General Knowledge Flashcards
Year the Federal Reserve System was created
1913
This established a federal charter for banks that permitted them to make real estate loans.
Federal Reserve System
This established a framework for government involvement in mortgage lending.
Federal Reserve System
Year the Federal Home Loan Bank Act was created
1932
This was created to allow Federal Home Loan Banks to lend money to savings and loans, credit unions and savings banks so that they could also finance home mortgages.
Federal Home Loan Bank Act
Year The Banking Act was created
1933
This further assisted in creating the Federal Deposit Insurance Corporation (FDIC)
The Banking Act
Created to insure deposits and protect consumers against bank default.
Federal Deposit Insurance Corporation (FDIC)
This allowed banks to continue to have a source of funds to make more home loans.
Federal Deposit Insurance Corporation (FDIC)
The year the Federal Housing Administrative (FHA) was created
1934
Who created FHA
National Housing Act.
It was created to help the housing industry recover from the Great Depression
Federal Housing Administrative (FHA)
This was not originally intended to fund loans but to provide mortgage insurance so banks would not have to incur loses for defaults on home loans.
Federal Housing Administrative (FHA)
The creation of the this, allowed lenders to commit more funds to home mortgage loans.
Federal Housing Administrative (FHA)
This is the largest insurer of mortgage in the world.
FHA
The year Federal National Mortgage Association (FNMA or Fannie Mae) was created.
1938
This increased the liquidity in the market and allowed for more money to become available for lenders.
Federal National Mortgage Association (FNMA or Fannie Mae)
This was established to provide financial incentives to renovate and build within certain urban areas.
U.S. Department of Housing and Urban Development (HUD)
Analyzes a bank’s success or failure to reach out to the lending communities it serves.
Community Reinvestment Act
Year that FNMA was privatized and become a government-sponsored entity (GSE).
1968
This was created to securitize government issued mortgages.
Government National Mortgage Association (GNMA, Ginnie Mae)
These two entities allowed loans to become securitized and sold on the secondary market for profit.
Federal National Mortgage Association (FNMA or Fannie Mae)
Government National Mortgage Association (GNMA, Ginnie Mae)
The year the Federal Home Loan Mortgage Corporation (Freddie Mac, FHLMC) was created
1970
This was created by subprime lending and a lack of liquidity in the market.
Housing bubble
Before July 2006, Subprime mortgage lenders were fueled by a lack of this
Regulation
The year the Dodd-Frank Wall Street Reform Act was created
2010
This put into place many new regulations after the housing bubble burst.
Dodd-Frank Wall Street Reform Act
This created the Consumer Financial Protection Bureau (CFPB)
Dodd-Frank Wall Street Reform Act
This was created to begin proposing new federal regulations to prevent another Great Recession
Dodd-Frank Wall Street Reform Act
This was created to supervise the mortgage industry and enforce federal law to prevent another Great Recession
Dodd-Frank Wall Street Reform Act
This was created to enforce federal law in the hopes that nothing like the Great Recession of 2008 and 2009 would happen again
Dodd-Frank Wall Street Reform Act
An individual who for compensation or gain or in the expectation of compensation or gain Takes a residential mortgage loan application
A mortgage loan originator or MLO
An individual who for compensation or gain or in the expectation of compensation or gain Offers or negotiates terms of a residential mortgage loan.
A mortgage loan originator or MLO
An individual who for compensation or gain or in the expectation of compensation or gain Does not include an individual engaged solely as a loan processor or underwriter
except if they are an independent contractor
A mortgage loan originator or MLO
Does not include a person or entity solely involved in extensions of credit relating to timeshare plans.
A mortgage loan originator or MLO
A licensing system that was developed and is maintained by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).
NMLS
The purpose of the ________ is to store the information of each licensee and allow for the movement of information between the MLO or applicant for an MLO license and the state in which they intend to be licensed.
NMLS
A _______ __________is a number that will identify which MLO is originating a loan by appearing on the residential loan application.
Unique identifier
A ________ ________ is defined as: an individual or firm (generally a firm) that brings borrowers and lenders together for loan origination.
Mortgage Broker
A ________ _______ typically takes loan applications and may process loans.
