Study Buddy Flashcards
1
Q
Why was TRID created?
A
To help borrowers understand the terms of their home financing transaction.
2
Q
Under TRID a lender or mortgage broker may NOT charge the borrower any fees other than the _______ until the borrower has received the Loan Estimate AND the borrower has expressed the intent to proceed?
A
Credit report fee
3
Q
What types of loans does TRID not apply to and why?
A
HELOCS, reverse mortgages, and mobile homes not attached to real property - because they do not receive an LE and CD.
4
Q
What is zero tolerance?
A
These are fees that the consumer CAN NOT shop for which include those paid to unaffiliated service providers for required services.
● Real Estate Transfer Taxes
● Credit Report charges
● Appraisal
● Interest Rate
● Loan Origination Fees
5
Q
What is no tolerance?
A
Things the borrower shops for on their own. These items can change indefinitely and have no tolerance limits.
● Hazard Insurance
● Title Insurance
● Termite inspection
● Per Diem
6
Q
Under TRID, what are the six items that make a complete loan application?
A
● Address of subject property
● Loan Amount
● Income (Monthly)
● Estimated Value of property of the subject property
● Name of borrower
● Social Security Number
7
Q
Who is ultimately responsible for giving the LE to the borrower?
A
The Lender is ultimately responsible for the delivery of the Loan Estimate however, Mortgage brokers may provide the Loan Estimate to the borrower.
8
Q
The rate lock is found on what disclosure?
A
The LE
9
Q
Redisclosure of the LE must take place within how many days of a valid change in circumstance?
A
3 days
10
Q
The borrower must receive revised LE no later than how many days prior to consummation?
A
4 days
11
Q
LE must be kept for how many years after closing?
A
3 years
12
Q
Revised CD must be given within how many days of a valid change in circumstances?
A
3 days
13
Q
Closing disclosure must be kept for how many years after consummation?
A
5 years
14
Q
Who enforces RESPA?
A
CFPB (previously HUD)
15
Q
Who created RESPA?
A
US CONGRESS
16
Q
RESPA does not apply to?
A
● Bridge
● Commercial
● Construction
● Non-Owner Occupied Properties
● Agricultural (25 acres or more)
● Vacant Land (unless it’s being built on in first 2 years)
● Investment Properties
● Temporary Financing
● ALL Cash Sales
17
Q
When must a servicer apply the full payment to the account?
A
The day it is received.
18
Q
What is force placed insurance?
A
When the lender chooses the hazard insurance company when the borrower allows their policy to lapse. Forced-placed insurance will be more expensive and will only benefit the lender.
19
Q
What does a Servicer do?
A
They collect monthly mortgage payments, payments for taxes and insurance or any other items that come due during the life of a mortgage, including late payments, are collected by the mortgage servicer.
20
Q
What does RESPA Section 8 prohibit?
A
Giving and accepting of any portion, split, or percentage of charges made or received for real estate settlement service business, unless for services actually performed?
21
Q
What is Section 9 of RESPA?
A
Prohibits home sellers from requiring home buyers to purchase their Title services from a particular company, either directly or indirectly, as a condition of the sale unless the seller pays for it. If the seller does not pay 100% of all fees, then the buyer may sue the seller, who violates this provision, for an amount equal to 3 times (treble damage) all charges made for the title insurance.
22
Q
What is the annual escrow analysis?
A
It’s a review of the escrow account to ensure enough funds are collected to pay upcoming installments of insurance premium(s) and/or taxes.
23
Q
Each month the lender may require a borrower to pay into the escrow account no more than how much of the total of all disbursements?
A
1/12 or 1 month
24
Q
If a borrower requests the escrow account to be closed, the lender MUST provide the Escrow Closing Notice how many business days prior to the escrow account being closed?
A
3 business days
25
What are all the RESPA disclosures?
● Know Before You Owe Booklet
● AFBA Disclosure Form
● Mortgage Servicing Disclosure Statement
● Initial Escrow Statement
● List of HUD Counselors
● Annual Escrow Statement
● Servicing Transfer Statement
● GFE
● HUD
26
When are the initial disclosures due?
Within 3 days of a completed loan application
27
What is the Home Loan Toolkit?
Helps the borrower calculate how much they can afford for a home, gives them questions to ask their lender, and features worksheets and checklists to fill out during the process.
28
When must the borrower receive an Affiliated Business Arrangement (AFBA)?
Within 3 days of the completed loan application or at the time of referral if the referral is after the initial disclosures.
29
When does the borrower receive the Mortgage Servicing Disclosure?
Within 3 days of the completed loan application (located on pg. 3 of LE)
30
When does the borrower receive the Initial Escrow Statement?
Usually provided to the borrower at settlement, however the lender has up to 45 days from settlement to provide to the borrower.
31
When must the borrower be provided with the list of 10 HUD counselors?
Within 3 days of the completed loan application.
32
When is the Servicing Transfer Disclosure required to be sent to the borrower?
Is required to be sent to the borrower if the lender sells or transfers the servicing rights of the borrower's loan to another lender or servicer.
33
How many days after the transfer of the servicing does the new lender/servicer have to send the Servicing Transfer Disclosure (Hello letter)?
The new servicer has no later than 15 days AFTER transfer to send servicing transfer disclosure (Hello Letter).
34
What is a Good Faith Estimate?
A form very similar to an LE, but is used when someone applies for a reverse mortgage. GFE must be provided within 3 business days of receiving a completed application.
35
What are settlement services according to RESPA?
Services that occur at or prior to the purchase of a home are typically considered settlement services. These services include title insurance, mortgage loans, appraisals, abstracts, and home inspections. Services that occur after closing generally are not considered settlement services.
36
Truth in Lending Act (TILA) is implemented by who?
Federal Reserve Board (FRB).
37
Truth in Lending Act (TILA) applies to credit transactions payable in how many installments?
5 installments or more.
38
What's the penalty for violating TILA in 2024?
1st violation is $14,069 and subsequent violations is $28,135.
39
What is the Annual Percentage Rate (APR) and what is another term used for APR?
The cost of getting the mortgage as a yearly rate. The Annual Percentage Rate is your interest rate plus finance charges expressed as a percentage. Other terms used for APR are (Effective rate).
40
What is the interest rate and what are some other terms that can be used for it?
It’s the amount a lender charges a borrower and is a percentage of the principal/the amount loaned. Other terms used for interest rate are (Nominal or Note Rate).
41
What are the Truth in lending act (TILA) disclosures?
● Balloon Payment Disclosure
● Right to Rescind Disclosure
● ARM Disclosures
● When Your Home is on the Line
● Loan Estimate
● Closing Disclosure
● Consumer Handbook on Adjustable Rate Mortgages (CHARM Booklet)
● Transfer of ownership
42
When is the ARM disclosure given to the borrower and why?
The ARM disclosure is given to the borrower 60 days prior to the interest rate changing if it's going to result in a new payment. and is given to prevent payment shock.
