The federal laws every loan officer must master (a practical guide)

Federal law is almost a quarter of the SAFE MLO Test and, more importantly, it's what protects you and your client on every loan. This is a quick reference guide, grouped by what each law is for.

Licensing

SAFE Act (2008)

Creates the MLO licensing and registration system: NMLS, 20 hours of education, the national exam and annual continuing education.

Disclosures and costs

RESPA (Regulation X)

Regulates closing costs and loan servicing. Its Section 8 prohibits giving or receiving referral fees (kickbacks) for settlement services. It's key in your relationship with realtors: you can't pay them for sending you clients.

TILA (Regulation Z)

Requires disclosure of the true cost of credit: APR, finance charges and payments. It includes the 3-business-day right of rescission on certain refinances of a principal dwelling.

TRID

Combines the RESPA and TILA disclosures into two documents:

• Loan Estimate: no later than 3 business days after receiving the application.
• Closing Disclosure: at least 3 business days before closing.

Loan originator compensation rule (Regulation Z)

Your pay can't depend on the loan's terms (such as the rate), and you can't be paid by both the borrower and the company on the same loan. You also can't steer a client into a worse loan just because it pays you more.

Fair lending

ECOA (Regulation B)

Prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance or exercising consumer protection rights. Requires notifying applicants when credit is denied.

Fair Housing Act

Prohibits discrimination in housing and mortgage lending based on race, color, religion, sex, national origin, familial status or disability.

HMDA (Regulation C)

Requires many lenders to report loan data so discrimination patterns can be detected and lending to the whole community can be measured.

Credit and privacy

FCRA

Regulates the use of credit reports: you need a permissible purpose to pull one, and the client has the right to know if a decision was based on their report.

GLBA

Protects personal financial information: privacy notices and a duty to safeguard client data. That's why you should never send client documents through unsecured channels.

Protection against abusive lending

ATR/QM

Before lending, the lender must make a good-faith determination that the client can repay (ability-to-repay). Qualified Mortgages meet requirements that give them added legal protection.

HOEPA

Adds limits and extra disclosures for high-cost mortgages.

Homeowners Protection Act

Governs cancellation of private mortgage insurance (PMI): the borrower can request it at 80% of the original value, and it ends automatically at 78% under the original schedule, if the loan is current.

Advertising and client contact

MAP Rule (Regulation N)

Prohibits deceptive mortgage advertising. It applies to your social media, your website and your ads.

TCPA and Do Not Call

Limit marketing calls and texts: you need proper consent and must honor do-not-call lists.

E-SIGN

Gives legal effect to electronic signatures and documents, as long as the client consents.

Fraud prevention

BSA/AML

Non-bank lenders must have an anti-money-laundering program and file suspicious activity reports (SARs). You can't tell the client a report was filed.

For the exam, focus on deadlines, thresholds and who does what. On the job, the ones you'll use most are RESPA, TRID, the compensation rule, ECOA and the MAP Rule.