Mortgage Broker
A ________ ________ can sometimes close the loan, but they typically turn it over to the lender for underwriting and closing
Mortgage Broker
A ______ ______is defined as an entity that provides funds for a mortgage.
Mortgage Lender
________ ________also manage the credit and financial information review.
Mortgage Lenders
A _________ ________ may also take the loan from the application process through closing.
Mortgage lender
Once the lender funds a loan, unless the lender retains the loan on their books, they will break the loan into two separate rights;
The servicing rights and the mortgage
The lender will typically sell the mortgage to the ________ ________
Secondary market
The servicing rights to a loan can be sold to a ____________ __________.
Mortgage Servicer
A __________ __________ is a firm that performs servicing functions, including collecting mortgage payments.
Mortgage Servicer
A __________ __________ is a firm that performs servicing functions, including paying the borrower’s taxes and insurance.
Mortgage Servicer
A __________ __________ is a firm that performs servicing functions, including generally managing borrower escrow accounts.
Mortgage Servicer
The ______ _______ ______ is the market in which mortgage loans and mortgage-backed securities are bought and sold.
Secondary mortgage market
_________ ________ ________are a type of asset-backed security that is secured by a mortgage or collection of mortgages
Mortgage-backed securities
____________ are sold to a group of individuals that packages them into a security that investors can buy and sell on the market.
Mortgages
Big players on the secondary market are:
The Federal National Mortgage Association (FNMA,
Fannie Mae), The Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac) and The Government National Mortgage Association (GNMA, Ginnie Mae).
Both __________ and __________ are government-sponsored entities or GSE’s
Fannie Mae and Freddie Mac
They provide liquidity to the market by purchasing mortgages and mortgage-backed securities and selling them on the secondary market.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac will only purchase this type of loan.
Conventional Loans
Government-owned entity that purchases mortgages and mortgage-backed securities and sells them on the secondary market.
Government National Mortgage Association (GNMA, Ginnie Mae).
Government National Mortgage Association (GNMA, Ginnie Mae) will only purchase this type of loan.
Government
When entities purchase loans from lenders, it frees up the lender’s funds, which keeps the market moving by allowing the lender help more borrowers. This process is called what?
Mortgage Loan Life Cycle
The three stages of a mortgage loan life cycle.
Borrowers consideration, the primary market and the secondary market.
An entity that has the power to regulate the mortgage industry.
Regulatory Authority
They have the power to investigate, impose penalties, provide supervision or a combination of the three.
Regulatory Authority
Each state has its own state __________ __________ that is responsible for the supervision and enforcement of the state laws regarding the mortgage industry.
Regulatory Authority
At the highest level are ___________ __________ __________ that enforce federal law and supervise the mortgage industry.
Federal regulatory authorities
There are _________ __________ _________that are only able to regulate their state and cannot set laws beneath the federal standards.
State regulatory authorities.
The major enforcer and supervisor for the federal government of the mortgage industry.
Consumer Financial Protection Bureau
A relatively new entity created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, assigned to increase the oversight and regulatory burden of the mortgage industry.
Consumer Financial Protection Bureau
The key federal law that regulates the licensing process and responsibilities of mortgage loan originators.
The Secure and Fair Enforcement Act of 2008 (SAFE Act)
The year the SAFE Act was passed
2009
The text of a law that was provided to each state as a guide to creating its own state law.
Model Law
What two entities created the Model Law
Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage (AARMR)
The application for MLO licensing used my the NMLS
MU4
The 20-hour pre-licensing education must include:
3 hours of federal law and regulation
3 hours of ethics, which must include instruction on fraud, consumer protection, and fair
lending issues
2 hours of training related to lending standards for nontraditional mortgage product
marketplace
12 elective hours
A ________ ________is a lot like malpractice insurance for a doctor
Surety bond
At a minimum, the continuing education must include:
3 hours of federal law and regulations
2 hours of ethics – including instruction on fraud, consumer protection and fair lending
issues
2 hours of training to related to the lending standards for the non-traditional mortgage
product marketplace
An MLO cannot take the same continuing education course in a two-year period. This is
called the:
Successive year rule.
