Transcript Chapter 6

Week 4 - REF
Government Regulation &
Licensing - Lending
IMPORTANT NOTE FOR
THIS WEEK!!!!!!
Possible Test Question Remarks…
 Take notes this week and I’ll mark my copy of
slides to keep track…
 We will take test & be Out by 7:30 next week,
hopefully.
 The 10th Amendment to the U.S. Constitution
reserved all powers not specifically enumerated
(listed) in the Constitution to the states.
 The U.S. Constitution and the first 10 amendments do
not specifically address the issues of banking, finance,
real estate law, or consumer legislation.
 It was left up to the states to develop laws that would
protect consumers from usury, develop mortgage and
real estate laws, and charter local banking institutions.
I. Real Estate Laws
Real Estate Laws
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The United States, for the most part, adopted the British common law systems of
legal Real Property and Real Estate ownership.
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REAL ESTATE is the ownership of the physical land itself.
REAL PROPERTY consists of those rights that come with the ownership of the real
estate.
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Real property rights are often stated as:
1.
2.
3.
4.
5.
6.
7.
8.
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The
The
The
The
The
The
The
The
right to
right to
right to
right to
right to
right to
right to
right to
possess.
use.
borrow money against.
rent to others.
dispose of (by, sale, will, or transfer).
quiet enjoyment.
exclude others.
do nothing at all.
An individual in control of all those rights is said to own the property in FEE SIMPLE.
A. ESTATES
 An ESTATE is a possessory interest in real estate or real
property.
 FEE SIMPLE is the highest form of possessory interest.
 There are several estates that have less than the full
possessory rights.
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LEASED FEE ESTATE
REVERSION
LEASEHOLD ESTATE
B. DEEDS
 TITLE is a term that signifies the proof of ownership.
 The title to a property is based on the legal chain of documents
that show ownership interests and transfers from owner to
owner.
 Title to real estate and real property is transferred from one
person to another by use of a legal document called a DEED.
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GRANTOR
GRANTEE
 A deed must be in writing in all jurisdictions and must meet all
requirements of the state in which the property is located.
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TITLE INSURANCE
1. General Warranty Deeds
 In most states, general warranty deeds are the most
commonly used deeds in real estate transactions.
 A GENERAL WARRANTY DEED offers the most
complete warranty regarding the quality of the title.
 The grantor warrants that the title he or she is
conveying is free and clear of all claims except those
specifically listed in the deed.
2. Special Warranty Deeds
 A SPECIAL WARRANTY DEED makes the
same warranties as a general warranty deed
except it limits the application of defects to
the title to those discovered while under
ownership of the grantor.
 It does not apply to title problems caused by
owners previous to the current grantor.
3. Grant Deeds
 The grant deed is very popular in the western states.
 A GRANT DEED transfers absolute legal title to a property. It is
sometimes called a “naked title deed.”
 A grant deed carries only two implied warranties:
1) that the grantor has not transferred title to anyone else at the same
time; and
2) that the grantor is transferring the estate free of any encumbrances
made by the grantor other than those disclosed to the grantee.
 The interesting thing about this form of transfer is that the deed
does not state that the grantor is the owner of the property or that
the property is not encumbered by debt or liens not made by the
grantor.
Figure 6-1
4. Quitclaim Deed
 The quitclaim deed is most often used to remove
items from the public record, such as easements or
recorded restrictions.
 It merely says that the grantor is relinquishing any
interest that he or she has in the property.
 A quitclaim deed contains no warranties, written or
implied.
Figure 6-2
5. Gift Deed
 A GIFT DEED is often used to transfer real
estate to children or other loved ones.
 Generally, no monetary legal consideration is
required to transfer the property.
 A gift deed can be invalidated if it is
discovered that it was used to defraud
creditors.
6. Sheriff’s Deed/Commissioner’s
Deed
 A SHERIFF’S DEED is used to transfer property that
has been ordered to be sold by a court of law.
 This can happen as a result of a monetary judgment
against the owner.
 In some states this is known as a commissioner’s sale
and a commissioner’s deed.
 A sheriff’s deed or commissioner’s deed carries no
warranties.
7. Tax Deed
 A TAX DEED is issued by a tax collector after
the sale of property that has been seized by
the state, county, or local municipality for
nonpayment of taxes due.
 Again, no warranty of the deed is expressed
or implied.
8. Deed of Trust/Deed of
Reconveyance
 These deeds are types of financing instruments.
 All states have laws that require legal delivery of a
deed from the grantor to the grantee.
 In general, all states have laws that will invalidate a
deed if the grantor is incompetent at the time the deed
is made, if the deed is never delivered, or if the deed is
a forgery or fraudulently altered.
C. MORTGAGES
 A MORTGAGE is a legal document that pledges the
property of the borrower to a lender as security for a
loan(lien).
