Civil Rights Act of 1866
Federal law granting citizenship to former slaves; passed over Johnson's veto. (Race and Color)
Fair Housing Act of
... [Show More] 1968
banned discrimination in the rental or sale of housing (Race, color, religion, national origin)
Housing and Community Development Act of 1974
added gender (sex) to the protected classes
Fair Housing Amendments Act of 1988
Added Disability and familial status to protected classes.
Real Estate Settlement and procedures Act RESPA
Requires lenders and brokers to ensure that applicants understand the terms and fees of the mortgage transaction that they are considering
Home Mortgage Disclosure Act (HMDA)
Requires financial institutions to maintain and annually disclose date about home purchases, home purchase pre-approvals, home improvements and refinance applications involving 1 to 4 unit and multifamily dwellings
Electronic Communications Privacy Act
Prohibits persons from tampering with computers or accessing certain computerized records without authorizations. The Act also prohibits providers of electronic communications services from disclosing the contents of stored communications.
Community Reinvestment Act CRA
A congressional act that encourages mortgage originators to actively lend in their communities and that requires financial institutions to evaluate the "fairness" of their lending practices.
Restricts the collection and use of information that would result in housing discrimination on the basis of race, sex, religion, national origin and a variety of other factors.
Fair Housing Act
Prohibits discrimination by direct providers of housing, such as landlords and real estate companies as well as other entities, such as municipalities, banks of other lending institutions and homeowners insurance companies whose discriminatory practices make housing unavailable to persons because of: Race or Color, Religion, Sex/Gender, National Origin, Familial Status, Disability..
Fair Housing Statute
Opens up services and employment opportunities to the 43 million Americans with disabilities.
Americans with Disabilities Act ADA
Protects consumers from abusive, unfair, and deceptive practices by third-party debt collectors.
Fair Debt Collection Practices Act FDCPA
Prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance.
Equal Credit Opportunity act ECOA
Restrictions collections of use of information that would result in employment discrimination on the basis of race, sex, religion, national origin and a variety of other characteristics.
Equal Employment Opportunity Act EEOC
Mandates that personal data be collected as much as possible directly from the record subject.
Privacy Act
Requires each of the nationwide consumer reporting companies: Equifax, Experian, and Transunion to provide you with a free copy of your credit report, at your request, one every 12 months
The Fair and Accurate Credit Transactions Act FACTA
Prevents identity theft, improve resolution of consumer disputes, improve the accuracy of consumer records, make improvements in the use of, and consumer access to, credit information, and for other purposes.
The Fair Credit Billing Act FCBA
Applies to "open end" credit accounts, such as credit cards, and revolving charge accounts - such as department store accounts.
Fair Credit Reporting Act FCRA
Prohibits opening of mail without a search warrant or the addressee's consent
Mail Privacy Statute
Amends the Truth in Lending Act (TILA) and establishes requirements for certain loans with high rates and/or high fees
Home Ownership and Equity Protection Act HOEPA
All of the following would help a counselor develop a realistic household budget, except:
- Payment information for a paid-off car
- Amount spent on groceries
- Rent payment information
- Monthly cable bill
Payment information for a paid-off car
The following are good ways to decrease expenses except:
- Cancel car insurance
- Cancel cable service
- Brown bag lunch for work
- Rent videos instead of going to the movies
Cancel car insurance
Steps to create an Action Plan
- State goal
- Identify obstacles
- Agree on livable budget
- Steps with dates to achieve goal
- List who is responsible for steps
- Signature (optional)
- follow up and update
Which of the following is not needed in determining a budget?
- Pay stubs
- Credit report
- Utility bill
- Child support
- Stock dividends
Credit report
Stock dividends
Tran would like to take a vacation and needs $3,000. He has $400 saved already. If he wants to take a trip in 18 months how much will he need to save monthly?
$145
Which section of a credit report contains information about student loans?
- Inquiries
- Public records
- Account Information
- Consumer Rights
-Personal Information
Account information
What makes up a credit score?
