement a. Annual Escrow Statement b. Servicing Transfer Statement (if applicable) iii. Prohibited practices a) Sect. 6 – Loan servicing b) Sect. 8 – Kickbacks, fee-splitting, unearned fees a. Restrictions b. Penalties for violation c) Sect. 9 – Seller required title insurance Page 2 of 18
  3. 3. a. Prohibitions on seller b. Penalties for violation d) Sect. 10 – Escrow limitations a. Lender limits and required annual analysis b. Penalties for violation D. Enforcement i. HUD and Regulation X a) Procedure b) Fines c) Injunctive relief ii. Individual law suits iii. Filing a RESPA complaint V. Truth In Lending Act (TILA) of 1968 1 hr A. Consumer Credit Protection Act i. Purpose ii. Who TILA protects B. Regulation Z i. Provisions ii. Disclosures at Closing iii. Advertising a) Guidelines and restrictions b) Trigger Terms and related requirements C. Home Ownership Equity Protection Act (HOEPA) - restrictions i. Refinancing guidelines ii. Home equity loans D. Enforcement and Penalties VI. Home Mortgage Disclosure Act (HMDA) 0.25 hr A. Purpose B. Prohibited practices: Red-lining C. Required borrower data VII. Community Reinvestment Act (CRA) 0.25 hr A. Purpose B. Prohibited practices: Red-lining C. Requirements for financial institutions VIII. Gramm-Leach-Bliley Act (GLBA) (aka Financial Modernization Act) 0.25 hr A. Purpose – Consumer privacy B. Requirements i. Who is covered ii. Written policy requirements C. Enforcement IX. Fair Housing Act .50 hr Page 3 of 18
  4. 4. A. Title VIII – Protected classes B. Penalties C. Enforcement X. Sherman Antitrust Act 0.25 hr A. Purpose B. Blockbusting C. Price fixing D. Penalties XI. Telemarketing and Consumer Fraud and Abuse Prevention Act 0.5 hr A. Purpose B. Deceptive telemarketing rules C. Penalties XII. U.S. Patriot Act 0.25 hr A. Anti-money laundering i. Purpose ii. Program requirements B. Consumer identification program (CIP) C. Mortgage broker’s role XIII. Anti-Wire Fraud and Mail Fraud (Title 18 U.S.C.), and COCCA 0.75 hr A. Provisions and prohibited conduct B. Penalties XIV. Federal Trade Commission Act 0.25 hr A. Unfair methods of competition XV. What’s New – Recent Laws and Regulations 0.5 hr Required State Law Course Time: 12.0 hrs Learning Objectives: I. Acquire basic knowledge of the history and creation of law and related regulations. II.Acquire a working knowledge of the basic purpose, provisions, and penalties for non-compliance of each law and related regulations. For each law, know whom it protects and what responsibilities and restrictions it places on the mortgage broker. III. Acquire basic knowledge of the essential elements of the Colorado contract as they relate to the mortgage industry. IV. Understand the basic foreclosure process. Content Outline: Page 4 of 18
  5. 5. I.Creation of law 1.0 hr A. Sunrise Review Process 1. Submit application-must establish reason for registration or licensing of trade to protect the public health, safety, or welfare of the public 2. DORA review of the proposal & recommendation to regulate professional or occupational group 3. Introduction of bill to require registration or licensing 4. CAMB submitted Sunrise Application to DORA June 2004 requesting State registration of mortgage brokers. 5. DORA submitted written report to the Colorado General Assembly October 14, 2005 B. Legislative Process 1. Introduction of bill into house or senate-purpose of bill defined 2. Bill becomes law-Governor signs bills into law C. Executive Branch-elected positions 1. Governor a. Offices of the Governor 1) Boards, Commissions and Director model 2. Lieutenant Governor 3. Secretary of State a. Requires all companies in Colorado to be registered 4. Attorney General 5. Colorado State Treasurer D. State Government Department Agencies 1. Department of Regulatory Agencies (DORA) a. Executive Director appointed by the Governor b. Communication of consumer rights and industry professional’s responsibilities c. Consistent application of professional standards, education, licensing and enforcement of real estate license law regulations. d. Connection of regulatory activities and economic development E. Divisions 1. Division of Real Estate-licensing, education & enforcement agency a. Director of Division of Real Estate 1] Mortgage brokers 2] Real Estate brokers 3] Appraisers 4] Subdivision Developers F. Boards, Commissions and Director Model Page 5 of 18
