Chapter 4 Loan Estimate Flashcards
How many days after receiving the Loan Application (1003) must a MLO provide the Loan Estimate (LE)?
3 Days
How many days before consummation must a LE be placed in the mail or delivered?
7 days before consummation.
Rate Lock
Occurs when the interest rate for a loan is locked for a particular period.
What are the basics of a loan’s terms that a lender is required to disclose on the LE?
-The loan amount
-The interest rate
-The monthly principal and interest payment
-Whether the loan has a prepayment penalty
-A balloon payment
On the LE if the following sections are selected yes for balloon and prepayment penalty, what must a lender include next to them in the disclosure?
The amount of those features
Which Fees on the LE may not change? (Zero tolerance fees)
-Fees paid directly to the lender, mortgage broker, or an affiliate or either.
-Fees paid to an unaffiliated 3rd party if the lender did not permit the consumer to shop for the 3rd party provider for a settlement service. This can include fees like credit report appraisal reports, flood determination fees, flood monitoring fees, and tax monitoring fees.
-Transfer taxes or tax stamps (but these can change if the loan amount changes.
10% cumulative-tolerance fees (on the LE)
Feels that accumulatively cannot go up more than 10% from the disclosure on the LE.
Includes:
-Recording Fees
-Charges for 3rd party services where;
-The charge is not paid to the lender or the lender’s affiliate
-The consumer is permitted by the lender to shop for a 3rd party service
-The consumer selects a service provider on the lender’s written list of service providers. (MLO must provide 1 service provider for each category.)
No-tolerance fees (fees on the LE that are allowed to change without any limitations)
Generally are items that a lender has no control over the transaction.
-Prepaid interest
-Property insurance premiums
-Amounts placed in escrow, impound or reserve or similar account
For services required by the lender, if the lender permits the consumer to shop, and the consumer selects a 3rd party service provider not on the lender’s written list of service providers.
Can the lender provide a list of settlement providers that the consumer is not permitted to shop?
Yes as long as those services ar clearly and conspicuously distinguished from the services that the consumer is permitted to shop.
How do you calculate daily interest cost?
Principal balance X Interest Rate / 360 for conventional or 365 for government loans
Prepaid interest
The amount of interest required by the lender that the borrower must pay is prorated in advance for the time between closing and the first mortgage payment (up tp 30 days).
(Mortgage interest is always paid in arrears.)
What is the escrowed threshold at the end of the year where if there is more than this amount in the account it is refunded to the borrower?
$50
Buydown
Give the borrower the opportunity to decrease their interest rate. Discount points and Permanent Discount Buydowns are both types of Buydowns.
Generally, 1% of the loan is 1 discount point, though each lender may give differing reductions of the loan for a discount point.
Temporary 2-1 Buydown
During the first year of the loan, the borrower will make payments based on an amortization scheduler using a rate that is 2% less than the note rate.
In the second year, the borrower will make payments based on an amortization schedule which is 1% less than the note rate.
From the 3rd year on, they will make payments at the note rate.
(The lender is paid at the full rate but the difference (either 2% or 1% is taken from a buydown account usually contributed to by the enticing party. At the end of 2 years it is depleted.)
Valuation Rule
Per ECOA the lender is required to notify the borrower within 3 business days of application of their right to receive a copy of the appraisal. The lender is required to provide the copy to the borrower promptly upon completion but no less than 3 business days from consummation, whichever is earlier.
