Definitions Flashcards
What is a fixed loan?
loan terms remain constant for the life of the loan and are generally 15 or 30 years
What is an ARM?
interest rate periodically adjust to reflect fluctuation in cost of money. The index is the part that adjusts or goes up and down. The margin which is the profit the lender banks stays the same for the life of the loan.
What is interest only or straight note?
period of reduced payments for a specified time then payment increase to fully amortize by end of term
Mortgage Fraud
any misrepresentation or concealment used in an attempt to obtain a mortgage loan
Bona Fide Offer
refusal of advertiser to show, demonstrate, or sell product offer, disparagement of advertised product, showing and demonstrating product that is defective, unusable, impractical for purpose represented
Actual Fraud
intent to deceive
Constructive fraud
unintentional, the result of carelessness or negligence
Fraud for property
consumer fraud, borrower misrepresent information on loan applications to qualify, including but not limited to misrepresenting income and expenses, lying about owner occupancy, or source of income for down payment
Fraud for profit -
industry insiders, examples include bogus sales, inflated appraisals, air loans, etc.
Air Loan -
non-existent loans and no-collateral loans, there is no property and the address is made up. For example getting a loan on a property that does not exist
Deed scam
- forged seller’s signature on deed. For example credit repair not giving the property back
Double sold loans
primary mortgage holder sells loan to fraudulent company for servicing, borrower signs multiple copies of the same application or documents that the loan originator submits to different lenders
Unrecorded or silent second
buyer gives a seller a second mortgage without informing the lender or makes the lender aware but never intends to file the lien to make any payments to the seller with the seller agreement. Its not illegal but unethical.
Loan flipping -
no net tangible benefit, refinances with fee rich loan that has not benefits
Equity Skimming
making loans or rescues knowing the borrower will not be able to pay
Switch after Sale
accepting a deposit for product then switching product to higher priced item, failure to make delivery of product within reasonable time or make refund, disparagement by acts or words of the advertised product
Straw buyer
a person who makes a purchase on behalf of another person. A straw buyer is used the real buyer cannot complete the transaction for some reason.
Bait and Switch
alluring but insincere offer to sell product or service, purpose is to switch consumers from buying advertised product to something else, still bait and switch if consumer chooses other product/service
CFPB
aka The Bureau, created by Dodd-Frank Act and Consumer Finance Protection Act
What is the purpose of the Consumer Finance Protection Bureau?
promote financial stability through accountability and transparency
Which entities report to the CFPB?
money & banking:
OCC, OTS, FDIC, Federal Reserve, NCUA, HUD, FTC
Escrow Account
Impound Account aka reserve account where the lender takes the money to cover your taxes and insurance
Index + Margin =
Rate (Full Indexed Rate)
Affiliated Business Arrangement
- if you own even 1% you have to give a disclosure to the consumer immediately or prior to docs
Wraparound Mortgage
when an existing loan on a property is retained while the lender gives the buyer another larger loan. Total debt (new second loan and existing loan) is treated as a single obligation by the buyer with one payment made on the entire debt.
Equity Participation Mortgage (Shared Appreciation Loan or SAM)
permits the lender to share part of the earnings, income, or profits for a real estate project. Also known as a participation loan. An ex is if a borrower is upside down and the bank forgives them a portion of the original loan with the contingency to receive 5% equity when the home is sold.
Package Mortgage -
a mortgage that includes personal property, like appliances, in the property sale and all are finances together in one contract, but generally requires an added security instrument (UCC) to lien the personal property portion of the sale.
Construction Mortgage
aka interim loan, this temporary loan is used to finance the construction of improvements and buildings on land (materials etc.). when construction is complete the appraiser verifies that specifications have been met and the original option of value is valid
Take out Loan
is the permanent financing loan that replaces the construction loan (interim loan) once the project is completed
Cash-Out Mortgage/Refinance
allows the borrower to get cash for the equity that has built up in a property eg Home equity loan for a specific purpose or refinances and receives cash at closing
- allows owners to tap into equity built up into home over the years but still retain ownership
- must have net tangible benefit
Home Equity Loan
-loan is usually one-time loan for specific amount of money/specific purpose; closed end loan
loan
Home Equity Line of Credit
-line of credit (HELOC) is money that is available to the homeowner to be borrowed as needs arise; an open-end
Hybrid Arm -
an adjustable rate mortgage with an initial fixed rate greater than 1 year (period). For example, 3/1, 5/1, 7/1, 10/1 ARMs
Bridge mortgage-
occurs between the termination of 1 mortgage and the beginning of the next. When the next mortgage is taken out, the bridge mortgage is repaid. For example, if you need down payment money from the sale which is pending to purchase the next home.
Blanket mortgage -
covers more than 1 parcel of land or lot and is usually used to finance subdivision developments. Usually has a partial release clause, allowing the borrower to pay a certain amount to release some of the lots with the mortgage continue to cover the remaining lots.
Bi-weekly mortgage-
payment plan on fixed rate mortgage set up lie a standard 30-yr conventional loan but payments are made every 2 weeks instead of every month. The 26 annual payments equal 1 extra payment ea. yr
Balloon Payment
also known as partially amortized loan is a type of fixed rate mortgage with a monthly payment based on a 30- year schedule
budget mortgage
is a mortgage that is escrowed or PITI
Indices include
COFI/LIBOR/Prime/COSI/etc.
Margin
sometimes referred to as spread is the lender’s profit