35% - Account History
30% - Amounts Owed
15% - Length of Credit History
10% - New Credit
10% - Types of Credit
Fair Credit Reporting Act (FCRA)
- Right to know what is in your file
- Right to dispute incomplete or inaccurate information
- Access to your file is limited
- May seek damages from violators
- May have additional state rights
Fair and Accurate Credit Transactions Act (FACTA)
- Right to a free annual credit report
- Right to place a fraud alert for 90 days
- Credit card numbers must be truncated
Fair Credit Billing Act (FCBA)
- Dispute errors on account (within 60 days)
- Must be billed in timely manner (at least 14 days before payment is due)
Items to include when tracking income
- regular salary
- temporary jobs
- unemployment compensation
- public assistance
How to calculate income if the amounts varies month to month
Average it out over 12 months
Items NOT to include when calculating income
- Pre-tax payroll deductions
- Credit score
Documents to use to calculate income
- paychecks, direct deposit slips
- if self-employed, income and expense sheet
- additional income checks or cash
- Government benefits letters (SSI, unemployment, etc)
Items to include when tracking expenses
- all bills
- all fixed monthly expenses
- all cash expenses
- seasonal or annual expenses (holidays, gifts, vacations)
Documents to use to track expenses
- Utility, insurance and other bills
- Bank statements
- Credit card statements
- Records about car registration, school supplies etc.
All of the following are reasons why it is important for a client to track income and expenses before finalizing a budget, except:
-It helps show clients that they actually spend less on some expenses than they think.
- It helps identify spending habits.
- It helps show clients that their spending and expenses are out of control.
- It helps define realistic and attainable goals and timelines.
It helps show clients that their spending and expenses are out of control.
What are the secondary steps to help clients develop a realistic budget?
- Examine content in the budget worksheet
- Ask client what she has discovered about income and spending habits
- Ask client if she thinks her goals are achievable
- Coach client on strategies for defining needs over wants
- Walk through strategies for adjusting goals and budget
- Develop a client action plan that includes client actions/tasks and time frames
Strategies for increasing income
1. Find a second job
2. Work overtime
3. Negotiate higher salary/wage
4. Sell assets (e.g., car)
5. Hold a yard sale
6. Teach a skill/craft/activity
7. Sell a craft
8. Charge rent (if adult dependents in home)
9. Evaluate tax withholdings
Strategies for decreasing expenses
1. Prioritize needs vs. wants
2. Reduce or eliminate "wants" (e.g., clothes, gym)
3. Cancel or downgrade services (e.g., cable, telephone
4. Limit miscellaneous spending
5. Stick to a shopping list
6. Reduce debt (pay off a loan or credit card)
7. Move to more affordable housing
8. Change insurance coverage for lower premiums, but don't cancel
Which of the following is a "want" and not a "need"?
Health Care Premium
Car Insurance
Gym Membership
Rent
Gym Membership
All of the following are effective ways to decrease expenses, except:
Cancel insurance policy
Cancel cable service
Stick to a shopping list
Conserve energy in the home
Cancel insurance policy
All of the following are effective strategies to increase income, except:
Work over time
Teach yoga
Find a second job
Factor in an anticipated raise
Factor in an anticipated raise
Identify which information is used in determining a budget, and which is not.
Pay Stub
Bank Statements
Utility Bills
Social Security Award Letter
Annual Bonus
Stock Dividends
Employer Reimbursements
Credit Score
Include:
Pay stub
Bank statements
Utility Bills
Social Security Award Letter
Not to include:
Annual Bonus
Stock Dividends
Employer Reimbursements
Credit Score
Ray's commute on the bus takes over an hour, so he wants to buy a car as soon as possible, but he has poor credit and cannot obtain a loan right now. He thinks he can find a reliable car for about $2,000 and has about 20% of the total in the bank from his tax refund. If Ray's goal is to buy a car within 8 months, what is the minimum amount he needs to save each month?
$150
$175
$200
$225
$200
What information is collected by a credit bureau?
1. History of accounts
2. Number of inquiries
3. Number of collections
What personal information is included in a credit report?
1. Name
2. Social security number
3. Addresses
4. Phone numbers
5. Employers
What account/trade information is included in a credit report?
1. Payment history
2. Account dates,
3. Credit limits
4. Balance owed
What public records information is included in a credit report?
1. Bankruptcy
2. Judgments
3. Tax liens
4. Wage garnishments
What inquiries are included in a credit report?