They looked to strengthen loan originator qualification requirements and regulate industry compensation practices.
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
They issued new rules to implement the Dodd-Frank Act requirements, as well as to revise and clarify existing regulations and commentary on loan originator compensation.
CFPB
This defines “a term of a transaction” as “any right or obligation of the parties to a credit transaction.” This means, for example, that a mortgage broker cannot receive compensation based on the interest rate of a loan or on the fact that the loan officer steered a consumer to purchase required title insurance from an affiliate of the broker, since the consumer is obligated to pay interest and the required title insurance in connection with the loan.
The Loan Originator Compensation Rule (LO Comp)
To prevent evasion, ____ ________prohibits compensation based on a “proxy” for a term of a transaction.
The Loan Originator Compensation Rule (LO Comp)
To prevent evasion,_______ _______generally prohibits loan originator compensation from being reduced to offset the cost of a change in transaction terms (often called a “pricing concession”). However, the final rule allows loan originators to reduce their compensation to defray certain unexpected increases in estimated settlement costs
The Loan Originator Compensation Rule (LO Comp)
To prevent incentives to “up-charge” consumers on their loans, this generally prohibits loan originator compensation based upon the profitability of a transaction or a pool of transactions. However, subject to certain restrictions, the final rule permits certain bonuses and retirement and profit-sharing plans to be based on the terms of multiple loan originators’ transactions.
The Loan Originator Compensation Rule (LO Comp)
This was designed to address consumer confusion over mortgage broker loyalties where the brokers were receiving payments both from the consumer and the creditor.
LO Comp
This also requires that loan originators provide their unique identifiers under the NMLS on loan documents.
LO Comp
This extends existing recordkeeping requirements concerning loan originator compensation so that they apply to both creditors and mortgage brokers for three years.
LO Comp
________________ is considered annual or other period bonuses, awards or merchandise, services, trips or similar prizes as well as salaries, and commissions.
Compensation
The _________________ rule was put into place to eliminate the ability of lenders to pay loan originators based upon terms and conditions of a loan.
Loan Originator Compensation
For an MLO to be sure they are not steering and meet the requirements of the LO Compensation Rule the MLO must show:
The consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and
• The loan options presented to the consumer include the following:
o The lowest interest rate for which the consumer qualifies;
o The lowest points and origination fees, and
o The lowest rate for which the consumer qualifies for a loan with no risky features,
such as a prepayment penalty, negative amortization, or a balloon payment in the first seven years.
The most common type of mortgage available.
Fixed rate mortgage
A mortgage with a fixed interest rate over the entire term of the loan.
Fixed Rate Mortgage
A mortgage that has fixed terms of 10 years, 15 years, 20 years, 25 years or 30 years.
A Fixed Rate Mortgage
The only time a payment changes on a fixed rate mortgage is if one of these 3 things would happen
- In the event of the borrower’s taxes increase
- If the insurance increases
- When the mortgage insurance is removed.
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition.
Escrow
For example, the deposit by a borrower with a lender of funds to pay taxes and insurance premiums when they become due. These items are placed into what type of an account?
Escrow
This account is where the funds to pay taxes and insurance are held until they are due to be paid.
Escrow
When the taxes and insurance become due, with an Escrow account, one of 2 entities can pay them.
- Lender
2. Servicer
What type of mortgage is a 30-year fixed mortgage.
Traditional Mortgage
A ____________ mortgage is anything other than 30-year fixed rate mortgage
Non traditional
A mortgage loan where the interest rate on the loan periodically adjusts.
Adjustable rate mortgage (ARM)
With an Adjustable Rate Mortgage, the adjustment is based upon these 3 things. an index, a margin and adjustment caps.
- Index
- Margin
- Adjustment caps.
This mortgage starts out with an initial rate and payment.
Adjustable Rate Mortgage (ARM)
The initial rate and payment amount on this mortgage remains in effect for a limited period. That limited period can range from 1 month to several years.
Adjustable Rate Mortgage (ARM)
With most ARMs, your options for how often the interest rate and monthly payment may change, is one of the 5 following
- Monthly
- Quarterly
- Yearly
- 3 year
- 5 years
On an ARM, the period between the rate changes is called what?