  6. 6. 1. Mortgage Broker Program a. Director model a. Oversees mortgage brokers 2.Real Estate Commission a. Composed of five members appointed by the Governor b. Three members are brokers with not less than five years experience, one consumer and one subdivision expert c. Appointed for three-year term d. Oversees real estate brokers 3. Board of Real Estate Appraisers a. Composed of seven members appointed by the Governor, confirmed by the State Senate b. Three appraisers, two consumers/public members, one mortgage lender, one county assessor b. Board members serve staggered three year terms c. Oversees appraisers 4. Division of Insurance a. Oversees title companies and insurance industry II. Laws and Regulations 1.0 hr A. Colorado Revised Statutes (C.R.S) 43 titles 1. Real Estate & Mortgage related titles in Colorado Revised Statutes b) Title 5- Consumer Credit Code, is amended by the addition of a new article (House Bill 02-1259, Section 1) Article 3.5 Consumer Equity Protection Act 1) Purpose a] Protection of consumers’ home ownership equity 2) Provisions & restrictions on mortgage broker a] 5-3.5-102 Protection of obligors b] Limitation of balloon payment c] No call provision d] No negative amortization e] No increased interest rate upon default f] Limitations on mandatory arbitration clauses g] No advance payments h] Limitations on prepayment fees (a)First thirty-six months only (b)No prepayment fees for certain refinancing (c)Lender must offer choice i] 5-3.5-103 Restricted acts and practices 1. No lending without cautionary notice 2. No lending without due regard to repayment Page 6 of 18
  7. 7. 3. Refinancing within a one-year period j] No refinancing certain low-rate loans k] Restrictions on covered loan proceeds to pay home improvement contracts l] No financing of credit insurance m] No recommending default n] No fee for payoff quote o] 5-3.5-104 Reporting to credit bureaus 1] Lender or its servicer shall report at least quarterly both favorable and unfavorable payment history information 3) Enforcement – liability as stated in C.R.S. 5-3.5-201 a] The Attorney General and any obligor may enforce this article. c) Title 6-Consumer & Commercial Affairs, is amended by a new paragraph (House Bill 02-1259, Section 3) 1. Purpose 2. Provisions a] Article 1, Colorado Consumer Protection Act i. 6-1-105 (1) A person engages in a deceptive trade practice when they violate Section 38-40-105, CRS ii. 6-1-110, is amended by the addition of a subsection House Bill 02-1259, Section 4) iii. Restraining orders-injunctions, assurances of discontinuance iv. District attorney may, in addition to any other remedies, apply for and obtain, in the court that has previously issued an injunction, a further injunction against continuing to participate in the business of originating mortgage loans for up to five years. b] Article 4-Property and Casualty Insurance c] Article 11-Title Insurance Code of Colorado d) Title 10-Insurance 1. Purpose 2. Provisions a] Article 4-Property and Casualty Insurance 1] Part 110.6-Homeowner’s insurance definition 2] Part 114-Requirements on hazard insurance coverage for loans secured by real property 3] Part 116-Use of credit information 4] Part 117-Loss history information report-notice to insured- definition b] Article 11-Title Insurance Code of Colorado 1] Part 108-Prohibitions e) Title 12- Professions & Occupations 0.50 hr 1. Purpose Page 7 of 18