1. Requests initiated by a company or a person for a consumer's credit profile information.
Payment History - Indicators of good and bad credit
Positive - Timely payment history demonstrates reliability
Negative - Late payment history demonstrates higher risk of future delinquency
Capacity used - Positive and Negative
Positive - Low credit utilization demonstrates good financial management
Negative - High credit card balances demonstrate poor financial management
Length of Credit History - Positive and Negative
Positive - Longer credit history provides more information for lenders, which means lower risk
Negative - Shorter credit history provides little or no information for lenders, which means higher risk
Type of Credit Used - Positive and Negative
Positive - Different types of credit show variety. Variety shows lenders that consumers can manage different types of credit
Negative - Fewer types of credit show limited profile information to lenders, which means a higher risk
New Credit - Positive and Negative
Positive - credit applications can lead to new credit accounts or loans, which can establish credit over time.
Negative - Too many inquiries or new credit accounts in a short period of time will raise questions to lenders
Which section of a credit report will contain employer details:
- Consumer Rights
- Account Information
- Personal Information
- Public Records
- Inquiries
Personal Information
Which section of a credit report will contain information about a student loan?
- Personal information
- Public records
- Inquiries
- Consumer rights
- Account information
Account information
Which section of a credit report will contain court information such as bankruptcy?
-Public records
-Inquiries
-Personal information
-Consumer rights
-Account information
Public records
Which section of a credit report will show recent attempts to open a credit card?
- Personal information
- Public records
- Consumer rights
- Inquiries
- Account information
Inquiries
Which section of a credit report will contain information about how to correct inaccuracies?
- Personal information
- Consumer rights
- Public records
- Inquiries
- Account information
Consumer Rights
What is a credit score?
a number assigned to a person that indicates to lenders their capacity to repay a loan. (credit worthiness)
FICO score
Fair Isaac Corporation - scores ranges from 300 - 850
Account History
The payment history of an account over a specific period of time, including the number of times the account was past due or over limit. (35%)
Amounts Owed
ratio of total credit extended to the amount if credit owed (30%)
Length of Credit History
overall length of credit history in the credit report, as well as the average age of accounts (15%)
New Credit
number of recent credit inquiries, as well as new credit accounts (10%)
Types of Credit Used
variety of accounts (e.g. credit card, auto loan, mortgage) (10%)
Easiest way to order a credit report?
www.annualcreditreport.com
What to do if incorrect information on your credit report?
1. Notify credit reporting agencies of inaccuracies
2. Keep records of dispute documentation
What to do if delinquencies/collections/judgement are on your credit report?
1. Get current and pay on time moving forward
2. Set up payment reminders
3. Adjust budget to factor in all monthly payments
What to do if credit card is maxed out/too much debt?
1. Pay down debt and keep balances low
2. Pay more than the minimum
3. Know what the balance is
4. Check statements
What to do if no credit/poor credit/ limited credit?
1. Open a credit card account
Which complies with fair credit laws?
- An employer can check a credit report at any time.
- A vendor can display part of the credit card number on the sales receipt.
- A credit reporting agency can list information about a collection over eight years old.
- A creditor can acknowledge a consumer dispute after two months.
A vendor can display part of the credit card number on the sales receipt
Which federal law protects a consumer's right to dispute a billing error associated with his or her credit card account?
-Fair and Accurate Credit Transactions Act (FACTA)
-Fair Credit Reporting Act (FCRA)
-Fair Credit Billing Act (FCBA)
Fair Credit Billing Act
Four steps of asset building
1. Choose the right bank or credit union account.
2. Build savings for emergencies and large purchase.
3. Invest for retirement.
4. Take advantage of tax credits
Account maintenance/service fee
Fee charged by a financial institution for account maintenance.
Wire transfer fee
Fee charged when a client sends a payment to another account electronically
Check purchasing fee
Fee charged when a client purchases checks.
Money orders and cashiers check fee
fee charged when a client obtains a money order or cashier's check.
Overdraft fee
Fee charged when an account does not have enough money to cover a purchase and the financial institution loans money to complete the payment.
Overdraft protection transfer fee
Fee charged when an account with overdraft protection does not have enough money to cover a purchase and funds are transferred from another linked account to cover it.
Stop payment fee
Fee charged to stop payment on a check before the check is cashed.