43
What is the CHARM and when must it be given?
The CHARM booklet provides information to consumers about the features and risks of Adjustable Rate Mortgage loans. Must be given within 3 days of a completed application when the borrower is considering an ARM loan.
44
What is The Mortgage Disclosure IMPROVEMENT ACT (MDIA)?
MDIA (3/7/3 RULE) states that LE is required within 3 business days of receipt of a completed application. The earliest date for loan consummation/closing is the 7th business day after disclosures are delivered/mailed. If a redisclosure is required the borrower must receive the revised Closing disclosure at least 3 business days before loan consummation/closing.
45
If the loan closes on a Friday, and there are no legal public holidays in between, when does the borrower rescission period expire?
Midnight on the following Tuesday.
46
When must the escrow be returned if any money was collected and the borrower rescinds?
Within 20 calendar days after receipt of a notice of rescission.
47
What types of loans have a right of rescission?
● Refinance
● Reverse
● HELOC
● Home Improvement
● Second Mortgages
48
What is the Loan Originator Compensation Rule?
Protects consumers by reducing incentives for loan originators to steer consumers into loans with particular terms and by ensuring that loan originators are adequately qualified.
49
What is Dual Compensation?
Loan originators may not receive compensation from both the consumer and another party, such as a creditor. Can only get paid by the borrower or the creditor, not both.
50
What was yield-spread premium compensation back in the day?
MLO/lenders used to get paid for giving interest rates above par.
This is now prohibited.
51
Loan Originator Compensation Rule is an amendment of what act?
Truth in Lending Act (TILA).
52
What risky features are not allowed in Qualified Mortgages?
● Balloon payments
● Interest-only
● Negative amortization
● Loan terms greater than 30 years
● Excess upfront points and fees more than 3%
● Inability to repay
● Prepayment penalty that is over 3 years (Conventional Fixed Rate Only)
● Prepayment penalty that is 2% of the loan’s balance during the first two years and 1% during the third year
53
For a QM the APR cannot exceed APOR by first-lien covered transaction with a loan amount greater than or equal to $130,461 by what %?
0.0225
54
For a QM the APR cannot exceed APOR by first lien covered transaction with a loan amount less than $78,277?
0.065
55
For a QM the APR cannot exceed APOR for Subordinate-lien covered transactions with a loan amount greater than or equal to
$78,277?
0.035
56
What 8 pieces of information must a lender find out, consider, and document to determine if the borrower has the ability-to-repay (ATR)?
● Monthly mortgage payment
● Income and assets
● Credit
● Employment
● Debt-Income ratios
● Other debts (alimony/ child support)
● Expenses (taxes/ insurance)
● Simultaneous mortgages
57
What type of rates are lenders not able to use on adjustable rate mortgages to determine if a borrower can repay a loan (ATR)?
Introductory or “teaser” rate
58
Why was the Home Ownership and Equity Protection Act (HOEPA) created?
HOEPA was created to prevent predatory lending.
59
A mortgage is considered to be a high-cost mortgage if its points and fees exceed what?
● 5% of the total loan amount if the loan amount is equal to or more than $26,092 (2024)
● 8% of the total loan amount or $1,305 (2024), whichever is less, if the loan amount is less than $26,092 (2024). These figures are adjusted annually
60
Four important things to remember on a high-cost mortgage loan?
● No balloon payments (except small creditors)
● Must have ability-to-repay (ATR)
● No prepayment penalty
● Must speak to HUD counselor
61
How long must a borrower establish and maintain an escrow acount for high-priced mortgage loans, regardless of loan-to-value ratio?
5 years
62
When shall a creditor shall not extend a high-priced mortgage loan to a borrower to finance the acquisition of the borrower's principal dwelling without obtaining two written appraisals prior to consummation?
● The seller purchases the property 90 or fewer days prior to the date the consumer agreed to acquire the property, and the purchase price is 10% or more than the seller's purchase price
● The seller acquired the property 91 to 180 days prior to the date the consumer agrees to acquire the property, and the purchase price is 20% or more than the seller's
purchase price
63
Is there a prepayment penalty on a HPML?
No
64
What's the purpose of the Equal Credit Opportunity Act?
To be equal when people are applying for credit.
65
ECOA records must be kept for?
25 months
66
Under ECOA, you cannot ask a borrower if they are single, widowed or divorced. How do you have to ask?
Married, unmarried or separated
67
What are the 9 protected classes of ECOA?
● Sex (HUD Equal Access Rule)
● Color
● National origin
● Religion
● Race
● The good faith exercise of any right under the Consumer Credit Protection Act
● Age (provided the applicant is old enough to enter into a contract)
● Marital status
● Participation in a public assistance program
68
After notifying the applicant of a counteroffer, how many days does the creditor have to notify the borrower of action taken if the applicant does not expressly accept or use the credit offered?
90 days
69
When does the lender have to notify the borrower about their right to receive a copy of the appraisal?
Within 3 days of a completed application
70
When is the latest the lender has to deliver the appraisal if the borrower chooses not to receive a copy of the appraisal?
By closing
71
ECOA says you may fill out a borrower's protected class for demographic purposes, under HMDA. What are those 3 things?
Sex, race, and ethnicity
72
This type of discrimination is when a lender treats applicants differently. This is when a particular protected class is treated differently than another person?
Disparate treatment
73
What act protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities?
Fair Housing Act
74
What Act was the originally created to prohibit all forms of racial discrimination in real estate whether committed by government (public) or private parties?
The Civil Rights Act of 1866
75
What is exempt under the Fair Housing Act?
● Single-family homes sold or rented by the owner, without the use of a real estate agent
● Housing ran by religious organizations
● Owner-occupied properties with no more than four units and owner lives in one unit
● Private clubs who limits occupancy to members of the club
76
What is Familial Status defined as under the Fair Housing Act (FHA)?
Any family in which individuals under the age of 18 and still live with a parent, legal custodian, or individual who is designated by the parent or legal custodian and who has written permission from the parent or legal custodian.
77
What is redlining under the Fair Housing Act?
When a lender denies an applicant a loan for housing in a certain neighborhood, even though the applicant may be eligible for the loan. Done by unethical lenders.
78
What is steering under the Fair Housing Act?
Illegal practice of directing a prospective homebuyer to or away from a neighborhood based on the presence or absence of a protected class.
Done by unethical Real Estate Agents.
79
Under the Fair Housing Act, who must complaints be filed with and withing how long of the last date of the alleged discrimination?
HUD, must be filed within 1 year
80
What Act was created to encourage banks and depository institutions to help meet the credit needs of the communities in which they operate?
The Community Reinvestment Act
81
What Act requires that all lending institutions report the loan information collected for all applicants?
HMDA (REG C)
82
HMDA information is found in what Section on the 1003 (loan application) and what is the name of the section?
Sec 8/ Demographic Section
83
What are the three items collected under HMDA that ECOA says MLO can fill out based on visual observation?
