TITLE 14 THE MORTGAGE REFORM AND

CA Real Estate Law Flashcards

TITLE 14 (THE MORTGAGE REFORM AND

ANTI-PREDATORY LENDING ACT)

• The idea was to establish certain standards about

mortgages issued to consumers.- Aqualified mortgageis one in which the borrower will NOT be asked to pay more than3%of the amount borrowed in points and fees, and with a residential, owner-occupied loan, the loan will be one that amortizes the debt during the term.-No interest only loansornegative amortization loansare allowed on a borrower's primary residence.- Also,no balloon paymentsandno loans spread outover more than a 30-year

term.PURPOSE:To reduce the risk for the borrower to

prevent the homeowner from losing their home to foreclosure, which in turn reduces the risk for the lenders who have made the loan, and the economy as a whole.SUSPENDED LICENSE- Temporary loss of a license.- The Real Estate Commissioner has the power to suspend a license.- Commissioner can fine licensee up to $250 a day up to a maximum of $10,000 in lieu of suspension.- If broker's license is suspended, the broker and the broker's salespeople may share commissions earned before suspension date.QUALIFIED MORTGAGE- One in which the borrower will NOT be asked to pay more than3%of the amount borrowed in points and fees, and with a residential, owner-occupied loan, the loan will be one that amortizes the debt during the term.-No interest only loansornegative amortization loansare allowed on a borrower's primary residence.- Also,no balloon paymentsandno loans spread outover more than a30-year term.THE FAIR HOUSING AMENDMENTS ACT -- 1988(1)This Act expanded protection to tenants in regard topeople with disabilitiesandfamilial status.(2)The people with disabilities include victims of AIDS or HIV -- Landlords cannot discriminate on this issue.(3)Familial status refers to the protections of children under the age of 18 living with their parents, persons obtaining legal custody, and pregnant women.(4)Tenants with disabilities must be allowed to alter the rented premises at their expense, but may also have to restore the premises to original condition if a new tenant wants them restored.(5)When a broker prominently displays theEqual Housing Opportunityposter in his/her office, it places the burden of proof on the consumer to show that the broker was acting in a

discriminatory manner.CONVERSION --Prohibited act- Misappropriation of trust funds.- Using others' money as his own (e.g., for a vacation in Nevada).CANCELLED LICENSE- Expiration, revocation or suspension of broker's license, or broker's death, cancels licenses of all salespeople in the broker's employ.- The Real Estate Commissioner has the power to cancel a license.- Sales people CANNOT close transactions they have been negotiating.- If broker died before escrow closed, transaction would continue and the broker's heirs would collect the commission from the broker's estate.

Real Estate Finance Documents:(1)Trust Deeds and Real Property Sales

Contracts(2)Dodd-Frank Wall Street Reform and Consumer

Protection Act of 2010

HOUSING DISCRIMINATION ACT (HOLDEN ACT)STATE LAW- Prohibits"Redlining,"a form of channeling or steering.- Prohibits a financial institution fromrefusing to make a loan or offering less favorable termsbased on neighborhood characteristics (except when necessary to avoid unsafe and unsound business practice), such as race, sex, color, religion, or national origin.PANIC SELLING (BLOCKBUSTING / PANIC PEDDLING) - Trying to persuade people to list or sell by telling them that members of another ethic group are moving into the neighborhood, and is illegal conduct.- It is a violation of BOTH state and federal law.- "Panic selling can only occur when the buyer is also a seller" = FALSE STATEMENT- In an integrated neighborhood, if a broker solicits listings under the slogan, "Sell now, save equity," or offers lower commission rates to Caucasians, he is in violation of the law for both activities.- If a real estate broker is securing listings by telling owners that minority groups are moving into an area and that values will decrease, the quality of schools will decrease, and crime will increase, he can be disciplined by the Real Estate Commissioner.NEGATIVE AMORTIZATION LOANS- Under which the debtor pays only the interest every month but owes a huge balloon payment at the end of the term.- Banned in CA as of 2010.BALOON PAYMENTSA large payment due at the end of the contract term.MISREPRESENTATION --Prohibited act- False statement of facts.- Misrepresentation is fraud (e.g., A licensee listed income property showing a 12% return but did not include all of the expenses).- Licensees do not often make malicious misrepresentations.- Withholding negative information on theTransfer Disclosure Statementis illegal(negative fraud).- Misleading potential lender isunlawful conduct.REVOKED LICENSE- Loss of license.- The Real Estate Commissioner has the power to revoke a license.

DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT OF 2010

• Law passed by the U.S. Congress in July 2010.- Resulted

from the failure of major financial institutions and the

economic crash of 2008.PURPOSE:-It's purpose is to

promote financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail," toprotect the American taxpayerby ending bailouts, toprotect consumersfrom abusive financial service practices, and for other purposes.-Regulates the process ofresponsible loan originationand established anew licenseto ensure that the individual working in loan origination is qualified morally, ethically, and professionally to safeguard the well-being of the consumer.Two primary parts of this act that create the most impact on