ch 5 continued

Question 1

8 ATR criteria

Answer 1

1. Current or reasonably expected income or assets
2. Current employment status
3. Monthly mortgage payment for the loan
4. Monthly payment on any simultaneous loan secured by the same property.
5. Borrower’s debts, alimony, and child support obligations
6. Monthly debt-to-income ratio or residual income.
7. Credit history

Question 2

Tangible net benefit

Answer 2

The benefit to the borrower outweighs any possible negatives or costs associated with the loan.

Question 3

Churning

Answer 3

Refinancing a loan repeatedly without any net benefit to borrowers simply to collect fees from the borrower.

Question 4

When is the closing disclosure due?

Answer 4

At least 3 business days before consummation.
(All calendar days except Sundays and legal public holidays.)

Question 5

How long must a copy of the CD be kept?

Answer 5

5 years

Question 6

After sending the CD when can you close

Answer 6

If mailed 3 days to be received, 3 days for review, and close the next day (3+3+1)
If delivered in person 3 days to review, close the next day.
(There must be evidence that the borrower received it or you must wait the initial 3 days to assume receipt.)
(All calendar days except Sundays and legal holidays count)

Question 7

What does a settlement agent do?

Answer 7

They are responsible for going over all documents with the borrower before they are signed. They are employees of the closing agency.

Question 8

Funding

Answer 8

The process at closing by which the funds are dispersed to their proper owners.

Question 9

How do you calculate front-end DTI?
(Housing expense ratio)

Answer 9

Calculating total housing expenses (PITI) and dividing by the gross income of the borrower.

Question 10

How do you calculate back-end DTI?
(Total Debt-to-Income Ratio)

Answer 10

Dividing the total amount of monthly debts including housing expenses (PITI) and dividing it by the gross income.

(Do not include utilities, cell phone, or other living expenses.)

Question 11

How do you calculate qualifying monthly payment?

Answer 11

Monthly income x housing expense ratio
or
Monthly income x total debt-to-income ratio - consumer monthly debt
(Take the lesser of the 2)

Question 12

How do you calculate LTV?

Answer 12

Loan balance divided by property value (answer is converted to a percentage)

Question 13

What is a combined loan to value?
(CLTV)

Answer 13

Total of the first mortgage and the amount drawn from the HELOC or the total second mortgage divided by the lesser of the appraisal value or purchase price.

Question 14

How do you calcluate CLTV? Who uses it?

Answer 14

(First mortgage + amount drawn on HELOC or total second mortgage) / the lesser of the appraisal value or the purchase price.

Used by Fannie and government loans

Question 15

How do you calculate TLTV (Total Loan to Value)?
Who uses it?

Answer 15

(Sum of the first mortgage + Total HELOC line or total second mortgage) / the lesser of the appraised value or the purchase price.

Used by Freddie

Question 16

How is cash available at closing calculated?

Answer 16

Property value X LTV - Payoff amount - closing costs

Question 17

How are interest-only payments calculated?

Answer 17

Loan amount X interest rate / 12

Question 18

Generally how much will 1 discount point buy down the interest rate?

Answer 18

.25% - .5%

Question 19

How do you calculate a break-even analysis on a discount point?

Answer 19

Cost of the point/savings/12 = number of years to break even

Question 20

What is the trigger for a HOEPA loan?

Answer 20

5% of loan amounts greater than $22,969
or
the lesser of 8% or $1148 of loans $22,969 or less

Question 21

How do you test to see if APR is over APOR to determine HOEPA?

Answer 21

if APR is greater than APOR + trigger % then it is a HOEPA loan

Question 22

How do you test points and fee’s for HOEPA?

Answer 22

Loan amount X Trigger Rate
Total Points and Fees / Loan amount

If points and fees as a % is greater than trigger rate = HOEPA