  8. 8. 2. Provisions a] Article 61–Real Estate 12-61-101 to 12-61-811 1] Part 1-Brokers & Salesperson aa) 12-61-113.2 ii) Definitions a] Employing Broker, Independent, and Associate b] Settlement Services ii) When permitted iii) Reporting Affiliated Business Arrangements to RE Commission iv) “Sham” Affiliated Business Arrangements v) Division of Insurance 2] Part 7-Real Estate Appraisers aa) USPAP Conduct Rule bb) Advisory Opinion cc) Broker Price Opinion (BPO) 3] Part 8-Brokerage Relationships 4] Part 9-Mortgage Broker Licensing Act 12-61-901 to 12-61-915 2 hrs aa) Section 12-61-902, C.R.S. - Definitions bb) Section 12-61-903, C.R.S. amended Revised-license required effective January 1, 2008 i] Who is required to be licensed-conversion of registration to license-must be licensed in Colorado regardless of whether or not licensed in another state ii] Shall apply for license renewal every three years iii] How to become licensed-criminal history check iv Post a bond v] Renewal fee vi] Education requirements on or after January 1, 2009 complete pre-licensing course and examination approved by the director of at least nine hours of classroom instruction vii] Independent testing services to develop, administer and grade the exam viii] Director shall issue or deny a license within 21 days after receiving criminal history record check, completed application, E & O, application fee, and proof of the posting of the surety bond cc)12-61-903.5. Errors & Omissions insurance-require Director to determine terms and conditions of coverage required dd) 12-61-904 (Amended). Exemptions for licensing ee) 12-61-904.5. Broker’s relationship to borrower- Page 8 of 18
  9. 9. rules ff) 12-61-905. Powers and duties of the director gg) 12-61-905.5. Disciplinary Actions-grounds-procedures-rules hh)12-61-905.6. Hearing-administrative law judge-review-rules ii) 12-61-905.7. Subpoena-misdemeanor jj) 12-61-907. Bond required of $25,000 kk)12-61-908. Fees set by director ll) 12-61-910. Violations-injunctions mm)12-61-910.4. Nontraditional mortgages-consumer protections nn) 12-61-911. Prohibited conduct-fraud-misrepresentation-conflict of interest-rules oo) 12-61-911.5. Acts of Employee-mortgage broker’s liability pp) 12-61-912. Dual status as real estate broker or salesperson- requirements qq) 12-61-913. Written contract required-effect rr) 12-61-914. Written disclosure of fees and costs-contents-limits on fees-lock-in agreement terms-rules within three business days ss) 12-61-915. Fee, commission, or compensation-when permitted- amount f) Title 38-Property-Real and Personal 1. Purpose 0.25 hr 2. Provisions a] Article 25.5-State and Local Tax Liens b] Article 29-Title to Manufactured Homes c] Article 35-Conveyancing and Recording 1] Part 125-Closing and settlement services-disbursement of funds-“Good Funds” law i. Available for immediate withdrawal as a matter of right ii. Available for immediate withdrawal as a consequence of an agreement of a financial institution iii. Failure to comply with the provisions of this section shall be deemed a deceptive trade practice d] Article 40, is amended by the addition of a new section (House Bill 02- 1259, Section 2) 1] Purpose- protects consumer, creditor, lender or an agent of the lender 2] Provisions & restrictions on mortgage broker i. 38-40-101. Mortgage broker fees-escrow accounts- unlawful act-penalty ii. 38-40-102. Disclosure of costs-statement of terms of indebtedness iii. 38-40-105. Prohibited acts by originators of certain mortgage loans e] Penalties for non-compliance with this article 1] Court may refuse to enforce contract 2] A violation shall be deemed a deceptive trade practice in Section 6-1-105, (1) (uu), CRS Page 9 of 18
  10. 10. f] Safety clause (House Bill 02-1259, Section 5) this act is necessary for the immediate preservation of the public peace, health & safety B. Mortgage Broker Rules – To teach entire rule 2.0 hrs 1)Emergency Rules and Permanent Rule Process a) Emergency rule becomes permanent rule. b) Division issues emergency rule to be able to act in interim 2) Reasonable Inquiry and Tangible Net Benefit, Rule 3-1-1 3) Errors and Omissions Insurance for Mortgage Brokers, Rule 1-3-1 4) Mortgage Broker Disclosures, Rule 5-1-2 a) Good Faith Estimates b) Compensation Disclosure c) Colorado Lock-in Disclosure Form 5) Mortgage Brokers Duty to Respond and Provide Requested Documents for Investigations, Rule 3-1-26 6) Prepayment Penalties, Rule 3-1-4 7) Maintaining current contact information required for licensing, Rule 3-1-3 8) Mortgage Broker Contracts Rule 5-1-1 9) Mortgage Broker Advertising Rule 8-1-1 C. Rules on the Horizon: 1) Coercing and Intimidating a Real