Financing

Question 1

One loan point is equal to ___ % of the borrower’s loan amount

Answer 1

1

Question 2

the ratio of the loan amount to the property value is called

Answer 2

loan-to-value ratio

Question 3

Lenders must cancel PMI when the principle balance is 78% or when the mortgage loan reaches its originally scheduled ____ midpoint

Answer 3

amortization

Question 4

______ are documents that are executed (signed) when a borrower receives a mortgage loan. These instruments include a promissory note and a security instrument

Answer 4

Financing instruments

Question 5

Define promissory note

Answer 5

the borrower’s promise to repay the mortgage loan.

Question 6

Define security instrument

Answer 6

an instrument attached to a promissory note pledging the subject property as collateral -may be either a deed of trust or a mortgage

Question 7

The deed of trust includes three parties:

_____ (borrower)

_____ (lender)

_____ (3rd party holder)

Answer 7

trustor

beneficiary

trustee

Question 8

What is the defeasance clause in a security instrument?

Answer 8

orders the lender or trustee to immediately release full title to the borrower once the loan amount is paid in full

Question 9

What is the acceleration clause in a security instrument?

Answer 9

makes the entire debt due immediately if there’s borrower default - must occur before a foreclosure can occur.

Question 10

What is the due-on-sale clause in a security instrument?

Answer 10

requires the borrower to repay the loan when transferring ownership to another

Question 11

What is a pre-payment penalty clause in a security instrument?

Answer 11

permits the lender to charge a specified amount for interest lost when a borrower sells or pays off a loan early. Pre-payment penalties are rare in today’s market.

Question 12

_______ loans aren’t government issued or guaranteed.

Answer 12

conventional

Question 13

_______ loans can be either conforming or non-conforming

Answer 13

conventional

Question 14

a conforming loan meets the loan limits and other criteria set by _______

Answer 14

Fannie Mae and Freddie Mac

Question 15

A conventional loan that fails to meet Fannie Mae and Freddie Mac credit score requirements, LTV and/or loan amount is called a ________ loan.

Answer 15

non-conforming

Question 16

A ____ is a conventional non-conforming loan because it exceeds conforming loan limits, but meets other conforming loan requirements.

Answer 16

jumbo loan

Question 17

The USDA ______ (FSA) offers direct guaranteed loans to farmers and ranchers for rural housing. Congressional appropriation funs these loans.

Answer 17

Farm Service Agency

Question 18

Define adjustable-rate mortgages (ARM)

Answer 18

a mortgage in which the interest rate fluctuates based on some selected economic index

Question 19

Define negative amortization

Answer 19

something that occurs when a payment fails to cover the amount of interest due. The difference in interest owed and interest paid is added to the principal of the loan.

Question 20

what is a land/contract / contract for deed

Answer 20

owner financing that requires the buyer to make installment payments to the seller for the property purchase. The seller retains the title while buyer gets equitable title.

Question 21

What is a purchase money mortgage?

Answer 21

a loan a seller issues to the buyer as part of the purchase transaction. This typically occurs in situations where the buyer cannot qualify for a mortgage through traditional means.

Question 22

What is a wrap-around mortgage?

Answer 22

the seller holds a mortgage that wraps the new buyer’s mortgage around the seller’s existing mortgage. The seller continues to make payments on the first mortgage, and buyer makes payments to the seller on the wrap-around mortgage.

Question 23

What does TILA stand for and what does it require?

Answer 23

Truth in lending act

lenders to disclose credit terms and conditions when advertising triggers loan terms

Question 24

The _____ prohibits lenders from making credit unavailable or offering unfavorable terms to those in a protected class, based on their class

Answer 24

Equal Credit Oppurtunity Act (ECOA)

Question 25

RESPA requires that lenders provide written disclosures to make estimated costs and final costs clear to consumers. These disclosures are called _____

Answer 25

TILA/RESPA Integrated Disclosures (TRID)

Question 26

TRID is exempt from applying to loans that aren’t secured by real estate, these would include:

Answer 26

HELOC’s, manufactured homes, reverse mortgages, commercial and business loans