Non-sufficient funds/returned item fee
NSF fee is charged if there is not enough money in an account to cover a check payment or other purchase.
ATM transaction limit/check-writing limit fee
Fee charged if a consumer exceeds an allotted number of ATM transactions or writes more than the allotted number of checks in a month
What is a liquid account?
money can be retrieved quickly without taxes or penalties.
What is a limited accessibility account?
interest bearing savings accounts and money market accounts
Examples of accounts that would be ideal for short-term large purchase savings include:
1. High interest savings accounts
2. Money market
3. CD
All of the following arguments will be valuable to share with a client to help them understand the importance of an emergency fund, except:
- Emergency funds can be used to cover living expenses while Jill looks for a new job, If she is laid off.
- Emergency funds placed in a liquid account can be retrieved when needed without taxes or penalties.
- Emergency funds will be available to use to purchase an electronic game for her daughter when Jill finds a great sale.
- It is ultimately cheaper to pay for emergency expenses from an emergency fund rather than on credit.
Emergency funds will be available to use to purchase an electronic game for her daughter when Jill finds a great sale.
Which is the most appropriate use of emergency funds:
- Contributing to a mutual fund
- Upgrading a refrigerator
- Establishing a retirement fund
- Repairing the transmission on a car
Repairing the transmission on a car
To explain the importance of establishing a retirement fund, you can present all of the following arguments, except:
- Her company might "match" a portion of the retirement funds that she contributes.
- She could benefit from certain tax incentives
- She could borrow against the retirement investment if she has an immediate need for cash.
-Her investment could grow more if she begins investing earlier.
She could borrow against the retirement investment if she has an immediate need for cash.
Earned income tax credit
Also known as the EITC, a refundable federal income tax credit for low- to moderate-income working individuals and families, even if they did not earn enough money to be required to file a tax return.
Educational tax credit
person who is post-secondary educational program, or who are supporting children in a post-secondary program
Child and Dependent Care Tax Credit
Helps families reduce their child care costs by allowing them to deduct up to $5,000 of these costs from their federal tax obligation
Common Predatory Lending Practices
1. Limited time offers
2. High-risk loans (balloon payment, pre-payment penalties)
3. Higher loan amounts
4. High fees or costs
5. False or hidden disclosures
6. Loan flipping
Tips to avoid predatory lending
1. Shop for a loan
2. Ask questions
3. Beware of to good to be true
4. Know your financial situation
Identity theft checklist
1. Place a fraud alert
2. Order credit reports
3. Obtain an Identity Theft Affidavit from the FTC
4. File a police report
Chapter 7 Bankruptcy
Liquidation - Process of selling non-exempt assets to repay creditors.
Means Test
A bankruptcy qualification that considers income and equity in assets to determine if a client has the ability too repay part of the debt. (Chapter 7)
Two types of bankruptcy
Chapter 7 and Chapter 13
Chapter 13 bankruptcy
Wage earner's plan - develop a plan to repay all or part of the debt over 3 - 5 years.
All of the following are immediate steps a client should take in the event of identity theft, except:
- Create an identity theft report
- Contact the insurance company
- Order credit reports from the credit reporting agencies
- Place a fraud alert
Contact the insurance company
In some cases, bankruptcy may be the best option for a client. Which of the following options would be the least appropriate for a housing counselor to present as an alternative?
- Debt management plan (DMP)
- Household budget adjustment
- Loan modification
- Negotiation with creditors
- Wait seven years for accounts to drop from credit report
Wait seven years for accounts to drop from credit report
It is the responsibility of the counselor to determine whether or not a client should file bankruptcy.
True
False
False
Renting Advantages
- defer most repairs, maintenance
- avoid hassle of paying property tax
- mobility
Renters Responsibilites
- pay rent on time
- comply with rules and guidelines
- care for the property
Renting disadvantages
- cannot build equity
- limited control over decorating
- no tax benefits
Renting upfront costs
- application fee
- security deposit
- first and last months rent
- pet deposit
Buying advantages
- control over decisions related to living environment
- settle into a community/ school system
- no home inspections by landlords
- ability to modify home
- tax benefits
- build equity
Buying responsibilites
- make monthly payment
- uphold standards and rules set by HOA
- carry out and fund home repairs
Equity
value of ownership interest in property. Difference between the fair market value of a property and the remaining mortgage balance owed.
