Ab Flashcards

Question

BSA/AML

Answer 1

The BSA (bank secrecy act)works in conjunction with the federal government’s Anti-Money Laundering (AML) InfoBase to fight fraud.

Answer 2

Currency transactions report A bank form to report a 10k transfer of money in 1 day

Answer 3

Suspicious activity report

Answer 4

SAR- suspicious activity report CTR- currency transaction report FBAR- foreign bank and financial account report DOEP-designation of exemption person

Answer 5

The Gramm-Leach-Bliley Act (GLBA or GLB Act) is also called the Financial Services Modernization Act of 1999. requiring standards for safeguarding consumers’ nonpublic personal information (NPI).

Answer 6

Nonpublic personal information

Answer 7

RESPA expressly prohibits the payment of kickbacks or other unearned fees between settlement service providers, such as when a lender gives a real estate agent a fee for using the lender, or vice versa.

Answer 8

Yield spread premium is a fee (i.e., commission) a lender pays to a mortgage broker in exchange for a higher interest rate or an above-market market rate. As a result, in 2010, HUD adopted a rule that decreed the following: The YSP must be deducted from the loan origination charges. The credited YSP amount must appear on the Loan Estimate.

Answer 9

The amount and continuance of income

Answer 10

Married Unmarried Separated

Answer 11

Home mortgage disclosure act HMDA enacted in 1975 Codified in regulation c HMDA states that lenders must collect voluntary, self-reported demographic information from loan applicants, including whether an applicant is part of a protected class. Borrowers may opt out of disclosing HMDA information, but that doesn’t always protect them from the information being collected and reported. HMDA also lets MLOs know what they may not ask borrowers. (Race, sex, ethnic)

Answer 12

geographic location, race or national origin, sex, and income of each applicant

Answer 13

Fair credit reporting act passed in 1970 as another federal law that protects consumers who apply for credit. The FCRA regulates what information creditors can collect and use and how this credit report data must be protected.

Answer 14

How fico determines a credit score

Answer 15

Residential mortgage credit report RMCR is used when there are more than one or two inaccuracies on the borrower’s credit report or additional information must be added to the report. When the credit reporting company produces an RMCR, all credit reference information is updated and verified. Employment and rental history can be included in the RMCR, as well.

Answer 16

Fair and accurate credit transaction act an amendment to the FCRA that serves to protect consumers from identity theft by requiring all credit reporting agencies (CRAs) to provide consumers with credit reports for no cost, and allowing consumers to place a fraud alert on their files when necessary.

Answer 17

Home Ownership and Equity Protection Act focuses on predatory practices relating to home equity lending and includes requirements for certain loans with high interest rates or high fees. HOEPA (often pronounced ho-E-puh) loans also are referred to as Section 32 mortgages after the section of the law that addresses them.

Answer 18

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 The PATRIOT Act requires MLOs to authenticate borrowers’ identities and file reports of any suspicious activity during mortgage transactions.

Answer 19

AML Anti money laundering programs Have a CIP requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account or changes an existing account CIP Consumer identification program

Answer 20

Customer due diligence act The CDD Rule requires banks to: Verify customer identity. Verify the beneficial owners of companies opening accounts. Understand the nature and purpose of customer relationships to develop customer risk profiles. Conduct ongoing monitoring to identify and report suspicious transactions and update customer information.

Answer 21

Electronic Signatures in Global and National Commerce Act (E-Sign Act) is a federal law that enables mortgage lenders to obtain electronic signatures on contracts and disclosures so long as the consumer consents to receiving electronic documents. If the consumer doesn’t consent or withdraws previously given consent, electronic records are off the table.

Answer 22

Homeowner protection act called the PMI Cancellation Act, is an important law that you need to understand, because it impacts borrowers who may be required to pay for private mortgage insurance (PMI). Like many of the other acts you’ve already learned about, the HPA is enforced by the CFPB, thanks to the Dodd-Frank Act.

Answer 23

Qualified mortgage General qualified mortgage: A loan that meets all the requirements and has a debt-to-income ratio of 43% or less. Small creditor qualified mortgage: A loan that meets all the requirements and is originated by a lender that makes 500 or fewer mortgages annually and has $2 billion or less in assets. GSE-eligible qualified mortgage: A loan that meets all the requirements and can be purchased, insured, or guaranteed by a GSE, FHA, VA, or USDA.