Race, ethnicity, and sex
84
HMDA does not apply to loans secured by real property for purposes of?
● Financing college tuition
● Funding vacations
● Purchasing goods for business inventory
● Loans on unimproved land
● Construction or bridge loans and other temporary financing
85
Who compiles, sells and collects account information about borrowing and repayment history to report on the credit report?
Credit reporting agencies
86
FCRA targets the three leading credit agencies, who are they?
TransUnion, Experian, and Equifax
87
How long does the Credit Reporting Agency have to remove outdated information like judgments, bankruptcies, and tax liens?
Judgements (7 years), paid tax liens (7 years), bankruptcies (7-10 years), unpaid tax liens will stay on forever
88
If a borrower is denied because of their credit report, the creditor must provide the borrower with what information?
Name, address, and phone number of the credit reporting agency that provided the information
89
Under FCRA when can the consumer get a free copy of their credit report?
● Fraud alert issued due to identity theft
● Consumer is unemployed and plans to apply for a job in the next 60 days
● Consumer gets denied based on credit, (FCRA defines this as an “adverse action”)
● Inaccurate information which appears on your credit report
● If the consumer receives public assistance
90
When is it ok to obtain a credit report on a borrower?
The borrower must give consent and there must be a purpose in order to pull credit. In mortgages, loan qualification is considered a permissible purpose.
91
Who Enforces Fair Credit Reporting Act?
CFPB/ FTC
92
FACTA was primarily created to protect consumers from what?
Identity theft
93
What sections under FACTA help prevent identity theft?
● (SEC. 112) Freeze, Fraud Alerts and Active Duty Alerts
● (SEC. 113) Truncation of Credit Card and Debit Card Account Numbers
● (SEC. 114) Establishment of Procedures for the Identification of Possible Instances of Identity Theft (Red Flag Rules)
● (SEC. 216) Disposal of Consumer Report Information and Records (burn or shred)
94
What section of FACTA prohibits businesses that accept debit cards or credit cards from printing no more than 5 digits of the card number or the expiration date on any receipt?
(SEC. 113) Truncation of Credit Card and Debit Card Account Numbers
95
What sec of FACTA requires any person that maintains or possesses
consumer information, to properly dispose of any such information?
(SEC. 216) Disposal of Consumer Report Information and Records (burn or shred)
96
What is the Gramm–Leach–Bliley Act (GLBA) also known as?
The Financial Services Modernization Act of 1999 (FSMA)
97
What is non-public personal information (NPI)?
Any information that a financial institution collects about an individual in connection with providing a financial product or service, unless that information is publicly available.
98
What is the Safeguards Rule?
The Safeguards Rule under GLBA focuses mainly on information security. It requires financial organizations to protect the customer’s information that they collect. Companies must develop a written security plan that describes how they protect the data that is collected.
99
The penalty for fraudulently obtaining personal information under GLBA?
Up to 5 years in prison and $10k for individuals and $100k for financial institutions
100
Who enforces the Do-Not-Call Registry?
FTC
101
Who created the DNC?
FCC and FTC
102
Telemarketers are only allowed to place calls between what times?
8am and 9pm in the time zone specific to where the consumer resides
103
DNC rules do not apply to what entities?
Charities and tax exempt nonprofit organizations, political campaigns and callers taking surveys or polls (can’t have a sales pitch)
104
What's the penalty for violating the DO NOT FAX?
$500 per unauthorized fax. Trebled damages of $1,500K for knowingly doing it.
105
Who are the five banking regulators?
● Consumer Financial Protection Bureau (CFPB).
● The Office of the Comptroller of the Currency (OCC).
● Federal Reserve Board (FRB).
● The Federal Deposit Insurance Corporation (FDIC).
● The National Credit Union Administration (NCUA).
106
What are three things that are illegal under MARS RULE?
● It’s illegal to collect money from a customer unless you have a written agreement and both parties agree
● It’s illegal to tell people they shouldn’t communicate with their lender or servicer.
● It's illegal to tell someone not to pay his or her mortgage
107
Who created MARS?
FTC
108
Who created MAP?
FTC
109
What act establishes provisions for requesting cancellation and the termination of PMI?
Homeowners Protection Act (HPA)
110
At what LTV are lenders required to remove PMI on conventional mortgages?
78% for conforming; 77% for non conforming/ high risk and when the mortgage loan reaches its midpoint
111
What items must the creditor provide to the consumer when there is a change in the hardware or software that is needed to access or retain electronic records?
● Statement of the revised hardware and software required
● The right to withdraw consent without the issuing of any condition or fee for the
withdrawal
112
Who enforces the US Patriot Act?
US Department of Treasury/ FinCEN.
113
What are the 5 pieces of information that the US Patriot act what requires financial institutions to obtain and what is that program called?
Customer Identification Program (CIP)
● Name
● Date of birth
● Address
● SSN or EIN
● Government issued photo I.D
114
Under BSA/AML when must a bank electronically file a Currency Transaction Report (CTR)?
Deposits, withdrawals, money exchange, or other payment/transfer) of more than
$10,000 cash per day
115
What report must financial institutions file whenever there is a suspected case of money laundering or fraud and who must they be filed with?
Suspicious Activity Report (SAR) - reported to Financial Crimes Enforcement Network (FinCEN). These reports help monitor any activity within finance-related industries.
116
A SAR report must be kept for how long from the date of the filing?
5 years
117
Who Created the SAFE ACT?
Housing and Economic Recovery Act (HERA)
118
Who enforces the SAFE ACT?
CFPB
119
Unique identifiers are required to be disclosed on what?
● Trust deed
● All disclosures require the MLO’s NMLS number
● Mortgages
● Promissory note
● Advertisements of any kind
● 1003 URLA (loan application)
120
What is the definition of a mortgage loan originator (MLO)?
An individual who takes a residential mortgage loan application, offers and negotiates terms of a residential mortgage loan for compensation or gain.
121
Whose role is it to make sure all the proper documentation is organized to send to the underwriter?
Loan processor
122
Any loan processor or underwriter who is an independent contractor and engages in residential mortgage loan origination activities as a loan originator with respect to any dwelling or residential real estate in the state must?
Obtain and maintain a valid loan originator license from the state
123
To be eligible for a loan originator license, how many hours is required for pre-licensing education and what is the breakdown?
20 total hours:
● 3 hours of federal law
● 3 hours of ethics and
● 2 hours of training on nontraditional mortgage products
● 12 electives
124
Loan originators licenses expire annually, and must be renewed between what days?
November 1st- December 31st renewal due date
125
Who oversees compliance over the State Authorities, registry of the NMLSR and mortgage schools and courses?
Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators Mortgage (AARMR)
126
What agency is responsible for the effective supervision, regulation, and housing mission oversight of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac)?
The Federal Housing Finance Agency (FHFA)
127
What report is filed by a company on behalf of its loan originators, shows the condition of the company and must be reported and filed with the NMLS?
