Flashcards in mortgage finance Deck (35)
what is adjustable rate mortgage (ARM)?
contains an escalation clause allows the interest to adjust over the loan term
what is buy down mortgage?
allows the borrower to buy down the interest rate, thus reducing the monthly payment for a number of years
what is budget mortgage?
includes principle, interest taxes, and insurance (PITI). the taxes and insurance portion of each monthly payment are put into an escrow account and pains when those payments are due.
what is graduated payment mortgage (GRM)?
is also known as the flexible payment plan. the borrower make lower monthly payment for the first few years and larger ofrht remainder of the loan. if the lwer monthly payments do not confer all the interest charges, the add the unpaid interest to the principle balance the create negative amortization because the balance increases instead of decreasing. the borrower who has negotiated a growing equity mortgage (or GEM) realizes that there will be periodic increase in the monthly payment. however, the increase is applied directly to the principle, thus reducing the term of the loan.
what is package mortgage?
are usually used in the sale of new home in subdivision or in condominium sales. this type of loan cover both real and personal property
what is open end mortgage?
allows the mortgage to borrow additional funds, up to a max dollar amount, all of which are secured by the same original mortgage.
what is shared appreciation mortgage (SAM)?
the lender agrees to orientate the loan at borrow market interest rates in rerun for guaranteed share of the appreciation to eh borrower will realize when the property is sold. this typically is used in financing of commercial project.
what is prepayment clause?
an open mortgage usually allows a borrower to off the loan at any over the life of the of the loan at any time over ht life of the loan without penally. this allowed by prepayment privilege clause in the mortgage. when a borrower repays the loan ahead of the mortgage an other charge a prepayment penalty is a percent rage of ht e remaining balance.
what is lock in clause?
in the note typically means that upon loan application the lender has agreed to to the lock the rate for the specified time period, or it could mean that the loan cannot be prepared unless all interest paid.
what is hypothecation?
mean to pledge property to the lender as collateral without giving up possession of it.
what is due on sale clause?
in mortgage allows the lender to collect full payment from mortgage when the property is sold. the clause prevents owner from selling the property to a buyer on a loan assumption subject to the mortgage or land lender.
what does RESPA mean?
real state settlement procedures act
what is real estate settlement procedures act (RESPA)
it requires that lender disclose to the buyer and seller all settlement cost on the federal reales mortgage loans, and and first second lien for the purchase refinancing of one to four family dwellings
what is lender disclose at the time of the loan application at closing of the loan under RESPA?
1. the booklet settlement cost
2. within three business days of application the lender must provide borrower with a good faith estimate
3. uniform settlement statement (HUD-1)
what is booklet settlement cost for RESPA?
the booklet settlement and you must be given to prospective borrower within three business days format he time that person receives or prepares a loan application
what is good faith estimate (GFE)?
the lender must proved the borrower with a good faith estimate (GFE) of the settlement cost the borrower will likely incur. the new GFE discloses the charges that cannot change, the that can increase up to 10 percent at settlement and those that change at settlement
what is uniform settlement statement (HUD-1)?
this must be used to itemized all charges related to the transaction. borrowers have right to review the HUD-1 to the extent to which the are available, within 24 hours of the closing
what are lender not able to take?
they are prohibited from receiving any kickbacks or other referral fees from the service.
Can lender charge for HUD-1 at closing?
what is RESPA limitations for lenders?
this limits the amount of money a lender may require the borrower to hold in escrow amount for payment of taxes insurance and etc. and require the lender to provide initial and annual escrow account statement to the borrower.
what is regulation z (the truth lending act)?
requires that lenders disclose the true cost of credit expressed as an APR or annual percentage rate.
what is regulation z cover?
all one four family real estate financing for residential borrowers who are natural persons, but loan that are used for business, commercial or agricultural purposes; personal property credit transaction involving more than $25,000 and loans to the owner of dwelling containing more than four housing units.
what does regulation z defines?
defines a creditor as an entity that extends consumer credit more than 25 times, a years or more than 5 times a years if the transaction involves a dwelling as security. the credit must be subject to a finance charge or payable in more than four installments by written agreement.
what was the lending act passed with what?
as part of the consumer credit protection act.
why was the lending act as part of the consumer credit protection act pass?
when negotiating a home improvement loan, refinancing a home loan, a home equity loan and an FHA reverse mortgage, there is three business day right rescission marketed by regulations full disclosure is required by the lender if any of the lender if any of the following trigger items appears in a ad
what are trigger items for truth in lending act?
1. amount of monthly payment
2. number of payments
3. amount of down payment
4. finance charges
5. term of the loan
what is full service discount brokers?
with this business policy, the broker firm may offer full service at reduced commission or rebates and inducement to buyers and sellers
what is fee for service broker?
under this business model flat fee or limited service broker allow buyers and seller to select from menu of real restate services.
what is mortgage fraud?
means the lender was provided with false or misleading information on a loan application, or with falsified document in the loan process.