Chapter 7 & 8

Question 1

Renegotiable Rate Mortgage (RRM)

Answer 1

Amortized over 30 years, BUT must be RENEWED 3,4,5 year intervals/Lender can increase interest rate each renewal/ but no more than 1/2 of 1% for each year of the initial term.

Question 2

DE

Answer 2

Direct endorsement program = Approved Lender of FHA insured loan to underwrite directly for FHA .

Question 3

Shotgunning fraud

Answer 3

multiple loans for the same property, in excess of the actual value of the property.

Question 4

Individual in cooperation

Answer 4

cooperative purchaser /receive DEED for a proportionate undivided interest and has a right to occupy the a particular unit.

Question 5

Recognition clause

Answer 5

recognize the right of each individual parcel owner by the lender in the BLANKET mortgage. even if the developer defaults or in case of foreclosure

Question 6

compound interest

Answer 6

interest computed on the principal + accrued interest.

Question 7

Interest Rate Cap

Answer 7

LIMIT to the amount of interest the borrower can be charged

Question 8

Regulatory capital requirements

Answer 8

Retain certain percentage of the capital for covering the existence of loan obligations.

Question 9

Open-end Loan

Answer 9

Expandable Loan/ Mortgage or deed of trust for future advance/ Does not have a definite end date / lender give the limit up to which they may borrow.

Question 10

TDHCA

Answer 10

texas department of housing and community affairs/ Eligible first time home buyer > mortgage loan funds and downpayment assistance

Question 11

Gap commitment

Answer 11

A Garantee for the developer to have access/ differences for the Floor plan and upper level of the permanent loan if the developer does not reach the rental goals.

Question 12

Release Clause

Answer 12

in Blanket mortgage /each lot as it is sold .

Question 13

Installment sales Method

Answer 13

Allow seller to get partial payments which allow him to defer some taxes

Question 14

Income Ratio

Answer 14

Housing Expense Ratio

Question 15

predatory lending

Answer 15

aggressive loan term/ ignore the lender’s ability to pay the loan / benefit the lender not the borrower

Question 16

LLC advantage

Answer 16

Give the tax advantage of the partnership & limited liability of the corporation.

Question 17

Working the Gap

Answer 17

Technique/ involve excessive lien stacking excessive knowingly on a property with a very narrow time frame.

Question 18

Growing equity mortgage

Answer 18

Fixed-rate mortgage / increase for a fixed amount over a given schedule period of time. /entire term of the loan

Question 19

Aggregate Cap / overall Cap

Answer 19

A limit on amount of interest can increase over the life of the loan

Question 20

Construction loan OR INTERIM financing

Answer 20

Open-End mortgage , cost of labor and material with just the LAND not structures.

Question 21

Subprime Lending

Answer 21

Make loan for people who may have difficulty to qualify for traditional loan
Second Chance lending, Near prime, or non-prime lending