Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

NMLS > MLO Activities > Flashcards

MLO Activities Flashcards

1
Q

What does pre-qualification mean?

A

Pre-determining what a POTENTIAL borrower may be able to borrower
-Does not guarantee approval; not binding
-Done by ANY MLO
-Does not require disclosure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What does Pre-Approval mean?

A

Determining if potential borrower can be financed & for what amount
-Rendering a credit decision; may be binding
-Only done by lender
-Triggers mandate disclosures w/ completed app

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does URLA stand for? AKA? Created by?

A

Uniform Residential Loan Application; AKA 1003. Fannie’s form # 1003.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is Form 65?

A

Similar to the 1003; created by Freddie

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the penalty for a Mortgage Fraud?

A

Investigated by FBI, punishable up to 30 yrs in fed prison or $1M or BOTH

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the MLO’s job?

A

To obtain a complete & accurate 1003
They assist the client in completing the 1003 and collects necessary doc to validate info provided. They assist in data input, client is the one actually completing.
Need applicant to SIGN loan app & other required doc

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What must the co-borrower have?

A

Must have acceptable credit/assets
They are the ones accepting join obligation to repay the deb
If no JOINT assets/liabilities, need 2 apps

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the role of a processor?

A

They VERIFY info collected by LO - check stubs, W2, etc.
They send verification forms to appropriate parties, order credit report if not done by LO, and prepare prelim title report, order appraisal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does the UW do?

A

Evaluate the doc, borrower info, & various risk factors to make decisions:
1) Automated- info fed into automated uw system (AUS)
2) Manual - Done by indivd. who works for lender

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the most widely used automated UW systems?

A

> Fannie Mae’s DU (Desktop UW)
Freddie’s Loan Product Advisor (LP)
FHA - Total Scoreboard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is in SECTION 1 in URLA?

A

Borrower info - marital status, previous address needed if at current address for 2 yrs or less

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is in SECTION 1B, C, D in the URLA?

A

Employment info - current & previous employment over 2 year period, Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is in SECTION 1E in URLA?

A

Income from other sources - alimony, child support, disability, retirement, IRA, Social Security, Trust

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is in SECTION 2 in the URLA?

A

Financial Info - Assets & Liabilities
> Things you own that are worth $ and that you want considered to qualify for this loan.
> Liabilities/debts that you pay each month, such as CC, alimony, & other expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is in SECTION 3 in the URLA?

A

List all properties you currently own & what you owe on them

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is in SECTION 4 in the URLA?

A

Loan & Property Info
*Do not assume/advise on how title should be held

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is in SECTION 5 in the URLA?

A

Contains questions regarding judgement, citizenship, default status, occupancy status and other questions that may affect the UW of the loan or result in additional conditions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is in SECTION 6 of the URLA?

A

Acknowledgement; Borrower & Co-Borrower must SIGN & DATE
They are understanding & agreeing to be bound by loan terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is in SECTION 7 in the URLA?

A

Military Service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is in SECTION 8 in the URLA?

A

Demographic Info; “Information for Govt Reporting Purposes” related to govt statistics. Referred to as the Home Mortgage Disclosure Act (HMDA) Section, It requests info regarding race, sex, and national origin

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is in SECTION 9 in the URLA?

A

To completed by the MLO - LO info

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are assets & what are some examples?

A

Borrower would need to satisfy a down payment & complete a mortgage transaction
> Cash in the Bank - need at least 2 or 3 months bank stmts bc investors want to see SEASONED funds
> Sale of Current Residence - a copy of the CD from the sales trans verifying that the property has been sold & applicant rcvd suff, proceeds to close the new loan
> Gift Funds - The donor must complete a gift letter showing amt of gift & donor’s relationship to the app. It doesn’t need to be returned back. May ask for bank stmt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are liabilities? What are some examples?

A

Various credit-related obligations, considered to determine the likelihood of repayment
> Revolving Accounts (ie credit cards) - the min monthly payment shown on the CR will be used to calculate DTI ratios **if a CR does not show a monthly min payment, UW will use 5% of the unpaid balance as a payment when calculating the DTI
> Installment Loans - monthly payments with fewer than 10 payments remaining may be excluded (ie auto loan)
> Auto Leases - These payments are ALWAYS included in the qualifying ratios regardless of the balance remaining on the lease
> Student Loans - If payment is deferred, DU & LP both require that UW include a payment in calculating borrower’s DTI for qualification.
> Contingent Liabilities - he/she has co-signed for another person’s debt but the actual payments are being paid by the primary obligor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How does UW calculate student loan liabilities?