Estate Appraiser 2) Dual Status as a Real Estate Broker and Mortgage Broker D. Mortgage broker is required to keep records of the disclosures for a period of four years E. Director Position Statements 0.25 hr 1. Non-Traditional Mortgage Products and Documentation Types a) Purpose b) Provisions c) Broker responsibility d) Penalty 2. Mortgage Broker Contracts a) Clarification of the uncertainties regarding mortgage broker contracts F. Colorado Real Estate Commission Rules 0.25 hr 1. Rule E-22-Inducements from settlement producers prohibited 2. Published in Real Estate Manual a) Purpose b) Provisions 1. Reasonable Value Defined 2. Customer Entertainment 3. Office Space Accommodation Page 10 of 18
  11. 11. 4. Noncompliance Penalties 5. Licensing required 6. Applicability of Colorado Mortgage Broker Law regarding State Financial Institutions. III. Essential Elements of a Colorado Buy-Sell Contract 1.5 hrs A. Section 1-Mutual Assent 1. Offer 2. Acceptance B. Section 2-Names and signatures of the Parties C. Section 2.3-Dates and Deadlines D. Section 2.2-Description of the Property E. Section 4-Sale Price and Payment Provisions F. Section 4.1-Consideration 1. Earnest money G. Section 4.3-Seller Concessions Section 4.4.1-New loan Section 4.4.2-Change to new lender after approval Section 4.4.3-Loan limitations: conventional, FHA, VA, Bond Section 4.4.4-Good Faith Estimate H. Section 5-Financing Conditions and Obligations Section 5.1-Loan Application Section 5.2-Loan Conditions Section 5.3-Credit Information and Buyer’s New Loan Section 5.4-Equity Loan Review I. Section 6-Appraisal Provisions Section 6.2.2, 6.2.3 & 6.2.4-Conventional, FHA, VA Section 6.3-Cost of Appraisal J. Section 7-Evidence of Title Section 7.1-Exceptions Section 7.3-Survey/Improvement Location Certificate Section 7.4-Common Interest Community Documents K. Section 8-Title Survey Review L. Section 9-Lead Based Paint M. Section10-Property Disclosure Inspection, Insurability and Buyer Disclosures N. Section 11-Methamphetamine Laboratory Disclosure O. Section 12-Closing 1. Delivery of deed 2. Hour and place of closing documents P. Section 13-Transfer of Title Q. Section 14-Payment of Encumbrances R. Section 15-Closing Costs, Documents and Services S. Section 16-Prorations T. Section 17-Possession Date U. Section 19-Insurance; Conditions of, Damage to Property and Inclusions Page 11 of 18
  12. 12. V. Section 25-Additional Provisions W. Section 30-Notice of Acceptance, Counterparts a. Buyer signature b. Seller signature X. Section 31-Counter; Rejection Y. Broker’s Acknowledgments and Compensation Disclosures 1. Buyer’s Agent 2. Seller’s Agent 3. Transaction-Broker 4. Change of status Z. Closing Instructions IV. Foreclosure Process & Regulations 2 hrs A. Foreclosure action-procedure C.R.S. 38-20-108 thru 116 B. Colorado Foreclosure Protection Act 1. 6-1-1103. Definitions 2. Foreclosure Consultants a. 6-1-1104. Foreclosure consulting contract 1) Notice Required by Colorado Law 2) Notice on Cancellation b. 6-1-1105. Right of cancellation c 6-1-1106. Waiver of rights-void d. 6-1-1107. Prohibited acts e. 6-1-1108 Criminal penalties f. 6-1-1109 Unconscionability 3. Equity Purchasers a. 6-1-1111.Written contract required b. 6-1-1113. Cancellation c. 6-1-1114. Notice of Cancellation d. 6-1-1118. Criminal penalties C. Short Sale Addendum V. Resources for Federal and State Laws and Regulations 0.5 hr A. RESPA B. TILA C. DORA www.dora.state.co.us/real-estate D. Colorado Revised Statutes www.michie.com/colorado E. Colorado Mortgage Broker Forms http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm F. Colorado Foreclosure Hotline 1-800-601-HOPE and Coloradoforeclosurehotline.org G. Sign up for Newsletters and E-Mail updates www.dora.state.co.us VI. How to File a Complaint 0.25 hr A. The Division of Real Estate requires a complaint form be completed Page 12 of 18