The Mortgage Call Report (MCR)
128
The Mortgage Call Report (MCR) has 2 components to it. What are they?
Residential Mortgage Loan Activity Report (RMLAR) and Financial Condition Report (FCR).
129
What amendment of the SAFE act mandates that all states implement Transitional Authority (Temporary Authority)?
The Economic Growth, Regulatory Relief, and Consumer Protection Act
130
How long after the date of application does a state-licensed MLOs seeking to get licensed in another state have to be licensed as an MLO continuously before using Transitional Authority?
30-day period
131
Who created the Consumer Financial Protection Bureau (CFPB)?
Dodd-Frank Act and Consumer Finance Protection Act
132
What's the purpose of the Department of Housing and Urban Development (HUD)?
To provide housing and community development assistance and to make sure everyone has access to “fair and equal” housing. To make sure communities have enough housing and any other development assistance they might need.
133
What are some things HUD is responsible for?
● Ensure there is enough affordable rental housing
● Strengthening the U.S. housing market
● Improve people’s quality of life by improving their housing
● Strengthen communities
● Enforce fair housing laws
134
Who oversees the Federal Housing Administration and the Fair Housing Act?
Department of Housing and Urban Development (HUD)
135
What does FHLMC stand for and what is it known as?
Federal Home Loan Mortgage Corporation (FHLMC)/ Freddie Mac
136
What are Fannie Mae and Freddie Mac automated underwriting systems (AUS) called?
Fannie Mae is called Desktop Underwriter (DU), and Freddie Mac is called Loan Product advisor (LPA).
137
FNMA and FHLMC will NOT purchase mortgages on properties that are not primarily residential including?
Vacant land or property primarily used for agricultural or commercial purposes
138
When three credit scores are obtained, which one is chosen?
The middle score
139
What are the 9 sections of the 1003?
1. Borrower Information
2. Assets & Liabilities
3. Real Estate
4. Loan Property Information
5. Declarations
6. Acknowledgements & Agreements
7. Military Service
8. Demographic Info
9. LO Information
140
Who does Fannie Mae hold responsible for the quality of the appraisal?
The lender
141
What’s another name for Fannie Form 1006 and what is it for?
Verification of Deposit (VOD) gives authorization to verify deposits listed on the loan application (bank balances).
142
What’s another name for Fannie Form 1008 and what is it for?
Uniform Underwriting and Transmittal Summary summarizes the important information from the loan application. Lenders use this information in reaching the underwriting decision. This form must be retained in the mortgage file for manually underwritten mortgage loans. (summarizes the application)
143
What is the maximum loan term for a conventional mortgage?
30 years
144
What are the front and back end ratios for conventional?
28/36.
145
If the borrower puts down 10% on a conventional loan. What’s the max seller concessions allowed for an owner occupied property?
6% if LTV is 75.001%-90%
146
Who’s considered a first time homebuyer under conventional?
At least one borrower must not have had any ownership in a property in the past 3 years (or 36 months).
147
Conventional mortgage borrowers will be required to pay what if they put down less than 20%?
Private mortgage insurance (PMI)
148
Who insures FHA and guarantees VA and USDA loans?
The Government National Mortgage Association (GNMA)
149
The Federal Housing Administration (FHA) is part of what government agency?
U.S. Department of Housing and Urban Development (HUD)
150
With FHA loans, What does MIP stand for?
Mortgage Insurance Premium
151
What percentage of the loan amount does the borrower have to pay for UFMIP for FHA?
1.75% of the loan amount.
152
What is The Federal Housing Administration (FHA) front end and back end ratios?
31/43%
153
What is the required minimum down payment amount for a FHA loan?
● Credit score of at least 580 = 3.5% down payment
● Credit score between 500 and 579 = 10% down payment
● Credit score under 500 = can not get an FHA loan
154
With a FHA loan If the property is sold within 91-180 days. What is required?
A second FHA independent appraisal is required and CAN NOT be charged to the borrower.
If the property is sold 180 days to 1 year is subject to additional review to establish value.
155
With an FHA loan the borrower can not resell the property for how long?
90 days
156
To prevent potential flipping schemes, FHA requires lenders to look back on the transfer history of a property for the past how many years prior to resale?
3 years
157
What is a FHA loan 203(k)?
Renovation Mortgage Loan, It provides home buyers or homeowners the option to borrow sufficient funds to address both the cost of the property and repairs which are desired or needed. These loans can be a 15 or 30-year fixed-rate mortgage.
158
What is a FHA loan 234(c)?
Condominium Mortgage Loans are designed to encourage lenders to extend affordable mortgage credit to those purchasing condominiums. This program ensures a loan for 30 years to purchase a unit in a condominium building.
159
What is a FHA loan 245(a)?
Growing Equity Mortgage (GEM) allows homeowners who are interested in further reducing the term of their mortgage to apply scheduled increases in their monthly payments to the outstanding principal balance. This loan starts off fully amortized, but as the payments increase each year, it becomes positively amortized
by the end. Resulting in paying the loan off early.
160
What is a FHA loan 255?
Home Equity Conversion Mortgage (HECM). A reverse mortgage product that allows seniors age 62 and over to convert equity in their primary residence to cash.
161
What is an Energy Efficient Mortgage (EEM)?
Loans to purchase or refinance homes and make energy-efficient improvements. An
energy-efficient mortgage allows you to fully pay for and finance energy-efficient improvements under favorable terms.
162
What is a Certificate of Eligibility (COE)?
VA Loans require the borrower to submit a Certificate of Eligibility (COE), It confirms to the lender that the borrower qualifies for the VA home loan benefit and how much their entitlement is or remaining.
163
What's the front and back end DTI for VA Mortgage?
Back end of 41% (no front end), which can vary based on residual income.
164
If the borrower has already used part of their entitlement, the remaining entitlement is based on what?
The county loan limit, this means that if the borrower defaults on their loan, the VA will pay the lender up to 25% of the county loan limit. Take the county loan limits minus the amount of the entitlement that was already used.
165
When is the funding fee for VA waived for the Veteran?
● Surviving spouse
● Disabled veteran
● Purple heart
166
With a VA loan, what is the NGB form 22?
Is for members of the National Guard who need to prove that they’ve served for at least six years.
167
With a VA loan, what is the Certificate of Reasonable Value (CRV)?
Determines the maximum value of the property. Once the COE is submitted to the lender, the appraisal of the property is ordered and the VA appraiser will provide the Certificate of Reasonable Value to the lender once the appraisal is completed.
168
The VA allows lenders to charge up to what % of the loan amount to cover origination, processing and underwriting costs?
1% of the loan amount
169
What's the minimum down payment for a USDA loan?
No down payment/100% financing.
170
What is the max debt-to-income ratio for USDA?
29% front end/41% back end
171
What is an appraisal?
It’s a rough estimate of how much the home is worth. Mortgage lenders require that an appraisal be completed prior to signing on a home loan. The appraisal assures the lender that they aren’t lending more money than what the home
is worth.
