Chapter 1: SAFE Definitions

Question 1

An individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. The definition section also describes a ________ as someone who “assists a consumer in obtaining or applying to obtain a residential mortgage loan by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.”

Answer 1

Mortgage Loan Originator (MLO)

Question 2

Any request from a borrower, however communicated, for an offer of residential mortgage loan terms, as well as the information from the borrower that is typically required in order to make such an offer.

Answer 2

Application

Question 3

The term “_________________” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the State licensing and registration of State-licensed loan originators and the registration of registered loan originators or any system established by the Director.

Answer 3

Nationwide Mortgage Licensing System and Registry (NMLS)

Question 4

Federal legislation (2008) requiring a uniform national system for training, registering, and licensing residential mortgage loan originators, mortgage brokers, and lenders. The Nationwide Mortgage Licensing System and Registry (NMLS) performs all of these functions for every state. In addition, NMLS approves course providers and all course material.

Answer 4

Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act

Question 5

A multistate mortgage note gives the lender the opportunity to require immediate payment in full or “__________” the terms of the note. Events such as the sale or transfer of the property without lender consent may trigger __________ of the amount due to the lender.

Answer 5

Acceleration

Question 6

The consumer’s true annual cost of borrowing funds according to the federal Truth-in-Lending Act. It calculates an effective interest rate based on most of a loan’s upfront fees and the stated annual interest rate.

Answer 6

Annual Percentage Rate (APR)

Question 7

The process whereby a seller delivers ownership rights in real property to the buyer. Closing may also describe the completion of the loan process where the borrower receives use of the funds from the lender in return for promising to repay the loan and allowing the lender to place a lien on the real property.

Answer 7

Closing

Question 8

Although often used in conjunction with “Closing,” it is not exactly the same. It means the time that a consumer becomes contractually obligated on a credit transaction.

Answer 8

Consummation

Question 9

Fees and costs associated with obtaining loans and purchasing real estate above the sale price of the real property. These typically consist of fees paid to the government, lenders, loan originators, appraisers, real estate brokers, surveyors, inspectors, title companies, and attorneys. The sales contract dictates which ones are paid by the buyer and seller.

Answer 9

Closing Costs

Question 10

Legal document between lender and borrower (also known as the trustor) which is used in some states instead of a mortgage to transfer a property’s legal title to a neutral third party (trustee) to secure the repayment of the loan.

Answer 10

Deed of Trust

Question 11

Fees charged by lenders to borrowers at loan closing to lower the stated interest rate and the interest portion of each monthly payment. Each discount point costs the borrower an additional 1% of the loan in closing costs (i.e., 1/2 discount point = 1/2% of the loan). Each additional discount point also raises the yield (effective interest rate) on average by 1/8% on the loan to the lender.

Answer 11

Discount Points

Question 12

Set of values, conduct, and principles that consistently guide our behavior and decisions to deliver fair and honest service to all parties.

Answer 12

Ethics

Question 13

Market value of a property in excess of the amount owed by the borrower.

Answer 13

Equity

Question 14

Common type of loan based on and secured by the value of the home that exceeds the amount already owed by the borrower to other more senior lien holders. _______ typically have variable interest rates and are open-ended, meaning funds can be borrowed and repaid over and over again up to the maximum amount.

Answer 14

Home Equity Line of Credit (HELOC)

Question 15

Loan based on the difference between the value of the home and the amount owed.

Answer 15

Home Equity Loan

Question 16

The person or entity that funds/purchases the loan, also known as a lender or mortgagee.

Answer 16

Investor

Question 17

Licensed individual working for a lender or acting as an independent contractor to a mortgage broker who takes a residential mortgage loan application and negotiates terms of a loan for compensation or gain.

Answer 17

Loan Originator (Also called Mortgage Loan Originator, or MLO)

Question 18

Collecting a borrower’s monthly payments and disbursing payments to the current owner of the loan, disbursing taxes and insurance payments when due, handling mailings, monitoring liens or encumbrances, making certain that a homeowner has sufficient insurance to protect the lender’s interest, and handling a foreclosure when necessary.

Answer 18

Loan Servicing

Question 19

Legal document signed by all owners that pledges their real property as security for a loan. In some states, a deed of trust (see definition above) is used instead. Note: throughout this course, the term “mortgage” is used interchangeably with “deed of trust.”

Answer 19

Mortgage (Contract)

Question 20

Licensed entity that may originate, close, fund, sell, and/or service the loan.

Answer 20

Mortgage Banker (Mortgage Lender)

Question 21

A business licensed to facilitate the making of a loan between a borrower and a lender for compensation. The broker originates the loan, but he does not close or provide funds for the loan.

Answer 21

Mortgage Broker

Question 22

Compensation paid for mortgage broker services. These include fees paid to the licensed mortgage broker business by the borrower and/or fees and commissions paid by the lender for originating the loan.

Answer 22

Mortgage Brokerage Fee

Question 23

Lender or investor providing the funds for the loan in exchange for both the borrower’s promise to repay and his permission to place a lien on his real property.

Answer 23

Mortgagee

Question 24

Any means used by anyone involved in the loan process to gain a deceitful or unfair advantage over another. Mortgage fraud is prosecuted in most states for acts involving misstatements, misrepresentations, or omissions and for knowingly receiving funds resulting from any of these wrongful acts or for filing court documents that contain any of these wrongful acts.

Answer 24

Mortgage Fraud

Question 25

Process by which buyers of real property borrow money from lenders or investors by allowing a lien to be placed on the property as security for the loan.

Answer 25

Mortgage Lending

Question 26

Buyer or borrower who allows a lien to be placed on his real property in exchange for a loan.

Answer 26

Mortgagor

Question 27

defines these fees as all fees received by the loan originator or business from a borrower, not including application and third-party fees. These fees are not to be confused with origination points, which are occasionally charged by a lender in addition to other fees for originating the loan.

Answer 27

Origination Fees (or Loan Origination Fees)

Question 28

The group of lenders and investors make loans directly to borrowers. Market participants include banks, credit unions, mortgage companies (also known as mortgage lenders or mortgage bankers), and private lenders.

Answer 28

Primary Market

Question 29

Legal document creating a personal obligation to repay a loan.

Answer 29

Promissory Note (Or Note)

Question 30

Land, all improvements to the land (structures, fences, etc.), and the rights attached to those improvements on the land.

Answer 30

Real Property

Question 31

Process of obtaining new financing on a property that a borrower already owns.

Answer 31

Refinancing

Question 32

Mortgage that is subordinate (junior) in lien priority to another mortgage.

Answer 32

Second Mortgage

Question 33

The group of financial institutions and/or investors that buys existing mortgages from another lender or investor.

Answer 33

Secondary Mortgage Market

Question 34

A measure of how appropriate a loan is to the needs of the borrower when considering the borrower’s ability to honor the requirements of the loan in the present as well as the foreseeable future.

Answer 34

Suitability

Question 35

The length of time for repaying the loan.

Answer 35

Term