Answer 24

Qualified mortgages are loans that have terms of 30 years or less and a maximum debt-to-income ratio of 43%. They also can’t include any risky loan features. Like Interest-only Negative amortization Balloon payments Loan terms longer than 30 years

Answer 25

monthly payment isn't sufficient to cover the monthly principal and interest. The deficit is then added to the remaining principal balance

Answer 26

Nonqualified (non-QM loan): This is commonly referred to as reduced documentation, low doc, no doc, no income, no asset, stated income, or stated asset loans. The qualification criteria for reduced documentation loans are based on creditworthiness and the increased risk to loan providers due to the reduced or minimal documentation standards and verification needed to demonstrate the borrower’s financial information.

Answer 27

Adjustable rate mortgage An ARM is a loan with a rate that is adjusted, usually annually, based on the behavior of the economic index with which it is associated (e.g., the Consumer Price Index). So, if an ARM has an interest rate of 5% and a lifetime cap of 7%, the maximum that may be charged is 12%.

Answer 28

Hybrid ARM This type of interest rate is fixed for a period of time and then adjustable for a period of time. For example, a 5-1 ARM is fixed for the first five years, and then may adjust every year after that until it reaches the highest allowed interest rate. Often the hybrid ARM will have a larger first adjustment of 2% and then allow an adjustment up or down a maximum of 1% per year after that.

Answer 29

Payment option ARM This allows the borrower to choose from several different payment options. For example, each month, the borrower may choose a minimum payment option based on a “start” or introductory interest rate, an interest-only payment option based on the fully indexed interest rate, or a fully amortizing principal and interest payment option based on a 15-year or 30-year loan term, plus any required escrow payments.

Answer 30

Simultaneous second-lien loan This option is often used in place of a borrower’s down payment, and is either a closed-end second lien or a home equity line of credit (HELOC) that is originated simultaneously with the first loan. It helps the buyer avoid paying for mortgage insurance that could last for the life of the loan, but may limit the borrower’s ability to access the home’s equity in the future. The second mortgage would need to be paid in full if the borrower wants to access additional equity as the home’s value increases, because very few lenders will accept a third lien position.

Answer 31

construction mortgage is a form of temporary financing for construction purposes. The developer submits plans for a proposed project, and the lender makes a loan based on the value of the property (its appraised value) and the construction plans. The entire loan is not given at once; disbursements are made at intervals as phases of construction are completed. Upon completion, the lender makes a final inspection, closes the construction loan, and converts the loan into permanent, long-term financing.

Answer 32

Guarantee Fees Loans that carry risks must provide certain legal protections for lenders, which are called guarantee fees or g-fees. It works like this: Fannie Mae and Freddie Mac charge lenders mortgage g-fees so that principal and interest payments on mortgage-backed securities (MBS) are guaranteed. The g-fee covers administrative costs, losses in the event of borrower default, and a return on capital. The g-fees are usually a certain percentage of the MBS or a fixed amount. And, of course, lenders pass on g-fees to consumers by charging higher interest rates. Unlike document and origination charges and other upfront fees, g-fees are imposed during the entire length of the loan.

Answer 33

Alt-a loans are riskier than prime loans but not as risky as subprime ones; therefore, in order of descending risk are: Subprime loans (highest risk) Alt-a loans (medium risk) Prime loans (lowest risk) The “alt-a” stands for “alternative a-paper”; prime loans are also called “a-paper” loans. Alt-a loans can be a good solution for borrowers who have good credit scores but low income levels. These loans feature lower down payments and higher debt-to-income ratios (for example, an alt-a borrower may only have 15% or 10%, or even less, for a down payment). Alt-a borrowers also usually have higher debt-to-income ratios than borrowers who qualify for prime loans. Historically, these loans required less documentation than did prime loans, meaning that they had a higher rate of default.

Answer 34

A higher-priced mortgage loan (HPML) is a loan secured by the borrower’s principal residence with an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) depending on the lien type: First-lien mortgage: If the first mortgage has an APR that is 1.5 more percentage points higher than the APOR. Jumbo mortgage: If the loan is a jumbo mortgage and has an APR that is 2.5 or more percentage points higher than the APOR. Subordinate-lien mortgage: If the loan is a subordinate lien and has an APR that is 3.5 or more percentage points higher than the APOR.