  13. 13. B. You can file on-line or print off form and submit a physical package to the Division VII. Updates 0.50 hr Mortgage Lending Basics and Ethics = 20.5 Hours Mortgage Broker 101 Course time: 16 hrs Mortgage 101 I. Fundamental Roles in Lending 1.5 hrs A. Introductory discussion of mortgage brokers’ role in the process of originating loans. B. Relationship between mortgage broker and source of funds C. Processing 1. Functions and responsibilities of the loan processor D. Underwriting 1. Functions and responsibilities of the loan underwriter E. Closing 1. Understanding of the closing process the role of the tile closer and explanation of closing forms including the HUD1 F. Post-closing 1. Explanation of the role of the loan funder, shipper and servicing process II. Definitions and Mortgage Terms 4.0 hrs A. Glossary of standard industry terms 1. Mortgage specific 2. Real estate specific 3. Title specific 4. Specific exercises to demonstrate proficiency in mortgage, real estate and title terminology. B. Standard Mortgage Forms 1. 1003 a) Detailed explanation of the URLA form. Its importance and effective completion of the form 2. Disclosures with practical hands-on applications a) Federal / State complete understanding of related Federal and State disclosures required at the time of loan application 3. Support Documents a) Explanation of required support documents needed at loan application i.e. voe,vod,vor, etc Page 13 of 18
  14. 14. 4. Traditional debt and security instruments a) Explanation of Deed of Trust, and various forms of deeds, including Warranty, Quit Claim and Special Warranty III. Basic Mortgage Mathematics 1.0 hr A. Principal and Income calculation 1. Standard P & I 2. PITI 3. MIP/MI 4. Interest Only 5. Hybrid Calculations / negative amortization. etc. a. A thorough understanding on how to successfully compute basic mortgage calculations using a financial calculator or factor tables IV. Debt to income ratios and Loan To Value 1.0 hr A. Front End Ratio B. Back End Ratio C. LTV D. CLTV Understanding various ratio calculations. How to perform them and how to explain the calculations V. Annual Percentage Rate (APR) 0.50 hr 1. Calculation of Amount Financed 2. Understanding of Itemization of Amount Financed 3. Understanding of APR is computed and how to explain to applicants VI. Basic Mortgage Program – Overview 2.0 hrs A. A complete working knowledge of all mortgage types, their specific uses and how to properly explain the benefits of each to the applicant 1. Fixed Rate Mortgages 2. Adjustable Rate Mortgages (ARM) • Understanding of all elements of the ARM loan including; Index, Margin, Caps and Start Rate 3. Home Equity Lines of Credit 4. Conventional Mortgages 5. Government Programs • FHA • VA • Bond Program 6. Jumbo – Non-conforming loan amounts 7. Expanded Criteria 8. Sub-prime 9. Niche and portfolio Page 14 of 18
  15. 15. 10. Affordable Housing Programs VII. Secondary Market 1.0 hr A. Overview of the Secondary market including traditional secondary sources B. Significance to loan origination and documentation C. Yield Spread Premium (YSP) 1. Understanding of YSP, what it is and how it influences loan pricing 2. Understanding of proper disclosure of any YSP D. Rate Sheets 1. How to read and interpret wholesale pricing sheets E. Cycle of Money 1. Understanding of how mortgage money flows through the various lenders to the secondary market 2. Understanding of how interest rates are determined and the market influences VIII. Qualification Process 3.0 hrs A. Understanding of how to effectively counsel an applicant and how to obtain the necessary information to begin the loan process 1. Information required from borrower 2. Taking the loan application (1003) 3. Securing documentation and analysis 4. Determining ability to repay • Complete understanding of how to calculate an applicant’s ability to qualify for a loan based on their income and debt structure 5. Creditworthiness • Credit scores i. Understanding of credit requirements and credit scoring ii. Understanding the 4 “C”s of credit underwriting; Credit, Capacity, Capital and Collateral 6. Credit reports • Understanding credit report types; RMCR and Tri- Merge • Understand documentation requirements for various credit circumstances IX. Closing Costs and Pre-Paid Expenses 1.0 hr A. Distinction and handling in disclosure 1. Understanding the time requirements for disclosure form and the potential penalty for non-disclosure B. Good Faith Estimate Page 15 of 18