A

If no payment letter can be found, lender must use 1% of the unpaid balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Contingent liabilities does NOT have to be taken into consideration, if BOTH of what are true?

A

1) The payments have been made on time for previous 12 month period
2) The lender docs that the payments were made from the primary obligor’s account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is a Wage-Earner?

A

They include paystubs (most recent 30 days) & W2 for most recent 2 year
>Should have continuous employment for at least 2 years in the SAME field, if not changes for advancement/special ED and training are acceptable
>Stable Monthly Income - GROSS income - PRIMARY income. They can also have SECONDARY income (see evernote)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When can you consider the borrower for using bonuses, commission, & part-time earnings as part of income?

A

Considered durable - must show consistent earnings for 2 years
Previous income + recent year income / 24

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What are Disability Payments?

A

Can count as income if they are PERMANENT.
Remaining term should be at least 3 years from date of mortgage app
Considered “public assistance” income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What is an auto allowance?

A

Amt an employer gives an employee for the business use of her/his car
> amt of reimbursement may be offset by deducting actual expenses from the allowance
> remainder is considered TAXABLE income income by the IRS & when averaged for the previous 2 years is considered income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Social Security Income can be grossed up by how much %?

A

25%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

When can you use Foster Care Income?

A

Requires a placement letter from, borrower stating he intends to continue with foster care, Can gross up 25%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

How do you calculate Rental Income?

A

Reduced by 25%
(Gross Rental Income - PITI) * 75% = Net Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

When does Housing/Parsonage Allowance considered as income?

A

If there is documentation that the income has been rcvd for the most recent 12 months and allowance is likely to continue for next 3 years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

When is Alimony, Child Support, & Maintenance considered to be part of borrower’s qualifying income?

A

If Borrower CHOOSES to use this, it needs to be consistent if they want to use (min 3 years)
*remember that they do not need to list as sources of income if borrower does not want them to be considered (ECOA)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

How to qualify for Self Employment Income?

A

Borrower must own 25% of the business
>If 25% or more of a person’s income is 1099 then also considered as SE income
>Need to provide personal & entity tax returns (all schedule) for at least min of 2 years
>Profit & Loss Statements and or balance sheets may also be required

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What does VOD stand for?

A

Verification of Deposit; Verify the seasoning can send to the bank

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What is a 4506T?

A

Lender uses this to verify tax returns; Transcript of Tax Returns (IRS)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What is a Form 8821?

A

IRS; authorize to release of other tax info

39
Q

What is a credit history?

A

A record of debt repayment detailing how a person paid credit accounts in the past as a guide to whether he/she is likely to pay accts on time as agree in the future

40
Q

What is a debt?

A

Money owed. Generally considered any SECURED or UNSECURED recurring monetary obligation that will not be cancelled until PIF
> A car lease is considered a debt
> Utilities & insurance premiums are NOT considered debt bc they can be cancelled

41
Q

What is Bankruptcy?

A

Court process that cancels debt & provides some relief/creditors. There are 2 basic proceeds - Chapter 7 & Chapter 13

42
Q

What is Chapter 7? AKA?

A

“Straight Bankruptcy”, a LIQUIDATION PROCEEDING. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor rcvs a discharge of all dischargable debts usually w/in 4 months

43
Q

What is Chapter 13 Bankruptcy?

A

Filed by an individ who wants to pay off debt over a period of 3-5 yrs. Preferable to someone who has non-exempt property he wants to keep
*incentive for consumers to file under this chapter & repay debt

44
Q

According to the Fair Credit Report Act (FCRA), how many years can consumer reporting agencies maintain bankruptcy info on a consumer’s credit?

A

No more than 10 years
> Chapter 7 Bankruptcies - max 10 years
> Chapter 13 Bankruptcies - only for 7 years after discharge date

45
Q

AKA for Appraisal Forms?

A

URAR (Uniform Residential Appraisal Report) or 1004
It is an estimate/opinion of value as of certain date that is supported by objective data

46
Q

How many months is the appraisal report valid for? When does it need a re-cert?

A

6 months, It must be re-certified if the appraisal will be 4 months old or more at closing

47
Q

What is the sales comparison approach for an appraisal? AKA?