 Mortgage law has traditionally been within the
jurisdiction of state law.
 The federal government has overturned state laws
restricting the “due on sale” clause, some usury laws,
established conditions that allow prepayment of
mortgages, and set ceilings on prepayment penalties.
D. RECORDING
 All the states have enacted laws known as
recording acts.
 The general intent of recording is to create a
publicly available record that establishes the
chain of ownership of any individual property.
 Virtually all states require recording to protect
an ownership claim.
E. STATE-CHARTED BANKS
 The states established banking laws and
regulations at a very early period to protect
the public.
 While state laws still govern state-chartered
institutions, the effect of their regulation has
been tempered by the fact that most real
estate lending is now governed by federal
laws and regulations.
F. USURY LAWS
 Beginning in the 1830s, many states, in an effort to limit predatory
lending practices, passed laws to limit the interest charges that
individual lenders and banks operating within their states could
charge a borrower.
 The establishment of the Federal Reserve and the secondary
markets put the federal government in the rate-setting business.
 To insure that the system works smoothly and provides reasonable
rates to all, the federal courts overturned many state usury laws, or
at least those sections dealing with federally related real estate
transactions.
 Most states still have usury laws that deal with other types of
consumer credit.
II. The Rise of
Federalism
The Rise of Federalism
 Over the last century, the federal government has gradually
extended its control of lending within the United States.
 Federal authorities have virtually taken over the entire banking
system.
 The adverse effect of federal regulation has been that federal
incursion has come at the expense of the states and property
owners.
 The demise of usury laws has created a system in which the
federal government sets interest rates.
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Garn-St. Germaine Act in 1982
DUE ON SALE CLAUSE
ASSUMABLE LOAN
III. The Modern Role of
the States
The Modern Role of the States
 The modern role of the state remains that of a
protector of the interests of its citizens.
 States still control deeds and recording laws. In
addition, they regulate appraisers, real estate agents,
and loan brokers.
 In the areas of anti-discrimination, consumer law, and
anti-redlining, many state laws are actually more
severe than federal law.
IV. CHAPTER SUMMARY
 The 10th Amendment to the U.S. Constitution reserves all powers to the
states that are not specifically given to the federal government.
 The highest and most common form of property ownership is fee simple,
which has with it a bundle of rights. This bundle of rights consists of real
property rights.
 Title to real estate is generally transferred by a deed. The most common
form of deed used in the United States is the general warranty deed.
 In the western states, the grant deed is popular. This deed, when used in
conjunction with title insurance, shifts any title liability to the title
insurance company.
 States have also carried out the very important function of publicly
recording all documents relating to real estate, such as deeds and
mortgages.
Mortgage License Preparation
 Links for two schools
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http://www.mareeducators.com/
http://mortgage.fastclass.com/index.cfm?
 Nationwide Mortgage Licensing System &
Registry (NMLSR)
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http://mortgage.nationwidelicensingsystem.org
/Pages/default.aspx
MLO SAFE Requirements Compliance Chart –
Updated: 9/23/2010
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The chart below displays each state’s deadline for certain requirements that mortgage loan originators
must meet in order to be SAFE¹ compliant. Each licensing agency may have additional requirements.
Please consult with each agency for a comprehensive list of all requirements.
Key Terms
PRE-LICENSURE EDUCATION (PE): SAFE requires 20 hours of NMLS approved pre-licensure
education to be completed. This education need only be completed or certified once, regardless of the
number of states in which one is licensed. Each agency may require more than the designated 20 hours
or require a certain number of hours with state content. For details on state requirements above the 20
hours, contact your state agency.
CERTIFICATION: “Certification” is the process by which state agencies certify that licensed mortgage
loan originators have successfully completed state education and/or state testing requirements in
satisfaction of the SAFE Act PE and state test requirements. See the Certification Page of the NMLS
Resource Center for more information.
CONTINUING EDUCATION (CE): SAFE requires 8 hours of continuing education to be completed each
year prior to renewal. Each agency may require more than the designated 8 hours or require a certain
number of hours with state content. For details on state requirements above the 8 hours, contact your
state agency.
SAFE MLO TEST: SAFE requires licensees to pass both the National and State Components of the
SAFE MLO Test. The National Component, passed once satisfies all state requirements. The State
Component must be passed for each state in which the applicant seeks licensure.
CRIMINAL BACKGROUND CHECK: SAFE requires all MLOs to submit fingerprints for a criminal
background check. This criminal background check is available only to regulators.
CREDIT REPORT: SAFE requires a credit report pulled through NMLS. This credit report will be
available only to regulators.
Nationwide Mortgage Licensing
System & Registry (NMLSR)
Review the PDF file downloaded.
Review information on the website……together
with the class
http://mortgage.nationwidelicensingsystem.org/
Pages/default.aspx
The end ………………………….for tonight!!!!!