Adjustment period
An interest rate on an ARM is made up of what two parts?
The index and the margin
In regards to an interest rate on an ARM, this is the measure of interest rates that fluctuate with the market.
Index
In regards to an interest rate on an ARM, this is the amount the lender ads, that is assigned at the origination, that always stays the same.
Margin
The three most common indexes in the mortgage industry are:
- The LIBOR (London Interbank Offered Rate)
- The COFI (FHLBB 11th District Cost of Funds Index)
- The CMT (Constant Maturity Treasury)
The index percent and margin percent added together is called what?
Fully-indexed rate
In regards to ARM, this is put into place to make sure that the borrower’s interest rate never goes up more than a certain percentage every time it adjusts.
Interest rate cap
The 3 different kinds of interest rate caps on ARMs
- The first adjustment cap
- The subsequent adjustment cap
- The lifetime adjustment cap
In regards to ARMs, this allows the loan’s interest rate to adjust up or down by only a certain amount at the first adjustment.
The first adjustment cap
In regards to ARMs, this only allows the interest rate to adjust by a specific percentage on any other adjustments after the first adjustment
The subsequent adjustment cap
In regards to ARMs, this limits the amount of total upward-adjustments for the life of the loan.
The lifetime adjustment cap.
The three common types of ARMs.
- Hybrid ARM
- Interest-only ARM
- Payment option ARM.
These types of ARMs are often advertised as 3/1, 5/1. 7/1 or 10/1 ARMs.
Hybrid
These types of ARMs are a mix between fixed rate and adjustable rate mortgages.
Hybrid
In regards to ARMs, taking the 3/1 for an example, the interest rate is fixed for 3 years and then adjusts every one year after that fixed period ends.
Hybrid
This ARM payment plan allows for the borrower to pay only the interest on their loan for specified number of years.
An interest-only (I/O)
Typically, _____________ ARMs allow for interest only payment for 3 to 10 years.
An interest-only (I/O)
In regards to ARMs, this allows the borrower to have smaller monthly payments for a certain period. After that, the monthly payment increases, even the interest rates stay the same, because the borrower is required to start paying down the principal as well as the interest.
An interest-only (I/O) ARM
Some __________ ARMs allow for the interest rate to adjust during the __________ period, some do not.
An interest-only (I/O) ARM
The ________ ________ ARM allows the borrower to choose from several payment options.
Payment option
The payment option ARM allows the borrower to choose from several payment options. The options typically include:
.
- An interest-only payment
- A minimum payment
- A combined PMT that includes the interest payment and a payment towards the
principal.
This “payment option ARM” allows the borrower to pay only the interest on the loan each month.
Interest-only payment.
This “Payment option ARM” allows the borrower to pay a payment that can be less than the interest due that month, which may increase the amount the borrower owes on the mortgage.
Minimum Payment
This payment option ARM allows the borrower to pay a payment that includes the interest payment and a payment towards the
principal.
Combined PMT
This type of loan is usually a short-term loan that provides funds to cover the cost of building or rehabilitating a home.
Construction loan.
A _________ loan generally has higher interest rates than longer-term mortgage loans used to purchase homes.
Construction
The money borrowed through a __________ loan is typically provided in a series of advances as the construction progresses.
Construction
A short-term loan secured by the borrower’s current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new home before the current home is sold.
Bridge loan
A mortgage that has a low initial monthly payment that gradually increases over a specified time frame that is determined out at the time of origination.
A graduated payment mortgage (GPM)
This loan uses negative amortization to allow the borrower to have an initially discounted monthly payment.
A graduated payment mortgage (GPM)
The purpose of this loan, is to allow a borrower with limited income that can document a likely future increase in income to buy a house sooner by starting with a smaller house payment that increases over time.
A graduated payment mortgage (GPM)
True or false: On a Negative Amortization loan, the amount of interest not covered is added onto the principal balance of the loan.
True
This occurs when a payment covers the amount of interest being accrued plus an additional amount towards the principal balance of the loan.
