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mortgage processing > Basics II > Flashcards

Basics II Flashcards

1
Q

What is a loan product?

A

An option of loan that has different terms, rates, and pricing

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2
Q

Fixed Rate Mortgage

A

Entire loan amortized over a certain amount of years

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3
Q

Balloon Mortgage

A

Outstanding principal is due at the end of a fixed time; i.e. 7/23 mortgage

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4
Q

Adjustable Rate Mortgage

A

Rates are adjusted at specific periods (Caps) in the mortgage; fluctuating interest rates

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5
Q

What are the 3 types of caps?

A

Initial Cap- limits how far up or down interest moves up for first adjustment
Period Cap- limits how far up or down interest moves per each adjustment
Lifetime Cap- Limits how far up or down interest moves per life of loan

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6
Q

What does it mean to have a 1 Year ARM with 2/6 caps?

A

Rate changes each year by 2% up or down; rate cannot go higher than 6%

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7
Q

What benchmark is the ARM tied to?

A

Index determined by Treasury Note; when index increases, rate increases

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8
Q

What is the Margin?

A

Fixed % (usually 2-3%) added onto the index of an ARM

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9
Q

What is the Fully Indexed Rate?

A

Index + Margin; this is the % the rate fluctuates on ARM

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10
Q

What is negative amortization?

A

Monthly payments don’t cover interest because of ARM rate adjustments; unpaid interest is added to principal

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11
Q

What is a Blend mortgage (Term or Hybrid ARM)?

A

ARM that has a fixed rate for a certain amount of time (3, 5, 7, 10 years), after which converts to annual adjustments via caps

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12
Q

Who are acceptable borrowers? Unacceptable?

A

Acceptable: Natural person (US Citizen), legal age
Unacceptable: Life estates, partnerships, corporations, land trusts, real estate syndicates, non-profits, diplomatic status

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13
Q

What is a non-occupant coborrower?

A

Does not intend to occupy property; must contribute 5% when LTV is <90%

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14
Q

What types of non-US Citizens can have a mortgage?

A

Permanent resident aliens and non-permanent resident aliens

Foreign nationals not eligible under agency guidelines

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15
Q

What docs are required from a Permanent resident alien?

A

Alien Registration card/Green Card; i-90 applied for green card; Conditional Alien Registration Receipt Card and Petition to remove conditions; Current Passport

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16
Q

What docs are required from a non-perm resident alien?

A

Temporary resident card I-688; Arrival Departure Record (I-94); Employment authorization card (I-688A); FHA requires SSNs

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17
Q

What is an arms length transaction?

A

all parties involved are not related to each other

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18
Q

Identify a first time homebuyer

A

Little to no experience; excited and nervous; highly trusting

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19
Q

Identify a move up homebuyer

A

Currently or previously owned home; wants specific neighborhood or school district; familiar with process

20
Q

Identify a relocation homebuyer

A

moving for work; leaving friends and sad; stressed and anxious

21
Q

Identify an affluent homebuyer

A

Financially savvy, high net worth individuals, can be demanding but smart

22
Q

Identify an empty nest homebuyer

A

Wants to downsize; retirement age with a reduction in income

23
Q

Identify an investor homebuyer

A

Purchase houses for rental or flipping; cashflow is primary concern; demanding and impatient; needs to close quickly

24
Q

What does the underwriter do?

A

Evaluates risks of loan and borrower and makes a lending decision

25
Q

What is an Automated Underwriting System?

A

Computer program that uses historical statistics to determine risk

26
Q

What is FNMA’s AUS?

A

Desktop Underwriter (DU)

27
Q

What is FHLMC’s AUS?

A

Loan Product Advisor (LPA)

28
Q

What is PAIL?

A

Property Assets Income Liability

29
Q

Describe the P in PAIL

A

Property- Acceptability as collateral (security) for loan (value), economic condition, and marketability is evidenced by an appraisal

30
Q

Describe the A in PAIL

A

Assets- Borrowers commitment to property (down payment), equity, and cash reserves

31
Q

Describe the I in PAIL

A

Income- ability to repay loan

32
Q

Describe the L in PAIL

A

Liability- willingness to repay loan

33
Q

What does layering of risks mean?

A

There is a combination of risk factors that indicate likelihood of default and foreclosure

34
Q

What are compensating factors?

A

Items in a loan file that can offset high risk factors

35
Q

What 3 decisions does the Underwriter make on a loan?

A

Acceptable risk
Needs more info
Unacceptable risk (denial)

36
Q

Who makes the ultimate decision on a loan?

A

The underwriter

37
Q

What is the most important document in a file?

A

The credit report

38
Q

What is a tax lien?

A

Claim against a property for unpaid taxes

39
Q

What are the 3 types of Bankruptcies?

A

Chapter 7- trustee distributes assets to creditors
Chapter 11- reorganization of debt by business
Chapter 13- Debt repayment plan

40
Q

Who are the 3 main credit repositories?

A

Equifax, TransUnion, Experian

41
Q

What is an in file credit report?

A

Separate credit reports from 3 repositories

42
Q

What is a triple merged report?

A

credit service sorts through data and eliminates duplicates, displays all 3 scores

43
Q

What is a Residential Mortgage Credit Report?

A

Merged report that is scrubbed so all data is current

44
Q

What is a credit score? What is it based on?

A

Statistically derived numeric expression of individual’s credit worthiness. Based on past credit history, amounts owed, length of history, new credit

45
Q

What is the interest rate based on?

A

Credit score- “risk based pricing”

mortgage processing (9 decks)

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