172
How long is an appraisal valid for; how old does it have to be before it needs to be recertified; if an appraisal recertification is needed, what
form is required?
6 months, 4 months, 442 recertification form.
173
What are the three common methods an appraiser will use to determine value?
● Sales comparison approach (Market approach)
● Income approach (Capitalization)
● Cost approach
174
What's the minimum amount of comparison properties an appraiser has to use?
They have to be sold within the past how many months? The comparison must be within how many miles of the subject property?
3 comparisons that have sold within the last 6 months and have to be within 1- 3 miles of the subject property.
175
After the appraiser selects the comps, they compare them all to each other. They then make adjustments based on differences in what?
Upgrades, size, features, sales date, and more. They then calculate the adjusted value for the subject property that reflects the home’s true value.
176
What is income approach?
Estimate the value of a property based on the income the property generates and other factors. It’s used by taking the net operating income (NOI) of the rent collected and dividing it by the capitalization rate.
177
When dealing with vacant land when would appraisers use a cost approach?
When there is a home being built within the first 2 years.
178
Mortgage brokers are unable to choose an appraiser on what types of mortgages?
And what act is it under?
The Dodd Frank Act has since extended this enforcement to include all mortgages.
179
What is amortization?
It’s the length of time it takes to pay off a mortgage in full. It’s an estimate based on the interest rate for the loan.
180
What type of amortization is where borrowers repay a portion of the loan principal each month. As a result, the loan balance drops with each payment?
Positive Amortization
181
What type of amortization is the balance between the fully amortized and interest-only loan. Part of the payment will cover some of the principal balance and the rest will cover the interest charges?
Partially Amortized
182
What type of amortization is when a borrower pays less than the interest due, so the loan amount actually increases, therefore requiring additional payments to bring it to a zero balance?
Negative Amortization
183
What is a Senior lien?
A Senior lien is considered to be the first and primary mortgage on a property. This amount will be paid first and only tax liens can potentially interfere.
184
What is a voluntary lien?
A Voluntary lien requires consent and is a condition of getting a loan (mortgage).
185
What is a Mortgage lien?
A Mortgage lien is a voluntary liens because you agree to the lien as part of the loan. It gives a creditor a claim to your home until your mortgage loan debt is paid off.
186
What is a Mechanic’s lien?
A Mechanic’s lien is an involuntary lien placed by a mechanic or other contractor if you fail to pay for services performed.
187
What is a HOA lien?
HOA liens are involuntary liens placed if the homeowner fails to pay homeowners association dues, the HOA may ask a court to issue a judgment granting it a claim against the borrower's home.
188
What is the document that shows ownership of property rights of an individual or business called?
Title
189
What are 3 types of Primary forms of concurrent real estate ownership?
● Tenancy in common
● Tenants by entirety
● Joint tenancy
190
What form of concurrent real estate conveys ownership to a legally married husband and wife, treating the couple as one individual. If one spouse dies, the title is transferred to the living spouse in entirety?
Tenants by entirety
191
What is performed by a title company to make sure that there are no issues, liens, or back taxes on the title that would prevent the sale of the asset?
A Title search
192
What is an Abstract of title?
A record of the title history including transfers, liens, and legal actions that are connected to the property.
193
What is a marketable title?
A title free from reasonable doubt or defect, which can be readily sold or mortgaged. A marketable title may have certain encumbrances that a buyer would
be willing to accept.
194
What is color of title?
Color of title is a title to real property that may have the appearance of a good and valid title to a parcel of property, but in reality it contains a title defect, and cannot transfer or convey ownership. It's shady!
195
What is an equitable title?
Equitable title is associated with a borrower's financial interest in the property. A borrower may have equitable title to a property that they have invested in, while the Trustee actually holds legal title to that same property.
196
What protects the owner of the property and the mortgage lender against defects or any future claims in the title to the property that happened prior to the time of sale?
Title insurance
197
This is a claim against a property by a party that is not the owner. Mortgages, easements, deed restrictions, encroachments and property tax liens are Examples. What's that called?
An encumbrance
198
What gives the right to use someone else's property for a specific purpose?
An easement
199
What is a document that establishes ownership over a property?
It is a legal document that transfers ownership of the property from the grantor to the grantee. A deed
200
Who is the Grantee?
Grantee is the party who receives the transfer of the property. In other words, the grantee is the buyer.
201
What is a noting in the public record, the terms of a legal document affecting title to real property such as a deed, a security instrument, a satisfaction of mortgage or an extension of mortgage?
Recording
202
What is a legal agreement between a trustor and beneficiary made at the end of the home buying process?
A deed of trust
203
What is a specific deed type that transfers the interest in a property from the seller to the buyer in exchange for a previously agreed upon price?
While the grant deed guarantees that the seller owns the property entirely, it doesn’t offer the buyer legal protection against any title defects. Grant Deed
204
What type of deed is a document signed between a homeowner and a bank or lending institution, allowing said institution to enforce the lien on the property if the loan isn’t repaid?
Mortgage deed
205
What is a Deed Restriction?
Deed Restriction is a limitation on how a property can be used.
Deed restrictions can limit what is
built or certain activities that would be pursued on the property.
206
What are 4 types of legal descriptions for properties?
● The US Public Land Survey System
● The Lot and Block survey system
● Metes and Bounds
● Monument Method
207
What are Title Theory jurisdictions?
The Lender conveys the equitable title to the buyer who will then issue a Deed of Trust naming the lender as the beneficiary of the trust. The title to the property is held by the trustee, who is given the power to foreclose should the buyer fail to comply with the terms of the mortgage agreement.
208
What's included in the promissory note?
● The date the promise to repay is effective
● The principal that identifies the amount of the money borrowed by the payor.
● The interest rate being charged is stated
● The date the first payment is due.
● The date of the last payment of an amortized loan
209
Who are the 2 parties in a Mortgage?
● Mortgagor (Borrower)
● Mortgagee (Lender)
210
Who is an entity that lends money to a borrower for the purpose of purchasing real estate?
They hold the mortgage and the note.
Mortgagee (Lender)
211
Who are the 3 parties in Trust deeds?
● The Trustor (Borrower)
● Trustee (Disinterested third party)
● Beneficiary (Lender)
212
Who is the disinterested third party that holds the legal title until the loan is paid off?
Trustee (Disinterested third party)
213
What is included in a deed of trust?
● The original loan amount
● A legal description of the property
● The names of parties: trustee, trustor, and beneficiary
● The maturity date of the loan
● The requirements of the loan
● Any late fees that could be assessed
● Power of sale clause
● Acceleration and alienation clauses
● Riders such as prepayment penalties or the terms of an adjustable-rate mortgage
214
There are 3 types of reverse mortgages, what are they?
● Single-purpose reverse mortgages
● Home equity conversion mortgages (HECMs)
● Proprietary reverse mortgages
215
What is the most widely used reverse mortgage because it carries no income limitations or medical requirements, and the loan can be used for any reason?