Regular amortization
An ___________ ___________ shows how much a person would have to pay monthly to pay off their loan in a specific period.
Amortization schedule
A type of revolving loan, that enables a homeowner to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in their property.
A Home Equity Line of Credit or a HELOC,
It is an open-ended loan that allow the borrower to take money out of their home to do other things with it.
A Home Equity Line of Credit or a HELOC
True or false: The borrower does not need to have equity built in their home to qualify for a HELOC.
False.
The borrower must have equity already built in their home to qualify for a HELOC.
A HELOC generally doesn’t allow the borrower to take 100 percent of the equity out of the property, it’s usually around this percent
80
A _______________usually only requires interest-only payments on it and can be paid down and then the money can be taken out again.
HELOC. Home equity line of credit.
A mortgage that requires a larger than usual one-time payment at the end of the term.
Balloon mortgage
These loans generally have lower payments in the years before a big amount at the end of the loan.
Balloon Mortgage
This payment is more than two times the loan’s average monthly payment and can often times be thousands to tens of thousands of dollars.
Balloon payment
Most of these loans require one large payment that pays off your remaining balance at the end of the loan.
Balloon loan
In this type of a mortgage, the borrower will pay interest and principal payments for a fixed term, sometimes that term is 10 years or 15 years, it can vary. After that fixed term is over the borrower must pay off the rest of the balance of the loan.
Balloon
A mortgage loan that is not insured or guaranteed by the federal government or one of its agencies, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS).
Conventional Mortgage
A ______________ mortgage is a mortgage that conforms with Fannie Mae and Freddie Mac guidelines.
Conforming
A loan that is _________________is any loan that does not conform to Fannie Mae and Freddie Mac guidelines.
Non-conforming
True or false:
A conventional loan can be either non-conforming or conforming.
True
_________________ loans can be fixed rate mortgage, adjustable rate mortgages, balloon mortgages or hybrid mortgages.
Conventional
Fannie Mae’s AUS is called:
Desktop Underwriter or DU
Freddie Mac’s AUS is called:
Prospector or LP
The most common loan types used in conforming lending are:
- 30 and 15- year fixed rate mortgages
2. Adjustable rate mortgages.
For conventional loans, debt to income ratio if manually underwritten.
28%/36%
For conventional loans, what is the minimum down payment?
3%
On average, what is the lowest fico credit score for conventional mortgages?
640
Loan limit maximum for a conventional conforming mortgage:
453,100
Mortgage minimum to be considered a conventional non-conforming loan.
453,100
Required on conventional loans with less than 20% down
Private Mortgage Insurance (PMI)
True or False:
Appraisals are not required on Conventional loans.
False
True or False:
Gift Funds are allowed for Down Payment on a Conventional loan.
True
In regards to a conventional loan, how long do you have to wait after a Chapter 13 discharge?
2 years
In regards to a conventional loan, how long do you have to wait after a Chapter 7 filing?
1 year
In regards to a Conventional loan, what is the wait time to apply after a Foreclosure?
2 years
Maximum loan to Value on a Conventional cash out refinance?
85%
Required reserves on a conventional loan
2-4 months
Sellers Concessions on a Conventional loan
3%
True or False:
On a conventional loan, the co-borrower does not have to occupy the residence?
False
Employment history needed for a Conventional loan
2 years
Is a Conventional loan considered a consumable loan?
No
This type of bankruptcy provides for complete liquidation of the debtor’s debts.
Chapter 7
This type of bankruptcy provides for the debtor to pay back their creditors through a payment plan decided by the court.
Chapter 13
This is a calculation made to determine whether the borrower has the ability to pay for the loan they are attempting to receive.
Debt to Income
Another term for Debt to Income ratios.
Qualifying Ratios
This ratio simply takes the amount that the borrower will be paying for their mortgage and divides it by their gross monthly income
The Front-End Debt to Income Ratio/Housing Expense Ratio
This ratio takes all of the borrower’s monthly liabilities and divides it by their gross monthly income.
The Back-End Debt to Income Ratio/ Total Expense Ratio
Calculation where you take the loan amount and divide it by the borrower’s purchase price or the properties appraised value (whichever is lower).