A

AKA “market data approach”, value determined by looking at the recent sale price of similar properties. Often used in evaluating residential property.
Based on Fannie, need at least 3 comparable sales that have closed w/in the past year
vacant land

48
Q

What is the Cost Approach in an appraisal?

A

Best for new construction, or for unusual/special purpose.
Used when evaluating the cost to replace property that was damaged due to natural disasters AKA Replacement Cost Approach

49
Q

What is the Income Approach for Appraisals? AKA?

A

AKA Capitalizaiton approach. Estimated the value of real estate by analzying the revenue or income the property currently generates or could generate

50
Q

What is Title Insurance Coverage? What is it called?

A

The American Land Title Association (ALTA), the national trade association for title insurance companies and title insurance agents

51
Q

What are the 2 types of coverage policy for title insurance coverage?

A

1) Standard: Usually issued to homebuyers. No physical inspection of the property is required & the buyer is protected against all recorded matters & ricks
2) Extended: All risk covered by a standard policy are covered by an extended coverage policy. It covers other unrecorded hazards

52
Q

What are the zones for flood insurance?

A

Zones A & V
Zone A is referred to the 100-yr flood or already exceeding a 1% chance of being inundated by a flood.

53
Q

What is the calculation to compute hourly pay?

A

Base hourly rate x # of hours = weekly base income
weekly income x 52 weeks = annual income
Annual income / 12

54
Q

How to calculate paid hourly + OT?

A

Multiply regular hourly rate by 1.5

Base rate x # of hours = weekly base income
OT rate x OT hr = OT weekly income

weekly income x 52 = annual income / 12 = month

55
Q

What is the calculation for being paid weekly?

A

Weekly salary x 52 = annual income / 12

56
Q

How to calculate Paid Bi-Monthly? What is Bi-Monthly?

A

Paid twice a month

Bi-monthly salary x 24 = annual income / 12 = monthly

57
Q

How do you calculate being paid bi-weekly?

A

Borrower is paid every other week.

bi-weekly salary x 26 = annual / 12 = monthly

58
Q

What do you gross up for 25%?

A

Anything that is PUBLIC ASSISTANCE - alimony, child support

59
Q

What is the interest?

A

Cost of borrowing $

60
Q

What is the principal?

A

The balance of the loan

61
Q

What does PITI stand for?

A

Principal Interest Taxes Insurance

62
Q

How to calculate the Annual Interest Only Payment?

A

The loan amount x the note rate (interest rate/nominal rate)

63
Q

How to calculate PMI for monthly charge?

Ex) Assume loan amount is $235,000 with a PMI factor of 0.52%. What is the monthly charge for PMI?

A

PMI rate x loan amount = annual PMI / 12

Ex) 235,000 x 0.0052 = Annual PMI payment

64
Q

What does per-diem mean?

A

It means per day or daily interest; amount of daily interest payable under a loan

A borrower’s first monthly payment is typically due on the 1st day of the 2nd month after closing

Interest is payable in arrears

65
Q

How do you calculate per-diem?

A

1) Principal loan amount x interest rate = total annual interest payable under the loan
2) Annual interest amount / 360 = per diem interest
3) Per diem interest amount x # of days remaining in one month

*Lenders typically calculate per-diem interest based on a “360-day year”

66
Q

What is LTV? How to calculate?

A

Amount of $ borrowed from the 1st mortgage compared to the value of the property

LTV = 1st loan amount / Lesser of the property value or Purchase Price

67
Q

What is CLTV? How do you calculate the CLTV?

A

CLTV refers to the 1st mortgage & the 2nd mortgage combined - compared to the value of the property

CLTV = 1st Loan Balance + 2nd loan balance / Lesser of the property value or purchase price

68
Q

What does HCLTV mean? What is the formula?

A

“Home Equity Line of Credit” HELOC combined to LTV ratio

HLTV = 1st loan amount + the max available balance of the HELOC / Lesser of the property value or purchase price **Reminder it doesn’t matter if they take out x amount on the HELOC use the FULL AMOUNT

69
Q

How to calculate the down payment?

A

LO 1st needs to know the min requirement for down payment of each indiv loan type
> Conventional Conforming: 3% - 20%
> FHA: Generally 3.5% of loan amount (can be a gift)
> VA & USDA: do NOT require a payment

AKA “minimum investment”

*Use the lower of the 2 of the appraised or purchase

70
Q

What is the acquisition cost?

Example: Assume that the sales price is $197,000, the loan amount is $132,700 and the closing cost are $6,500. What is the acquisition cost?