Answer 35

Conference of State Bank Supervisors (CSBS), a national organization dedicated to protecting and advancing the nation’s dual banking system. The CSBS doesn’t work alone but instead oversees the industry, along with the American Association of Residential Mortgage Regulators (AARMR). The AARMR is a national organization that represents state residential mortgage regulators. The AARMR assists with exchanging information during the administration and regulation of residential mortgage lending, servicing, and brokering. Their guidance focuses on the higher risk elements of certain stringent underwriting guidelines and adequate risk management.

Answer 36

Certificate of eligibility A COE is a document provided by the VA stating whether an individual is eligible for the VA loan, and the dollar amount of eligibility.

Answer 37

False Must be 10 percent or greater va disability

Answer 38

United mortgage data program

Answer 39

The standardized uniform residential mortgage application that is required by Fannie Mae if selling the loan to Freddie Mac

Answer 40

Writing Face to face Email Fax Internet Phone

Answer 41

Verification of deposit lenders will ask the consumer’s bank to complete a verification of deposit (VOD). After verifying the consumer’s account balance and history, they’ll sign the form and return it to the MLO

Answer 42

monthly housing expenses ÷ monthly gross income) × 100

Answer 43

monthly housing expenses ÷ monthly gross income) × 100

Answer 44

The 2 types of title insurance are Owners policy and lenders policy They both provide protection on the title of the home Both include protection from old unaware debts and obligations on the home

Answer 45

Terms of coverage title is generally acceptable, and that the mortgage establishes a lien of priority with a fee-simple or leasehold estate in the property. If other liens exist, the policy must list them in the order that they are subordinate to the first lien. Effective date of coverage Must began at date of final disbursement Amount of coverage Must be equal to principal amount of the loan

Answer 46

dwelling, loss of use, personal liability, personal possessions, medical payments, and other structures.

Answer 47

A = The first number is the maximum amount by which an interest rate may increase after the first adjustment B = The second number is the maximum amount by which the interest rate may increase after all subsequent adjustments C = The third number is the maximum interest rate that is allowed for the entire lifetime of the loan, above the initial rate. For example, an ARM with a 2/3/7 cap structure indicates that the interest rate may not increase more than 2% after the first adjustment, by more than 3% on any subsequent adjustments, and may not exceed the initial rate + 7% at any time.

Answer 48

(Loan amount divided by property amount ) x100

Answer 49

360 divided by 30 365 divide by number of days in a month

Answer 50

A cloud on title is any encumbrance, such as a lien or inheritance claim, that prevents the seller from providing clear, marketable title. Clouds on title may be simple (such as unpaid taxes) and easily remedied. They may also be more complex, such as an outstanding ownership claim on the property. Common clouds on title: A simple foreclosure or inheritance claim may be resolved by having the owner sign a quitclaim deed, which releases any claim they have on the property. More complicated clouds may be resolved through a quiet title suit, in which the property owner goes to court to attempt to remove (quiet) any claims to the property.

Answer 51

Title issues can be resolved by filing one of three common documents: A quitclaim deed removes an heir and clears up title among co-owners or spouses. A release of lien/judgment removes a paid mortgage or spousal or child support lien. A deed of reconveyance records payment of a mortgage under a deed of trust.

Answer 52

Schedule B-1 lists requirements that must be satisfied prior to issuing the policy. Requirements that must be cleared before the title can be exchanged include clearing up the previous owner's judgment liens and mortgages.

Answer 53

Schedule B-2 identifies standard exceptions, or flaws, that are not being insured in the policy. These exceptions typically include items such as current year taxes, easements of record, and restrictions shown on a plat map. They don't need to be cleared before the property closes.

Answer 54

An MLO should partner with the other service providers to ensure the rescission is fully effective by: Within 3 days Cancelling transaction documents Filing release/termination statements of public record Notifying related parties i.e., subcontractors

Answer 55

Conventional Loans Total debt ratio: 36% Housing ratio: 28%

Answer 56

Total debt ratio: 43% Housing ratio: 31%

Answer 57

VA Loans Total debt ratio: 41%

Answer 58

Average prime offer rate- an annual percentage rate that is based on average interest rates, fees, and other terms on mortgages offered to highly qualified borrowers. In general a 1.5 percent over APOR is a high rate

Answer 59

The housing and economic recovery act Create a licensing system and database for the mortgage industry Give the government more oversight of mortgage lending Help homeowners in financial trouble Develop consumer Safeguards Title V of HERA was the biggest change for state regulated Loan Officers and Brokers. Title V of HERA is called The SAFE Act, the Secure And Fair Enforcement Mortgage Licensing Act.

Ab Flashcards

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