Loan to Value. LTV
Responsible for the creation of the NMLS.
America Association of Residential Mortgage Regulators.
This is an arrangement between two different companies involved in providing services in the closing of a real estate transaction.
Affiliated Business Arrangement.
True or false:
There can be no ownership interest in an Affiliated Business Arrangement
True
True or false:
An Affiliated Business Arrangement does not requires a disclosure under RESPA.
False
The middleman between appraisers and mortgage companies.
Appraisal Management Company
A law in place to require financial institutions to prevent, detect and report money laundering activities
Anti-Money Laundering
Rate used to determine whether a loan is high- cost or higher priced.
Average Prime Offer Rate.
Calculates the annual percentage rate you would pay on the loan once the costs of getting the loan are factored in.
Annual Percentage Rate
A mortgage that will have a fixed rate for a set period and then the rate is adjusted. The rate will normally be adjusted once or twice a year.
Adjustable Rate Mortgage
Rule that requires lenders to determine whether a borrower has the ability to repay their loan and requires verification of the information provided to prove the ability to repay (under QM)
Ability to Repay
System used to automatically underwrite conforming loans.
Automated Underwriting System
Requires suspicious activity reports (SARS) regarding suspicious activities.
Bank Secrecy Act
A federal database of people who have delinquencies on any kind of federal debt.
Credit Alert Verification Reporting System
Federal regulator that regulates the mortgage industry. (The Boss)
Consumer Financial Protection Bureau
Required disclosure on ARM loans to educate the consumer about the type of loan they are on.
Consumer Handbook on Adjustable Rate Mortgages.
Calculated by dividing the amount of a 1st lien loan and the total line of the credit on a HELOC or total amount of a 2nd lien loan by the purchase price or the appraised value of the property whichever is less.
Combined Loan to Value
Required document on VA loans to determine the amount of eligibility that veteran borrower has.
Certificate of Eligibility
Index used on ARM loans (margin + index)
Cost of Funds Index
Two ratios, front end and back end.
Debt to Income
The AUS used by Fannie Mae.
Desktop Underwriter
A law in the U.S. that makes it illegal for any creditor to discriminate against any applicant based on race, religion, national origin, sex, etc.
Equal Credit Opportunity Act.
Prevent identity theft, puts limits on information sharing. Amendment to FCRA.
Fair and Accurate Credit Transactions Act
Regulates how consumer-reporting agencies use consumer information.
Fair Credit Reporting Act
Regulates depository institutions.
Federal Deposit Insurance Corporation
Collects and distributes HMDA information.
Federal Financial Institutions Examination Counci
The Federal Government Agency that oversees the US Housing Market.
Federal Housing Administration
These types of mortgages are guaranteed by the Federal Government and offered by banks/lenders.
Federal Housing Administration. FHA.
A corporation authorized by Congress to provide a secondary market for residential mortgages.
Federal Home Loan Mortgage Corporation
A government sponsored entity created by Congress to increase access to mortgage.
Federal Housing Administration (Freddie Mac)
Mortgages offered under Freddie Mac guidelines are called ______________ mortgages.
Conforming
The company that created the industry standard credit scores used by almost all lenders.
Fair Isaac Corporation. FICO
The _______ score is a numeric summary of the information in your credit reports that represents your potential credit risk.
FICO
The entity that a SAR(suspicious activity report) would be reported to.
Financial Crimes Enforcement Network FinCEN
A government sponsored entity created by Congress to increase access to mortgages.
Federal National Mortgage Association (Fannie Mae)
Mortgages offered under Fannie Mae guidelines are called ___________ mortgages.
Conforming
A document that the lender is required to give a prospective borrower when they apply for a loan.
Good Faith Estimate.
The ______ _______ _________is an estimate of all closing costs and fees required for the proposed mortgage loan.
Good Faith Estimate
Requires disclosure of information sharing policies.
Gramm-Leach Bliley Act
This is a type of mortgage on which the payment starts low and rises over time.
Graduated Payment Mortgage
A financial services corporation created by the US Congress (Fannie and Freddie Mac)
Government Sponsored Enterprise
A refinance program that allows eligible borrowers, with little to no equity in their homes, to take advantage of low interest rates and other refinancing benefits.