Home Equity Conversion Mortgages (HECMs)
216
What is a common method with a reverse mortgage, when the borrower receives a monthly check instead of making a payment?
Tenure method
217
When Does a Reverse Mortgage Become due?
When the borrower fails to pay property taxes, hazard insurance, and flood insurance (if applicable), upkeep on the home, when the last surviving borrower dies, sells the home, or no longer uses it as a primary residence.
218
What is an Adjustable-Rate Mortgage?
A mortgage when the interest rate stays the same, typically for the first year or a few years, and then it begins to adjust periodically.
Once the rate begins to adjust, the changes to the interest rate are
based on the market.
219
What is a Convertible ARM?
An adjustable-rate mortgage (ARM) that gives the borrower the option to convert to a fixed-rate mortgage after a specified period of time (Conversion Clause).
220
What is the benchmark rate that’s connected to an adjustable rate mortgage called?
It is a variable rate that can increase or decrease over time, following the movements of current market conditions. Index
221
What is the Margin when it comes to Adjustable Rate Mortgages?
The number of percentage points (usually 2% or 3%) added to the index by the mortgage lender to set the interest rate on an Adjustable-Rate Mortgage (ARM) after the initial rate period ends. Reflects the lender's profit and overhead.
222
What are the 3 types of Rate Caps on an Adjustable Rate Mortgage?
● The initial adjustment cap limits how much the rate can increase when the rate first adjusts
● The periodic adjustment cap (Subsequent) limits how much the rate can increase from one adjustment period to the next
● The lifetime adjustment cap limits how much the rate can increase or decrease over the life of the loan
223
What is the lowest interest rate that the ARM may adjust called?
Floor rate
224
What are the 2 popular types of Construction mortgage?
● A construction-to-permanent (Take Out) loan
● Stand-alone construction loan
225
What is a Stand-alone construction loan?
When the borrower does not need permanent financing. The loan will likely have a very short-term repayment period. When the construction is complete and the home is built, the borrower will owe the full amount due.
226
What type of fully amortized loan has an interest rate that will not change over the lifetime of the loan and the borrower’s principal and interest will remain the same each month?
Fixed rate mortgage. Typically 15/30 years
227
What is structured as a typical 30-year principal and interest loan for a set period, such as 5, 7, 10 years, but at the end of the term, a lump sum payment equal to the remaining balance that is owed is due?
Balloon mortgage
228
What is a Term Mortgage or Straight note?
Payments are not amortized. Instead, only the interest of the mortgage is paid off during the mortgage's term. When the mortgage reaches the end of its term the entire principal is due.
229
A mortgage product that allows the borrower to make payments every two weeks rather than once a month which will build equity in the home faster and pay less interest over the life of the loan?
Bi-weekly mortgage
230
Which loan can be used for major purchases or projects, such as home improvements, education, property investment or medical bills?
Home Equity Line of Credit (HELOC). Homeowners can borrow sums that total no more than the credit limit based on the equity in the home.
231
Which types of loans are for borrowers with a below-average credit classification, tarnished or limited credit history, and these loans are subject to higher than average interest rates?
Subprime loans. These loans are very risky.
232
What is a piggyback loan?
When a borrower takes out a first and second mortgage at the same time, on the same property. This is the simultaneous origination of multiple loans on the same collateral. Borrowers often get piggyback loans to avoid paying PMI, higher interest rates, using
a down payment assistance program offered.
233
What is a wraparound mortgage?
Form of owner or seller financing. The buyer gets a mortgage that includes, or “wraps around,” the existing mortgage the seller has on the property.
234
What is a holding or a seller held mortgage?
A short term type of seller financing where a seller lends money to a buyer to purchase their house and transfers the title once the borrower pays off the debt.
235
What is a due-on-sale clause/ alienation clause?
Requires the borrower to repay the lender in full upon the sale or conveyance of interest in the property that secures the mortgage.
236
What is an escalator or escalation clause?
A provision in a sales contract that states the borrower will allow his offer to increase if another offer is higher.
237
What is a prepayment penalty clause?
Allows the lender to charge a fee to the borrower if the loan is paid off early.
238
What is an open end clause/ future advance clause?
A mortgage clause that allows a borrower to get additional money from the same mortgage loan.
239
What is a subordination clause?
When a Loan is refinanced and has a second mortgage it allows the new mortgage to become a senior lien and the senior lien to become a junior lien position.
240
What is a conversion clause?
A provision within an adjustable-rate mortgage loan that allows a borrower to switch from an ARM to a fixed-rate mortgage.
241
What is an assumable mortgage clause?
Allows the buyer to take over mortgage payments for an existing loan. The original homeowner is released from any liability toward the loan, while the buyer assumes responsibility for the mortgage payments and ownership of the
property.
242
What is flood insurance?
Required on properties that are in the designated flood areas, and must be maintained and current for the life of the loan. It covers dwellings for losses due to flooding. It is not part of homeowner's hazard insurance.
243
Locations where residents are required to buy flood insurance are called what?
Special Flood Hazard Areas (SFHA)
244
What are the 3 types of flood zones?
● High-risk flood zones
● Moderate flood zones
● Low flood risk zones
245
What is the Moderate flood zone?
Flood Zones B and X live in areas with low-to-moderate flood risk.
Flood insurance is not always required in this zone.
246
What is the minimum and maximum amount of flood insurance required?
Minimum of $100,000 and a maximum of $250,000.
247
A form of real property, including all things that are permanently attached to it, whether natural or man made?
Real estate
248
What is a multi-family residence?
A residential property with 2 to 4 individual housing units (duplex, triplex or quadplex).
249
What are freehold estates?
Involves ownership, a freehold estate is an estate in which the owner has exclusive rights to enjoy the possession of a property for an undefined length of time.
250
What is fee simple ownership?
Type of ownership which the owner is entitled to all rights on the property. It is the highest type of interest in real estate recognized by law. Owner can choose what they want to do with the property, whether they sell it or will it.
251
What is assessed value?
The value of a property, which is established by a public tax assessor. The assessed value is used to determine property taxes.
252
What is a mortgage rider?
An appendix to the mortgage documents. Its main purpose is to include special terms, conditions and situations affecting the loan that are not present in the main
mortgage document.
253
What are credit unions?
Are created, owned, and operated by their participants. They are a non profit financial institution that is federally regulated and owned by its members who use their services and provide traditional banking
services to their members.
254
What is a legal person?
An entity that is seen in the eyes of the law as having certain rights and privileges; that, while not human, is permitted to assert a legal claim, or be subjected to legal duties. For example, a partnership or a corporation is considered a legal
person.
255
What is a co-signer (guarantor)?
An additional person added to the promissory note but is not on the home's title and has no ownership in the property.
256
What is a collection?
The efforts used to bring a delinquent loan current and is reported on the credit report as a derogatory account.
