A plain-english guide to the Consumer Financial Protection Bureau. You’ll find simple answers about the CFPB and how the new rules will change real estate transactions. To download a PDF, click here.
The CFPB Loan Estimate Form
The new Loan Estimate form replaces the early TILA disclosure and the Good Faith Estimate. It lists all the potential costs for the consumer’s loan like title insurance, percentage rates, closing costs, and the estimated monthly loan payment.
Creditors are responsible for calculating the best estimates possible for these services, which will be checked against the actual costs listed in the Closing Disclosure form when the loan is consummated. And unlike the former Good Faith Estimate, creditors can no longer revise and re-disclose if charges go up or down prior to closing. After all, resetting the estimate every time a circumstance changes weakens the purpose of the estimate!
Once a consumer’s application is received, the creditor has three days to deliver the Loan Estimate and should include a list of providers for services the consumer can shop around for.
Ticor is your CFPB Readiness Partner
Forms, dates, rules, and laws… it can seem like a lot to take in. The good news is that we’ve done our homework and we’re here to guide you through.
To learn more about how the CFPB changes impact you, contact a local representative.
Mortgage fraud is a material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. It continues to evolve as lenders and fraudsters alike adapt to changing economic conditions and government regulations. How much do you know about it? Take the quiz to find out.
6. Which of the following steps can a settlement agent follow to assist in preventing fraud from occurring in one of their transactions:
Disclose all receipts and disbursements on the HUD-1 Settlement Statement
Make sure the funding lender has everything the settlement agent has
Trust their escrow gut
All of the above
7. Proper identification should be issued by a governmental entity and include a physical description and (select all that apply):
Include the bearer’s signature
Include the expiration date
Include the bearer’s weight
Include the bearer’s photograph
8. Which of the following is a red-flag warning of a possible fraudulent transaction (select all that apply):
Purchase offer is more than the list price
Unusual expenses paid by the seller
Silent second mortgages
Transactions not recorded on the HUD-1 Settlement Statement
9. What are the two classifications mortgage fraud schemes are put into:
Fraud for profit and fraud for housing
Tit for tat
Civil and criminal charges
Tax evasion and wire fraud
10. Who are usually the perpetrators in a fraud for housing scheme:
A title policy insures against: Answer: Fraud and forgery
The Covered Risks section of both an Owner’s and Lender’s title policy state the insured is covered for, “a defect in the title caused by…forgery, fraud…” Since this coverage is offered in all of the title polices available, fraud and forgery is of major concern to the title industry as well as our Company.
A straw buyer is: Answer: Someone with good credit who agrees to help someone with bad credit obtain a loan
Generally, a straw buyer is someone recruited by a perpetrator to take out a mortgage and purchase a house in their name. The straw buyer normally does not live in the house or have the intent to reside at the house. They often receive cash in exchange for the use of their credit and name.
Which of the following items are commonly fabricated in order to induce a lender to approve a loan: Answer: All of the above
Mortgage fraud schemes involve falsifying a borrower’s financial status by including material misstatements on documents the lender’s underwriter relies on, when evaluating the eligibility of a borrower. This is done by supplying fictitious employment verifications, mortgage loan applications and bank statements
What document is the most forged document in a real estate transaction? Answer: Power of Attorney
A Power of Attorney is written authorization to represent or act on another’s behalf in private affairs, business or some other legal matter. As a result, perpetrators sometimes forge the names of property owners in order to sell a property out from under the rightful owner or use the Power of Attorney to get a loan to strip all the equity from a property unbeknownst to the property owner.
Flopping occurs in what type of transaction: Answer: Short Sale
A flopping scheme requires the perpetrator to conceal or provide falsified information to the loan servicer. This is information the servicer needs to make informed short sale decisions. These concealments might include hiding the true parties to transaction, any contingent transactions or the true value of property.
Which of the following steps can a settlement agent follow to assist in preventing fraud from occurring in one of their transactions: Answer: All of the above
The settlement agent is often the best defense against mortgage fraud. Without them, the fraud might never be prevented. It is important the settlement agent fully disclose all receipts and disbursements on the HUD-1 Settlement Statement and material facts to the funding lender.
Proper identification should be issued by a governmental entity and include a physical description and: Answer: Include the bearer’s signature and photograph
Forged documents are often one of the many elements included in a mortgage fraud scheme. It is important to the lender and title company the borrower is property identified. Although the identification requirements for the purpose of notarizing vary from one state to the next, it is often the lender who requires the borrower present identification which contains all of these elements.
Which of the following is a red-flag warning of a possible fraudulent transaction: Answer: A, B, C and D
Although any one of these items alone might not be an indicator – combined they definitely have the makings of a scheme.
What are the two classifications mortgage fraud schemes are put into: Answer: Fraud for profit and fraud for housing
The FBI defines these two classifications. They state fraud for housing entails misrepresentations by the applicant for the purpose of purchasing a property for a primary residence. This scheme usually involves a single loan. Fraud for profit often involves multiple loans and elaborate schemes perpetrated to gain illicit proceeds from property sales.
Who are usually the perpetrators in a fraud for housing scheme: Answer: Industry professionals
Industry professionals are the ones most familiar with the ins and outs of the loan process – and most often the perpetrators involved in a fraud for housing scheme. The scheme could never occur without the cooperation of the real estate agents, loan officers, appraiser and settlement agent assisting in all the material misrepresentations which must be provided.