Home Affordable Refinance Program. HARP
Loan for borrowers 62 years and older. Uses the equity in their home to create cash disbursements to the borrower.
Home Equity Conversion Mortgage
A loan in which the lender agrees to lend a maximum amount within an agreed loan term, where the collateral is the borrower’s equity in his or her house.
Home Equity Line of Credit. HELOC
Requires lenders to report their lending patterns geographically to prevent redlining and reverse redlining.
Home Mortgage Disclosure Act
Regulates high cost home loans.
Home Ownership and Equity Protection Act
Regulates the cancellation of private mortgage insurance
Homeowners Protection Act
The primary housing and lending regulatory authority in the U.S.
U.S. Department of Housing and Urban Development. HUD
A payment that only covers the interest on the loan.
Interest Only
A non-owner occupied property that is rented out by the borrower
Investment Property
This refinance loan allows you to lower your interest rate on an existing VA home loan.
VA Interest Rate Reduction Refinance Loan.
The AUS (Automated underwriting system)used by Freddie Mac.
Loan Prospector
A ratio used by the lender that divides the amount of money borrowed by the appraised value of the home expressed as a percentage.
Loan-to-Value
These are investment instruments that are bundled by Fannie, Freddie and Ginnie Mae for sale on Wall Street.
Mortgage Backed Security
Mortgage insurance charged monthly on an FHA loan.
Monthly Mortgage Insurance
A loan that doesn’t require income or assets.
A loan that doesn’t require income or assets.
A loan that requires no income verification
No income verification
A loan on a property not occupied by the owner. (investment property, vacation/second home)
Non-owner occupied
A loan on a property owned by the owner.
Owner-occupied
The two elements that go towards repaying your loan.
Principal and Interest
These are the four main components of your monthly mortgage payment. Principal is the loan amount. Interest is the rate at which the finance charge you pay for borrowing is calculated. Taxes are the real estate taxes for which you are responsible, and insurance is the homeowner’s insurance that your lender requires you to have.
Principle, Interest, Taxes and Insurance
The loan amount.
Principal
The rate at which the finance charge you pay for borrowing is calculated.
Interest
The real estate taxes for which you are responsible
Taxes
The homeowner’s insurance that your lender requires you to have.
Insurance
If you put down less than 20 percent most lenders or banks require you to have this. This can be put into your monthly mortgage payment or calculated into your rate.
Private Mortgage Insurance
A penalty charged to a borrower if they pay their loan in full before the end of its term.
Prepayment Penalty
A type of development is designed real estate, usually a combination of housing, recreation, commercial and industrial parks all within one development or subdivision
Planned Urban Development
A type of loan that requires the lender to make sure that borrower can repay the loan
Qualified Mortgage
Report required to be made to FinCEN under the Bank Secrecy Act (BSA) when there is a suspicion of money laundering or fraud.
Suspicious Activity Report
The loan only requires the borrower to state their income and assets, doesn’t require verification.
Stated income, stated asset
Payment received by a lender on the sale of a closed mortgage loan to the secondary market
Service Release Premium
An important document you will receive from the lender or bank within three days of your application. Within the document certain disclosures are set forth. Such as, finance charges, annual percentage rate (APR), amount financed, total of payments, and total sales price will be disclosed.
Truth in Lending. TIL
This is calculated by dividing the sum of the 1st lien mortgage amount and the disbursed amount of a HELOC or 2nd lien by either the property’s purchase price or appraised value (whichever is less)
Total Loan to Value
New legislation as of October 2015, requires the Loan Estimate and Closing Disclosure, replaces the GFE, TIL and HUD-1 disclosures.
TILA-RESPA Integrated Disclosure Rule
Mortgage insurance premium paid in a lump sum upfront on an FHA loan.
Upfront Mortgage Insurance Premium
25 question addition to the National Test Component that replaced most individual state tests.
Uniform State Test
This federal government agency guarantees mortgages that assist eligible veterans in buying homes.
Department of Veterans Affairs. VA
Used to verify that X amount of money is in a borrower’s bank account.