257
What is an appraisal contingency?
A contingency in a sales contract that the property must appraise at a value that is equal to or greater than your offering price.
258
What is a reconveyance?
Occurs when a loan is paid off in title theory states, legal title is transferred from the trustee to the trustor.
259
What is a fair market value?
The selling price of a home. The fair market value is determined by an appraisal.
260
What is homeowners insurance?
Required by the lender for anyone who has a loan on a property and protects the homeowner against damage to the property for certain things.
261
What is a home inspection?
Different from a home appraisal. An appraisal gives you a rough estimate of how much a home is worth, but an inspection tells you about specific problems in the home.
262
What is the secondary mortgage market?
Where home loans and servicing rights are bought and sold between lenders and investors. A large percentage of newly originated mortgages are packaged into mortgage-backed securities and sold to investors on the secondary market.
263
What is table funding?
Originated by a mortgage broker that closes a federally related mortgage loan in its own name, and the lender/investor is the person to whom the obligation is assigned to after settlement. Table funding only occurs in wet settlement states.
264
What is dry settlement (dry funding)?
Occurs in states that parties get together to sign mortgage documents, but all of the paperwork required to officially close the loan doesn’t have to be completed at closing. There are no mortgage funds distributed to the seller on that day.
265
What is a mortgage term?
The number of years the borrower will pay on the loan before they pay off their mortgage.
266
What is a traditional mortgage?
Defined as a 30 year fixed mortgage. Anything else is considered non-traditional.
267
What is risk-layering?
Refers to the cumulative effect of multiple risk factors, such as lower credit scores, higher DTI, interest only loans, not having the ATR, ect.
268
What is sweat equity?
Used by homeowners or investors by doing repairs and renovations on properties by themselves before putting them on the market. Paying carpenters, painters, and contractors can get extremely pricey, so a do-it-yourself renovation using sweat equity can be profitable when it comes time to sell.
269
What is appreciation?
An increase in the value of property over time. Factors in a home’s appreciation are its condition, location and the selling price of similar homes in the area.
270
What is physical deterioration?
A decrease in a property’s value as its physical condition is slowly wearing and tearing, or it is caused by elements over time.
271
What is economic obsolescence?
Refers to the loss of value of a real estate property due to factors that are external to the property. Economic obsolescence is beyond the control of property owners.
272
What are non-liquid assets?
Items that must be sold to convert to cash. These include land and real estate investments, art, cars, jewelry, collectibles, and antiques.
273
What is an open-end mortgage?
Permits the borrower to go back to the lender and borrow more money. There is usually a set dollar limit on the additional amount that can be borrowed and does not have an amortization schedule.
274
What is a mortgage recast?
Is a feature of some types of mortgages where remaining monthly payments are recalculated with a new amortization schedule to ensure the loan is fully amortized.
275
What is novation?
When a borrower takes over the payments for a mortgage, the original borrower is released from all liability and a new obligation is created with the same terms and interest rate from the old loan.
276
What is a purchase agreement?
A written contract signed by the borrower and seller stating the terms and conditions under which a property will be sold.
277
What is a Power of Attorney (POA)?
Legal authorization that gives a designated person the power to act for someone else. A POA gives the agent or attorney-in-fact the authority to act on behalf of the person.
278
What is hypothecation?
When the home serves as collateral, the bank does not have any claim on cash flows or income generated from it.
279
What are real estate transfer taxes?
State and local taxes charged for the transfer of real estate, this amount is typically equal to a percentage of the sales price.
280
What are capital gains?
The profit received based on the difference between the original purchase price and the total sale price. Capital gain refers to the increase in the value of a capital asset when it is sold.
281
What is a mortgage broker?
Middleman who connects borrowers and mortgage lenders together, but who does not fund their own loans.
282
What is an application?
A request for a mortgage loan which requires information about the borrower that is necessary in order to make a decision. Remember, this is not the same as a completed application. This is the initial application that is received prior to giving a pre-qualification or pre-approval.
283
What is a pre-approval?
A document that says how much the borrower can afford to take out in a home loan. Many lenders consider the preapproval to be the first step in getting a mortgage.
284
What is a W2?
Details the Borrower's income and the various local and federal taxes withheld from their income and is provided by the employer annually.
285
What is net worth?
Is calculated with a simple formula: assets (what you own) minus liabilities (what you owe).
286
What is a balance sheet?
Dated financial statement (in table form) that shows the company's assets, liabilities and net worth.
287
What are reserves?
The amount of savings balances that will be in the borrower's bank account prior to closing on their home purchase. These reserves are considered emergency funds.
288
What is the Average Prime Offer Rate (APOR)?
Derived from average interest rates, points, and other loan pricing terms currently offered to consumers for mortgage transactions that have low-risk pricing characteristics.
289
What are credit documents?
Includes credit reports, employment, income, and asset documentation.
290
What is a charge-off?
The amount of principal and interest due on a loan that is written off when the creditor decides this amount is not going to be collected.
291
What is Chapter 13 Bankruptcy?
type of bankruptcy which establishes a payment plan between the borrower and the creditor and is monitored by the court. It allows individuals with regular income to have a plan to repay their debts.
292
What is the front-end (housing expense)?
Calculates how much of a person's gross income is spent on housing costs (mortgage payments, mortgage insurance, taxes, hazard/flood insurance) divided by gross income. PITI / Gross Monthly Income = Housing Expense ratio.
293
What is the Automated Underwriting System (AUS)?
An electronic standard underwriting procedure that provides a computer generated loan decision.
294
What are the 4 things all lenders learn and underwriters use to make loan decisions?
● Capacity
● Capital (Cash)
● Credit/Character
● Collateral
295
What C of underwriting is a review of the Borrower’s finances and the condition of their financial state?
Capital. There are two separate parts here – cash brought for closing (down payment, closing costs, escrow) and cash for reserves.
296
What C of underwriting refers to the security of the loan based on the property?
An appraisal is performed by a licensed appraiser to provide the value of the property.
Collateral
297
What documenation is needed to verify self-employed borrower income?
2 years of personal and business income tax returns.
298
A minimum history of how many years of employment income is needed?
2 years
299
How much is untaxed public assistance grossed up?
0.25
300
When can Unemployment income be used as qualifying income?
If the unemployment is part of the borrower’s natural work cycle, and they must show the unemployment income on the last 2 years income tax returns.
301
Which form allows a taxpayer to authorize the right of any person or company to review their personal tax information from any given year?
IRS Form 8821
302
Monthly payments on installment debts need to be counted if there are how many months of payments remaining?
10 or more monthly payments remaining. Unless it's a lease.
303
If the credit report does not provide a monthly payment for the student loan, the lender must determine the qualifying monthly payment using a payment equal to what percent of the outstanding balance?
● 1% of the current balance for Fannie Mae
● .5% of the current balance for Freddie Mac
● .5% of the current balance for FHA
304
What is a Loan-to-Value Ratio (LTV)?
