Chapter 2: The Mortgage Lending Process Flashcards
Origination
the process of making or initiating a new loan
processor
typically responsible for verification of the information contained in the file (such as sending out employment verification forms) and coordination of the various aspects of the loan (such as working with the title company).
Underwriting
the process of evaluating and deciding whether to make a new loan and, if yes, on what terms.
Servicing
the continued maintenance of a loan after the loan has closed.
Par rate
the rate without discounts or points that lenders offer only to mortgage brokers, also known as the “wholesale” rate, that does not create an additional charge or provide for a credit for the borrower.
Rate Lock (Lock-In Agreement)
This is a commitment guaranteed by a lender that an interest rate will not change on a specific loan for a specific period of time.
Float
choosing not to lock the interest rate.
Lender’s return
total amount of money the lender can make from a loan in relation to the amount invested.
origination fee
cover the administrative costs of making and processing the loan, including setting up the loan on the lender’s books. AKA, points.
Discount points
Represents a pre-payment of interest at the beginning of a loan for reducing the note interest rate charged for some defined period of the life of the loan.
Yield spread premium
A tool that an MLO can use to lower the upfront cash out-of-pocket expenses at closing for a borrower in exchange for higher monthly out-of-pocket payments required by a higher interest rate.
Housing Expense Ratio
Front End Ratio. Total Housing Expense ÷ Gross Income = Housing Expense Ratio %
Total Debt-to-Income Ratio
Back-End Ratio. Total Debt ÷ Gross Income = Total Debt-to-Income Ratio %
loan processor
is the person who will independently verify the information provided by the borrower.
The 4 C’s
Credit, Capacity, Cash, Collateral