Verification of Deposit
Used to verify that a borrower is employed.
Verification of Employment
Used to verify that a borrower has X mortgage.
Verification of Mortgage
Used to verify that a borrower pays rent and pays their rent on time.
Verification of Rent
Paid to the broker for giving a borrower a higher interest rate on a loan in exchange for lower up-front costs generally paid in origination fees, broker fees or discount points
Yield Spread Premium
When the seller of a home agrees to pay certain costs associated with the closing process on behalf of the borrower, this is referred to a ____________ ___________.
Seller Concessions
The cash amount that the borrower has available after making a down payment and paying closing costs for the purchase of a home.
Reserves
Some loan programs allow for the seller to only pay a set percentage of ___________ __________, limiting the amount of contributions paid to help cover the borrowers closing costs.
Seller Concessions
This is required on all conventional/conforming loans when the borrower’s down payment is less than 20 percent OR if the loan has an LTV of 80 percent or higher.
Private Mortgage Insurance
Insurance for conventional loans that protects the lender from incurring loss in the event of default by the borrower.
Private Mortgage Insurance (PMI)
Typically provided through a third-party company, however, the payment for the _______ is included within the borrower’s monthly mortgage payment.
Private Mortgage Insurance (PMI)
In July of 1999, _______ ________ _________ went into effect. Before this, the federal government did not regulate PMI. The Homeowners Protection Act addresses how/when PMI may be removed from a loan.
Homeowners Protection Act
This addresses how/when PMI may be removed from a loan.
Homeowners Protection Act
This provides two ways for private mortgage insurance to be cancelled/removed.
The Homeowners Protection Act
The two ways for private mortgage insurance to be cancelled/removed.
- When the borrower has at least 20 percent equity in their home and has paid down the mortgage balance to 80 percent
- When the balance owed drops to 78 percent
Maximum debt to income for a FHA loan
31%/43%
Minimum down payment on FHA loans
3.5 % (up to 97.5%LTV)
Minimum credit score on FHA loans
580 with 3.5% down OR
500-579 with 10%+ down
Is monthly mortgage insurance required on FHA loans?
Yes
True or false:
Upfront mortgage insurance is not required on a FHA loan.
False
True or false:
Appraisals are required for FHA loans.
True
True or false:
Gift funds are not allowed for FHA loans.
False
On an FHA loan, borrowers have to wait for this amount of time after a foreclosure.
3 years
On an FHA loan, borrowers have to wait for this amount of time after a chapter 13 discharge.
2 years
On an FHA loan, borrowers have to wait for this amount of time after a chapter 7 filing.
1 years
LTV requirements for a cash-out refinance for FHA loans.
85%maximum LTV
Reserves needed for FHA loans.
None
Maximum sellers Concessions on an FHA loan
6%
True or false:
A Non-occupying Co-borrower is allowed on FHA loans.
True
Is an FHA loan assumable?
Yes with an FHA creditworthiness check.
This type of loan is less strict on employment history as they are meant for people with less than perfect credit or income qualifications.
FHA
True or false:
FHA loans are an Owner Occupancy loan that requires borrowers to move in within 30days.
False. Must move in within 60 days.
FHA (Federal Housing Administration) Loans are insures by _______.
The Department of Housing and Urban Development (HUD).
This type of home loan is generally easier to obtain as its underwriting guidelines are more lenient than conventional guidelines.
FHA
True or false:
To originate FHA loans, a lender must be approved through FHA.
True
When a loan is insured by _________, it protects the lender from incurring damages due to an FHA loan defaulting.
HUD
When would a lender submit a claim form to FHA?
When a FHA loan goes into foreclosure.
Can FHA take over a property when if goes into foreclosure?
Yes
If approved as an unconditional ________ ________, the lender can underwrite and close mortgage loans without prior FHA review or approval.
Direct Endorser (DE)
True or false:
FHA loans do not allow for non-traditional credit and no credit score loans.
False. FHA loans do allow for non-traditional credit and no credit score loans.
This type of loan allows for a borrower to assume a current mortgage generally with little to no change in terms (especially the interest rate) if approved by the lender.
Assumable