Foreclosure
The seizure of property from borrowers who are unable to repay their loans
Renters Insurance
Covers your personal property in a rented apartment or home.
Discount points
A fee charged by the lender at settlement that results in increasing the lender's effective yield on the money borrowed. One discount point equals one percent of the loan amount.
Default
failure to pay back a loan - mortgage loans are typically considered in default when a payment has not been made after 60 - 90 days.
Escrow
Funds to be used for specific purposes by parties carrying out a mutual transaction, deposited with a third party. Commonly used by lenders to allocate funds for a homeowner's property taxes, insurance premiums, or other fees when they become due.
Down Payment
A cash payment that home buyers are typically required to pay when closing on a home loan which represents a percentage of the total price of the home.
Closing Costs
Fees for final property transfer that are not included in the price of the property. Typical closing costs can include loan origination fees, discount points, appraisal fee, survey, title insurance, legal fees, prepayment of taxes and insurance, etc.
Range of closing costs
3 to 4% of the purchase price of the home.
Homeowners Insurance
An insurance policy that can provide coverage for damages to a dwelling and contents that belong to the homeowner. Additionally, it can offer protection to homeowners against losses resulting from liability claims from accidents occurring on the property. Homeowners insurance is mandatory for most homeowners with mortgages to obtain.
Ben obtains a mortgage for $90,000, which is the most likely amount that he will pay for closing costs?
-$1,000
-$3,500
-$7,000
-$10,000
$3,500
Front-End Ratio
A rate that calculates a borrower's housing-related obligations as a percentage of gross monthly income. Frequently used by lenders to qualify borrowers for a mortgage. Also called a housing ratio.
Conventional Loan
A mortgage loan backed by private lenders. Though not insured by any government program, such as the FHA or VA, loans with a down payment less than 20% of the purchase price may require private mortgage insurance.
Conventional loan ratios
28/36%
FHA Mortgage ratios
31/43%
Renters ratios
30/36%
PITIA
Principal, interest, taxes, Insurance, association dues
Principal
The amount of money borrowed to buy a house or the amount of the loan that has not been paid back to the lender.
Interest
Interest is the interest rate the bank charges you for borrowing their money.
Taxes
Property taxes charged by the county in which your home is located. Proceeds pay for education, law enforcement, and other services. These are mandatory and typically costs 1% of the value annually
Mortgage insurance premium (MIP)
a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.
Private Mortgage insurance (PMI)
insurance policy that protects the mortgage lender from loss in the event the borrower defaults on the loan; typically required by lenders when the down payment is less than 20%
Association Dues
Charged by community or Homeowners Association to pay for repairs, upkeep, landscaping, improvements, and property management
Ground Rent
An arrangement in which the owner of a dwelling or structure does not own the land on which the structure resides. In such cases, the borrower takes out a mortgage to purchase the dwelling, but must still pay rent for the land.
Hourly gross monthly income calculation
total hourly pay before deductions x hours per week x 52 weeks per year / 12
Weekly gross monthly income calculation
total weekly pay before deductions x 52 / 12
Bi-weekly gross monthly income calculation
total bi-weekly pay before deductions x 26 / 12
Semi-monthly gross monthly income calculation
total semi-monthly pay before deductions x 2
Self Employed gross monthly income calculation
Average adjusted gross income from tax returns and/or profit and loss statements / the number of months of income counted
Adjusted Gross Income
Gross income minus adjustments, or reductions.
Profit and Loss Statement
A summary of revenue, costs, and expenses incurred during a defined period, such as a fiscal year.
All of the following are true statements about upfront costs associated with renting and buying, except:
-Renters generally pay a security deposit upon signing a lease.
-The average cost due upon signing a lease for a rental is typically between 20% of the monthly rent.
-Closing costs are typically comprised of lender fees, discount points, title insurance, home inspection fees, escrow deposit, property taxes, private mortgage insurance, and attorney's fees.
-A client who desires to purchase a home worth $150,000 could be required to pay $7,000 in standard closing costs.
The average cost due upon signing a lease for a rental is typically between 20% of the monthly rent. [Show Less]