Measure comparing the amount of the mortgage with the appraisal value or purchase price (whichever is lower). LTV=loan amount divided by appraisal value or purchase price (whichever is lower).
305
What is a High Credit Loan-to-Value (HCLTV)?
a measure comparing the total amount on any mortgage (1st mortgage, entire HELOC) with the appraisal value or purchase price (whichever is lower).1st mortgage plus the full amount of the HELOC divided by the appraisal value or purchase price (whichever is lower).
306
What are discount points?
Lower the interest rate in exchange for paying an upfront fee. Each point costs 1% of the loan amount and lowers the rate by 0.25%.
307
What is a lender credit?
When the borrower agrees to pay a higher interest rate above par and the lender gives them money to offset their closing costs. When a borrower receives a lender credit, they pay less upfront, but pay more over time with the higher interest rate.
308
How is the annual interest rate calculated?
Loan amount x interest rate
309
How is the daily simple interest rate calculated?
Loan amount x interest rate divided by 365
310
If a loan closes on October 6th the first mortgage payment will be due when?
December 1st, The first mortgage payment after closing always skips a calendar month.
311
What is principal balance?
The amount that the borrower takes out in a loan. This is the P in PITI (principal, interest, taxes, insurance).
312
What is a floating interest rate?
An interest rate the lender has given to the borrower, but not locked or committed to lend.
313
The following details must be included in the lock in agreement?
● The interest rate locked in
● The lock's effective date
● The lock cost
● The lock's expiration date and time
314
Late fees are due after what day of the month?
15th
315
What's the penalty for mortgage fraud?
$1,000,000 and or 30 years in prison.
316
What is Fraud for property/housing?
Involves material misrepresentation or omission of information with the intent to deceive or mislead a lender into extending credit that would likely not be offered if the true facts
were known.
317
What is material misrepresentation/ misstatement?
Implies that the financial figures that have been disclosed in the financial statement are not a true representative. It is incorrectly stating, documenting, or omitting risk factors on a mortgage application.
318
What is predatory lending?
Deceptive practices carried out by lenders to mislead, coerce, or assist borrowers to take out loans they are unable to afford or will be paid back at a cost that is extremely above the market rate.
319
What is contract kiting?
Occurs when a seller agrees to create a second, falsified sales agreement with an inflated purchase price so the buyer can obtain a larger loan from a lender.
320
What is a builder bailout?
Occurs when the builder or developer is determined to sell properties quickly in a down real estate market.
321
What is short sale fraud?
A type of mortgage fraud where either false information is used or valid information is withheld to convince a homeowner to do a short sale. Short sale fraud can come from homeowners, lenders, real estate
agents and brokers, or other third parties involved in the sale.
322
What is an air loan?
A loan that is made to a straw buyer or a non-existent buyer, and is made on a property which is also non-existent. These are considered no-collateral loans.
323
What are inflated appraisals?
A very common part of most mortgage frauds. An appraiser agrees to inflate a property's appraised value in order to qualify it for a bigger mortgage.
324
What is a straw buyer?
A person who applies for a mortgage and purchases a home on behalf of another person. The actual buyer may be someone with bad credit or low income, who is unable to qualify
themselves.
325
What is occupancy fraud?
Occurs when the borrower lies about the occupancy status of the property, stating it will be owner-occupied when in fact, they are not living in the property.
326
What is equity skimming?
Involves a person, investor, or foreclosure specialist which will gain title to another person’s home to prevent a foreclosure. They will refinance the home, which takes out all the equity, and then sell it back to the borrower who will not be able to afford the new mortgage.
327
What is elder abuse?
Happens when someone takes money or belongings from an older person. In mortgages, it occurs when a child or caregiver to an elderly homeowner convinces the elderly homeowner to obtain the loan on the home for the child or caregiver against their will.
328
What is f'oreclosure?
A process that begins when a borrower fails to make their monthly mortgage payments. When the property is foreclosed upon, the lender typically repossesses the property and attempts to sell the home and satisfy any liens against the property.
329
What is non-judicial foreclosure?
When the lender can foreclose without going through the court system. This happens in title theory states (Trust Deeds).
330
The lender is required to give the borrower an application to apply for mortgage workout options within how many days from a missed payment?
45 Days
331
What is a l'oan modification?
A change made to the terms of an existing loan by a lender. It may involve a reduction in the interest rate or an extension of the length of time for repayment.
332
What is a deed in lieu of foreclosure?
An arrangement between the borrower and the lender where the borrower will voluntarily turn over title/ownership of the property to the lender to avoid the foreclosure process.
333
After the borrower completes a loan application for workout options, the lender must notify them if they are approved within how many days?
30 Days
334
What is dual tracking and what regulation prohibits it?
Dual tracking is when the lender seeks foreclosure actions while the borrower is being
considered for workout options. RESPA Section 6 states that there will be no dual tracking during this time.
335
If the borrower is not seeking work out options, how many days from a missed payment can the lender file a lis pendens?
After 120 Days
336
What is the Equitable right of Redemption?
Happens up until the sale of the home. This means the borrower must pay their entire mortgage balance, plus any additional fees or interest payments charged by their lenders, and they can keep their home and their lender won’t sell the property at auction.
337
What is a deficiency judgment?
Can occur when the sale of the property fails to cover the mortgage balance in full. It allows the lender to collect additional assets from the borrower to make up the difference.
40-10
338
What is the HER formula when finding the DTI ratio?
PITI/GMI
339
What are the formulas used in an ARM loan for the 1st adjustment?
S+A or M+I Choose the lower of the 2
340
What are the formulas used in an ARM loan that is adjusting NOT for the first time?
Y+B or M+I Choose the lower of 2
341
Seller Concessions are calculated on what dollar value?
The lower of the purchase price or appraised value
342
Public Assistance is grossed up how much?
25% or 1.25
343
If you are paid bi-weekly, how many times are you paid a year?
26 times
344
When finding per diem interest, do you include the day you close on the home? How many days of per diem interest would be due if the borrower closed on May 24th?
Yes. If the borrower closed on May 24th, they would have 8 days of per diem interest due at closing (31-24+1 = 8)
345
When asked to find the UFMIP, what is that percentage?
0.0175
346
When asked to find the MIP on a FHA loan what percentage is that?
0.0055000000000000005
347
What is the equation to find what the maximum the buyer can afford?
Choose appropraite front and back end ratios for the loan type. [GMI * (DTI ratio front) = monthly payment #1]. [GMI * (DTI ratio back) - debts = monthly payment #2]. Choose the lower of the 2.
348
Under TRID, what disclosures were combined to create the loan estimate and the closing disclosure?
The GFE and the INITIAL TIL created the LE, and the HUD 1 and the FINAL TIL created the CD.
349
What is the penalty for violating TRID?
1000000
350
Under TRID, what are tolerances?
The amount of a change to a particular item between the Loan Estimate and the Closing Disclosure before it is in violation of the law.