A

Defined as the total amount needed to purchase the property (everything - including down payment, loan amount, and any allowable buyer-paid closing cost)

Answer: 197,000 + 6,500

71
Q

Example: Assume that the sale price is $197,000, the loan amount is $132,700, and the closing costs are $6,500. In addition, the seller agreed to pay two discount points. What is the acquisition cost?

A

197,000 Sales Price
+ 6,500 Closing Cost
- $2,654 2 points = 2% of the loan amount
= total acquisition

72
Q

What is the HER Ratio? How to calculate?

A

Housing Expensive Ratio AKA “Front-End / Top Ratio”

PITI / Gross Monthly Income = Housing Ratio

73
Q

What is TOR Ratio? How to calculate?

A

Total Obligation Ratio, Debt to Income Ratio AKA “Back-End/Bottom Ratio”

Calculated by adding the payments for all long-term debts
> A long-term debt is generally defined as one that will take more than 10 months to repay
> Debt w/ 10 payments or less do not count (unless it’s an AUTO LEASE)
> Legal obligations such as child support and alimony must also be included

You would also include their house note (example: PITI)

Back Ratio = Total monthly debts / Gross Monthly Income

74
Q

What is the Housing Expense Ratio & Total DTI Ratio on all loans?

A

Housing Expense Ratio / Total Debt to Income Ratio
Conventional - 28% / 36%
FHA Loans - 31% / 43%
VA Loans - Not used / 41%
USDA Loans - 29% / 41%

**Borrower must qualify under BOTH ratios

75
Q

How to calculate the maximum mortgage amount?

A

In order to calculate the max loan amount a borrower can qualify for, the LO must memorize the ratios for conventional & FHA loans
1) Monthly GROSS income x FRONT RATIO = Maximum PITI
2) Monthly GROSS income x BACK RATIO - MONTHLY DEBT = Maximum PITI
3) The LOWER OF THE TWO is the MAXIMUM MORTGAGE AMOUNT THE BORROWER WILL QUALIFY FOR

76
Q

What are discount points? What’s the calculation?

A

Money paid up front
AKA “Buydowns” - temporary and fixed interest, it can be temporary or permanent

Calculation will always be based on the Loan Amount

Discount Point(s) = loan amount x #(%) of points

77
Q

What is Loan Origination Points? How to calculate?

A

Based on the loan amount and calculated in the same manner as discount points (% of the loan amount)

Loan Origination Points (or fees) are points paid to the LO as a fee for his/her service

Origination Point(s) = Loan Amount x #(%) oif points

78
Q

What is a MLO?

A

SAFE Act defines a mortgage LO as an individ who for compensation or gain or in the expectation of compensation or gain (taking a pay or expecting to get paid)
> Takes a residential mtg loan app
> Offers/negotiates terms of a residential mtg loan for compensation/gain
> “Assists” a consumer in obtaining or applying for a residential mtg loan by advising on loan terms, preparing loan pckg or by collecting info

79
Q

Who are those that are exempt to not get a license?

A

> Any indivd who preforms admin/clerical tasks for licensee
A person that only does TIMESHARE plans
Invid who negotiate a mortgage loan themselves or IMMEDIATE family members
Attorneys who negotiate loan terms
Employees of a depository institution (bank). They are required to REGISTER

80
Q

What is a registered loan originator?

A

Employee of a depository institution (a bank) regulated by a Federal banking agency or an institution regulated by the Farm Credit Admin

They are required to REGISTER, but NOT required to license by the state. Did not have to take class, fee, or pre-licensed.

81
Q

What is a State-licensed Loan Originator?

A

Licensed by his/her state, registered with the NMLSR and isn’t employed by a depository institution

82
Q

What is an UW & Loan Processor?

A

Individual who performs clerical/support tasks under the direction of a state-licensed LO or registered LO
They need to get licensed if they are indep. contractor UNLESS such independent contractor is a state licensed MLO. They don’t need to get one if it’s under supervision of ONE license or registered company

83
Q

What is a Unique Identifier?

A

A number (NMLS). They use this # to identify you as a LO (instead of a SSN)
It is established by the NMLS and trackins LOs
It’s to accomplish the purpose of the SAFE Act
It is required to be on ALL marketing materials, apps, required disclosures, & business cards, emailing, website

84
Q

In order to be licensed, what are the requirements?