  16. 16. 1. Complete understanding of the Good Faith Estimate 2. What fees can be charged for various loan types 3. Federal/State Distinction C. Review of protocols to project costs accurately 1. Understanding of how fees can be disclosed 2. Understanding of which lenders are required to disclose YSP and how to disclose properly with regard to warehouse funding X. Miscellaneous Categories 1.0 hr A. Underwriting 1. Understanding of the differences between Automated Underwriting (Aus) and Traditional Underwriting procedures B. Real estate appraisals 1. Knowledge of the appraisal process 2. Understanding of the Uniform Residential Appraisal Report C. Title Insurance 1. Understanding of the role of Title Company 2. Knowledge of the ALTA title policy D. Closing Process 1. Knowledge of the closing provider and the settlement agent 2. Understanding of a “Table Closing” and the role of all settlement service providers per RESPA guidelines Ethics, Business and Trade Practices Course time: 4.5 hrs Ethics, Business and Trade Practices I. Mortgage Fraud Introduction 0.5 hr A. Mortgage Fraud defined B. Who commits mortgage fraud C. Effects of mortgage fraud II. Types of Mortgage Fraud 1 hr A. Types of Fraud 1. Indicators of fraud 2. Actual fraud 3. Constructive fraud 4. Mortgage fraud B. Fraud for profit 1. Flipping C. Fraud for property D. The result of mortgage fraud 1. Foreclosure 2. Foreclosure scams 3. Consumer strategies Page 16 of 18
  17. 17. III. Fraud Participants 2 hrs A. Tile & Escrow Companies 1. Title and RESPA a. When does RESPA apply and RESPA changes 2. HUD a. HUD-1 b. disclosures B. Appraisers & Real Estate Brokers 1. Appraisal Fraud Schemes a. inflated appraisals b. lender pressure c. comparable sales selection d. stolen appraiser identity e. false/dual contracts f. unreasonable adjustments g. false condition statements h. seller concessions i. previous sale or listing 2. Real Estate Agents a. Dual Contracts b. straw buyer c. over-valuing d. unqualified buyers e. increasing list price after contract date f. false MLS C. Mortgage Brokers 1. Predatory Lending vs. Mortgage Fraud 2. Predatory Lending a. indications of predatory lending b. sub-prime lending c. predatory schemes d. risk reduction techniques i. federal intervention ii. existing laws 3. Ethical & Legal Considerations a. honesty b. conduct c. advertising d. disclosure e. confidentiality & record keeping i. FTC Safeguard Rule 1. protecting personal information 2. disposing of consumer report information 3. risks of identity theft Page 17 of 18
  18. 18. 4. reducing risks to computer systems ii. Complying with the Safeguard Rule 1. written security policy f. mortgage broker obligations upon discovery of fraud IV. Fraud Case Studies 0.5 hr V. Additional Appraisal Provisions - USPAP 0.5 hr A. Uniform Standards of Appraisal Practice – Purpose 1. To promote and maintain a high level of public trust in appraisal practice by establishing requirements for Appraisers. It is essential that Appraisers Develop and communicate their analysis, options and conclusions to intended users of their services in a manner that is meaningful and not misleading. 2. USPAP addresses the ethical and performance obligations of appraisers through definitions, rules, standards, standards rules and statements. B. Provisions Relevant to Mortgage Broker Compliance AO- Refers to “Advisory Opinion “ 1. AO-3 Update of prior appraisal 2. AO-18 Use of automated valuation method (AVM) 3. AO-19 Unacceptable assignment conditions in appraisal assignment concerning real property. 4. AO-25 Clarification of the client in federally related transactions. 5. AO-26 Readdressing (transferring) a report to another party. 6. AO-27 Appraising the same property for a new client. 7. AO-30 Federal financial institution regulatory agencies required for proper appraisal development and reporting (replaces AO-10) C. Uniform Standards of Professional Appraiser Practice (USPAP)Ethics Rule Position on predetermined values. Conduct, management and Confidentiality Page 18 of 18

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