Vocab for MLO Test (All of "A")

Question 1

1003 Form

Answer 1

It’s Fannie Mae’s form number for the Uniform Residential Loan Application (URLA). Freddie Mac refers to this as Form 65. The URLA, 1003, and Form 65 are all the same forms and serve as a mortgage loan application.

Question 2

1031 Exchange

Answer 2

A 1031 exchange is a real estate investing tool that allows investors to swap out an investment property for another and defer capital gains or losses or capital gains tax that you otherwise would have to pay at the time of sale.

Question 3

2-1 Buydown

Answer 3

It’s a type of financing that lowers the interest rate on a mortgage for the first two years before it rises to the regular, permanent rate.

Question 4

4506-C

Answer 4

It’s a type of financing that lowers the interest rate on a mortgage for the first two years before it rises to the regular, permanent rate.

Question 5

Abstract of Title

Answer 5

A summary giving details of the title deeds and documents that prove an owner’s right to dispose of land, together with any encumbrances that relate to the property.(Includes conveyances, interests, and liens)

Question 6

Acceleration Clause

Answer 6

A loan agreement that requires the borrower to pay off the loan immediately under certain conditions

Question 7

Accrued Interest

Answer 7

A loan agreement that requires the borrower to pay off the loan immediately under certain conditions

Question 8

Acquisition Costs

Answer 8

The original cost of an asset

Question 9

Adjustable Rate Mortgage (ARM)

Answer 9

A mortgage that does not have a fixed interest rate.

Question 10

Adjusted Basis

Answer 10

A mortgage that does not have a fixed interest rate.(Capital gain or loss for income tax purposes when the property is sold)

Question 11

Adjustment Interval

Answer 11

The time between the interest rate change and the monthly payment for an ARM. The interval is usually every one, three or five years depending on the index.

Question 12

Adjustment Period

Answer 12

The time between the interest rate on an adjustable-rate mortgage (ARM) can reset

Question 13

Affiliated Business Arrangement (AfBA)

Answer 13

When a person in a position to refer real estate settlement services has an affiliate relationship with, or a direct beneficial ownership interest in. (an entity to which settlement business is referred such as a joint venture title or mortgage entity.)

Question 14

Agreement of Sale

Answer 14

A legal document that outlines the terms of a real estate transaction (Obligates someone to sell)

Question 15

Alienation Clause

Answer 15

A contract signed with the lender that states that the borrow must pay the mortgage in full before the borrower can transfer the property to someone else.( Also known as a Due-On-Sale-Clause)

Question 16

Alternative Documentation

Answer 16

Documents that serve as proof of income for loans. (Could be pay stubs, W-2 forms, tax returns and bank stubs)

Question 17

American land title association (ALTA)

Answer 17

Improves the skills and knowledge of providers in the real property transaction (It’s a trade association for insurance industry) (Founded in 1907)

Question 18

Amortization

Answer 18

A period in which a debt is reduced or paid off by regular payments.

Question 19

Amortization Term

Answer 19

The length of time it will take to amortize the mortgage loan expressed in months. (EX: 30 year mortgage is 360 months)

Question 20

Annual Percentage Rate (APR)

Answer 20

The actual cost of borrowing money expressed in the form of an annualized interest rate (It’s told as a percentage)

Question 21

Annuity

Answer 21

A fixed sum of money paid to someone each year, typically for the rest of their life or specific duration. (It’s like a will)

Question 22

Appraisal

Answer 22

An expert estimate of the value of something.

Question 23

Appraisal Fee

Answer 23

A fee charged by a licensed appraiser to estimate a homes market value.

Question 24

Appraiser

Answer 24

A person who estimates the value of something such as real estate.

Question 25

Appreciation

Answer 25

An increase in an assets value. (Often because of inflation)

Question 26

Arbitration

Answer 26

A process in which a dispute is submitted, by agreement of the parties, to one or more arbitrators tomato a final binding decision to resolve the dispute.

Question 27

Adjustable Rate Mortgage Disclosure

Answer 27

Helps show the borrower the info on the loan payment if the rate increases. (Your payment in a ARM can change in the future)

Question 28

Adjustable Rate Mortgage Handbook (CHARM)

Answer 28

This must be presented within 3 days of an application.

Question 29

Asbestos

Answer 29

A soft gray mineral used to build material in the past. (Can be found in older homes, can cause lung disease)

Question 30

Assessed Value

Answer 30

A property’s determined valuation to calculate the appropriate tax rates.

Question 31

Assessment

Answer 31

Determination of the rate or amount of something, such as a tax or damage.

Question 32

Assessor

Answer 32

An official who evaluates or makes assessments (usually for taxation purposes)

Question 33

Asset

Answer 33

An owned item that has value (Property owned by someone)

Question 34

Assignment

Answer 34

The transfer of rights or property.

Question 35

Assignment of Mortgage/Assigned Loan

Answer 35

When a mortgage lender or borrower transfers the mortgage to a third party.

Question 36

Assumption (Of Mortgage or Trust Deed)/Assumable

Answer 36

Allows someone to find a house they want to buy and take over the seller’s existing home loan without applying for a new mortgage. (This means the remaining balance, mortgage rate, repayment period and other loan terms stay the same, but the responsibility for the debt is transferred to the buyer.)

Question 37

Assumption Fee

Answer 37

A fee paid to a lender when an assumption takes place. (someone else bought the property off the previous owner, to avoid a new mortgage.)

Question 38

Average Prime Offer Rate (APOR)

Answer 38

An annual percentage rate that is based on average interest rates, fees, and other terms on mortgages offered to highly qualified borrowers.