A

Must complete a 20 hr pre-license course which includes:
> 3 hrs of the course must focus on federal laws & regulations
> 3 hrs of ethic topics
> 2 hrs of the course must focus on nontraditional mortgage products
> Electives (12 hrs)
*Must do 8 hrs of CONTINUING education EVERY year must be completed by 12/31
> 3 hrs of federal law
> 2 hrs of ethic
> 2 hrs of nontraditional mtg products
> 1 hr elective

85
Q

What are the license maintenance?

A

LO license must be renewed each year no later than December 31st
>LOs must complete at least 8 hrs of continuing education each year
>LO who teaches a continuing education can rcv up to 2 hrs of credit for every hour taught
>Successive Year Rule - You have to take a different class every year if you are contuining

86
Q

What is the National Exam?

A

Once pre-license education has been completed, a LO candidate must sucessfully complete a written exam
> Exam has 120 questions - 115 will be scored & 5 will be unscored
> Candidates must pass the exam with a score of 75% or HIGHER
> A candidate who fails the exam can retake it again up to 3 times as long as there is at least a 30 day gap btwn tests
> After the 3rd failure, that candidate must wait at least 6 months
> Retest after Lapse of License: A LO who fails to maintain valid license for a period of 5 years or longer shall retake the test

87
Q

What consists of the Background Check?

A

1) Fingerprinting for submission to the FBI
2) Personal history & experience
3) Authorization for the NMLS & the state regulatory authority to obtain an independent credit report

88
Q

What is the Issuance of License? At a min, the LO needs to:

A

The min. standards for licensing & registration as a state-licensed mtg LO shall include the following:
> Applicant has NEVER had a mtg loan revoked in any govt jurisdiction
> Applicant has not been convicted or pled guilty or nolo contender to a felony during the 7 year period preceding the date of the app for licensing & registration
> Or AT ANY TIME preceding such date of app, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering

89
Q

Under the SAFE Act, the min requirements for each State’s Regulatory authority includes:

A

> Must provide effective supervision and enforcement of the law
Must ensure that all state-licensed MLOs operating in the state are registered with the NMLS
Must regularly report violations as well as enforcement actions
Must have a process in place for challenging info contained in the NMLS
Must have an established mechanism to assess civil money penalties for individ acting as MLOs in the state w/o valid license or registration
Must have one of these protection options in place: An established min net worth or surety bonding requirement that reflects the dollar amount of loans originated by MLO or have an established recovery fund paid into by MLOs

90
Q

Under the SAFE Act, the min requirement for each State’s Regulatory authority must include what?

A

> Must provide supervision & enforcement of the law
Must ensure that all state licensed MLOs operating in the state are registered with the NMLS
Must regulary report violations as well as enforcement actions
Must have a process in place for challenging info, example you can explain in your situation if we feel like we were wrongfully accused of something
A mechanism in place to assess civil money penalities
Must have one of the 3 protections: 1) min. net worth 2) surety bonding requirement 3) recovery fund paid into by the MLOs (if you get sued)

91
Q

Each state must have protection options. What are the 3 options?

A

1) Surety Bond: Each MLO must be covered by a surety bond in an amt prescribed by the state. The penal sum of the bond must be maintained to reflect the dollar amt of loans originated. When an action is commenced on a licensee’s bond, the state may require the filing of a new bond
2) Min Net Worth: Must be maintained for MLOs in an amt that reflects the amt of loans originated, as determined by the state
3) State Fund: Each state choosing this option must draft unique language establishing a state recovery fund which is paid into by the MLO & the mtg entity @ the time of app & renewal

92
Q

What authority does the State Examination Authority have?

A

Authority to conduct investigations under the SAFE Act. They may examine any MLO or mtg company.
Access to Books & Records
Authority to Access Info - to determine SAFE Act compliance
Investigation, Examination, & Subpoena Authority
Reports & Other Info
Mortgage Call Reports - each mtg licensee shall submit to the NMLS quarterly reports
Additional State Authority - accept audit reports made by an indep certified public acctnt

93
Q

What penalties can the State impose and what can they not?

A

A civil penalty on the MLO/person
Max penalty for each act or omission shall be $30,058
Each violation is separate
State & Fed regulating authorities do NOT have the authority, nor are they empowered, to impose a prison sentence

94
Q

NMLS

A

A mtg licensing system developed & maintained by the Conference of State Bank Supervisors & the AA of Residential Mtg Regulators for licensing & registering LOs. It is utilized by ALL US States & territories

NMLS (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions