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
True or false:
Assumable loans have no closing costs.
False
True or false:
To qualify for an assumable loan, the buyer must pay the difference, in cash, of the asking price verses the owed amount on the home.
True. For example: If a seller lists their home at $240,000 but only owes $200,000 on the loan, a borrower would need to pay $40,000 in cash, but could then assume the sellers mortgage. By doing so, they assume the sellers current mortgage term and interest rate, which may be lower than the current market rate.
True or false:
Assumable mortgages typically have higher closing costs.
False.
Assumable mortgages typically have fewer closing costs and can serve as a unique marketing strategy for sellers.
What are FHA’s “4 C’s of Underwriting” when evaluating FHA applications:
- Credit history of the borrower
- Capacity to repay the loan
- Cash assets available to close the mortgage
- Collateral, which evaluates the value of the home
True or false:
Court-ordered judgments must be paid off before an FHA loan can close.
True
Can a borrower still get an FHA loan if they have ever defaulted on a student loan?
No
Is it ok for a borrower to still get an FHA loan if they are delinquent or in default on any other type of federal debt?
No
An underwriter will use this to determine whether a borrower has ever failed to repay their federal debts or obligations.
Credit Alert Verification Reporting System (CAIVRS)
This type of loan allows slightly higher debt-to-income ratios when qualifying for a loan which allows for some flexibility.
FHA
While __________ loans are less stringent on the profile of the borrower, they are stricter on the property conditions.
FHA
Gift funds from a borrower’s relative or employer may be used on an FHA approved loan for this percent of the down payment.
100%
Gift funds from a borrower’s _______ or ________ may be used on an FHA approved loan for the entire amount of the down payment.
Relative, employer
FHA requires that a gift letter be signed by the donor and list these 3 things.
Name, contact information and a specific dollar amount.
When is the Upfront Mortgage Insurance Premium paid?
At closing
The Upfront Mortgage Insurance Premium is currently at _______ percent of the base loan amount.
1.7
When a borrower takes out a mortgage with a term of 15 years or more, what will the annual mortgage insurance premium be if:
Base loan amount is less than or equal to 625,500 and the LTV is less than or equal to 95%?
80 basis points or .80%
When a borrower takes out a mortgage with a term of 15 years or more, what will the annual mortgage insurance premium be if:
Base loan amount is less than or equal to 625,500 and the LTV is less greater than 95%?
85 basis points or .85%
When a borrower takes out a mortgage with a term of 15 years or more, what will the annual mortgage insurance premium be if:
Base loan amount is less greater than 625,500 and the LTV is less than or equal to 95%?
100 basis points or 1.00%
When a borrower takes out a mortgage with a term of 15 years or more, what will the annual mortgage insurance premium be if:
Base loan amount is greater than 625,500 and the LTV is greater than 95%?
105 basis points or 1.05%
When a borrower takes out a mortgage with a term of less than 15 years, what will the annual mortgage insurance premium be if:
Base loan amount is less than or equal to 625,500 and the LTV is less than or equal to 90%?
45 basis points or .45%
When a borrower takes out a mortgage with a term of less than 15 years, what will the annual mortgage insurance premium be if:
Base loan amount is less than or equal to 625,500 and the LTV is greater than 90%?
70 basis points (bps) or .70%
When a borrower takes out a mortgage with a term of less than 15 years, what will the annual mortgage insurance premium be if:
Base loan amount is greater than 625,500 and the LTV is less than 78%?
45 basis points(bps) or .45%
When a borrower takes out a mortgage with a term of less than 15 years, what will the annual mortgage insurance premium be if:
Base loan amount is greater than 625,500 and the LTV is between 78.01-90%?
70 basis points (bps)or .70%
When a borrower takes out a mortgage with a term of less than 15 years, what will the annual mortgage insurance premium be if:
Base loan amount is greater than 625,500 and the LTV is greater than 90%?
95 basis points (bps) or .95%
When a borrower takes out a FHA mortgage with a term of less than or equal to 15 years, how long do they pay Monthly Mortgage Insurance if:
LTV is at less than or equal to 78%?
11 years
When a borrower takes out a FHA mortgage with a term of less than or equal to 15 years, how long do they pay Monthly Mortgage Insurance if:
LTV is 78.01%-90%?
11 years
When a borrower takes out a FHA mortgage with a term of less than or equal to 15 years, how long do they pay Monthly Mortgage Insurance if:
LTV is greater than 90%?
The term of the loan
When a borrower takes out a FHA mortgage with a term that is greater than 15 years, how long do they pay Monthly Mortgage Insurance if:
LTV is at less than or equal to 78%?
11 years
When a borrower takes out a FHA mortgage with a term that is greater than 15 years, how long do they pay Monthly Mortgage Insurance if:
LTV is greater than 90%?
Term of the loan
When a borrower takes out a FHA mortgage with a term that is greater than 15 years, how long do they pay Monthly Mortgage Insurance if:
LTV is between 78.01-90%?
11 years
What type of insurances is purchased for conventional Loans?
Private Mortgage Insurance
________ __________Insurance and -________ __________Insurance Premium is paid directly to the FHA.
Monthly Mortgage, Upfront Mortgage
Monthly Mortgage Insurance and Upfront Mortgage Insurance Premium is paid directly to the _____.
FHA
True or false:
Private mortgage insurance can not be used for FHA loans.
False.
FHA has a maximum loan amount that they will insure, known as what!
Lending Limit
A common FHA refinance product.
FHA Streamline
______________ are utilized by borrowers with current FHA mortgages when they would like to reduce their mortgage insurance, interest rate or their payment.
Streamlines
The term “_______________” is used as these FHA refinances require less documentation and underwriting, and in some instances, may not require an appraisal.
Streamlines
True or false:
FHA Streamlines require an appraisal.
False
True or false:
A reverse mortgage is a type of home equity loan.
True
A reverse mortgage is a type of _________ _________loan.
Home equity
The most common type of FHA reverse mortgage
Home Equity Conversion Mortgage or HECM.
A __________ _________is a special type of mortgage/home equity loan developed and insured by the Federal Housing Administration (FHA) that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs
Reverse Mortgage
The main qualifications of a reverse mortgage are:
- The borrower must be over 62 years old
- Have a principal residence that is either paid off or have a low mortgage balance that may be paid off at settlement with the proceeds from the reverse loan.
This type of loan will take the equity that has been accumulated over time in an elderly borrower’s home and pays it back to them through either installment payments or in a lump sum.
Reverse Mortgage
True or false:
Typically, reverse mortgages do not require the borrower to make any payments until the borrower dies, sells the home, or moves out permanently.
True
If the borrower dies, there are 3 options regarding how the reverse mortgage may be satisfied:
• The borrower’s estate/heirs may sell the home and pay off the reverse mortgage.
• The borrower’s estate/heirs may pay off the reverse mortgage and keep the property.
• The borrower’s estate/heirs may surrender the property to the lender of the reverse
mortgage.
On a reverse mortgage, the borrower’s estate/heirs may have up to this amount of time, depending on the lender/Note, from the borrower’s death to determine how they would like to proceed with the handling of the property.
1 year
The 5 payments available on a Home Equity Conversion Mortgage/ Reverse Mortgage:
- Tenure
- Term
- Line of Credit
- Modified Tenure
- Modified Term
In regards to a reverse mortgage-When the borrower receives monthly payments from the lender as long as the borrower lives and continues to occupy the home as a principal residence.
Tenure
In regards to a reverse mortgage:
When the borrower receives monthly payments for a fixed period of time (Example: 20-year term: The borrower receives monthly payments for 20 years).
Term
In regards to a reverse mortgage:
The borrower can make withdrawals (up to a set maximum amount) at the borrower’s discretion.
Line of credit
In regards to a reverse mortgage:
A combination of the tenure and a line of credit options.
Modified tenure
In regards to a reverse mortgage:
A combination of the term and line of credit options.
Modified Term
In regards to a VA loan, what is the minimum debt to income?
41% with residual income
In regards to a VA loan, what is the minimum down payment?
0% on purchase transactions
In regards to a VA loan, what is the minimum credit score?
N/A
In regards to a VA loan, what is the monthly mortgage insurance?
None. They pay a guarantee fee.
In regards to a VA loan, what is upfront mortgage insurance?
None- they pay a guarantee fee
In regards to a VA loan, is an appraisal required?
Yes
In regards to a VA loan, are gift funds allowed for a down payment?
No down payment needed.
In regards to a VA loan, what is the timeframe for borrowers after Chapter 7 discharge?
2 years
In regards to a VA loan, what is the timeframe after chapter 14 filing?
1 year
In regards to a VA loan, what is the timeframe for borrowers after foreclosure?
2 years
In regards to a VA loan, what is the loan to value requirements on cash out refinances?
90% with 3.3% funding fee
In regards to a VA loan, what is the reserves?
No reserves required
In regards to a VA loan, what is seller Concessions?
4%
In regards to a VA loan, is the loan assumable?
Yes
In regards to a VA loan, is it an Owner Occupy loan?
Yes. Within 60 days
True or false:
VA loans are for the Veteran that was or is in the Military only.
False. VA loans are also available to a veteran’s surviving spouse.
The VA guarantees a certain portion of a VA loan, meaning that the VA will pay the lender up to ___ percent of the loan value should a borrower default n their loan.
25
A veteran borrower must have these 3 things to be eligible for a VA loan.
- Suitable credit
- Income
- A valid Certificate of Eligibility (COE)
True or false:
VA loans can only be used for primary residences.
True
To obtain a valid COE, the Veteran borrower must have been ___________ ______________or meet certain service requirements.
Honorably discharged
If a borrower does not meet the minimum service requirements, they may still be eligible if they were discharged due to 1 of these 5 reasons.(
- Hardship
- Convenience of the government
- Reduction-in- force
- Certain medical conditions
- Service-connected disability
Veterans can have a previously-used entitlement “restored” to purchase another home with a VA loan if:
- The property purchased with the prior VA loan has been sold and the loan paid in full.
- A qualified Veteran-transferee (buyer) agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the Veteran seller.
- The entitlement may also be restored one time only if the Veteran has repaid the prior VA loan in full, but has not disposed of the property purchased with the prior VA loan.
The VA specific cap as to how much a borrower may use to finance a home.
The VA has not set a specific cap as to how much a borrower may use to finance a home.
The ________ _________ are the amount a qualified Veteran with full entitlement can borrower without making a down payment.
Loan limits
The basic entitlement that is available to the veteran is ?
$36,000
Most lenders will lend up to _______ times the Veteran’s available entitlement without a down payment.
4
True or false:
Veterans using their benefits for their first home purchase will pay the same funding fee as Veterans using their benefits for a second transaction.
False.
Veterans using their benefits for their first home purchase will pay a different funding fee than the Veterans using their benefits for a second transaction.
True or false:
Funding fees vary for different branches of the military.
True
True or false:
Funding fees may also vary for Veteran borrowers who also make a down payment .
True
For a VA loan for a veteran as a first time use, how much will the funding fee be if they put less than 5% down?
2.15%
For a VA loan for a Reservest/ National Guard as a first time use, how much will the funding fee be if they put less than 5% down?
2.40%
For a VA loan for a veteran as a first time use, how much will the funding fee be if they put 5- less than 10% down?
1.50%
For a VA loan for a Reservest/ National Guard as a first time use, how much will the funding fee be if they put 5 to less than 10% down?
1.75%
For a VA loan for a Reservest/ National Guard as a first time use, how much will the funding fee be if they put 10% or more down?
1.50%
For a VA loan for a Veteran as a first time use, how much will the funding fee be if they put 10% or more down?
1.25%
For a VA loan for a Reservest/ National Guard as a subsequent use, how much will the funding fee be if they put 10% or more down?
1.50%
For a VA loan for Veteran as a subsequent use, how much will the funding fee be if they put 10% or more down?
1.25%
For a VA loan for a Veteran as a subsequent use, how much will the funding fee be if they put 5- less than 10% down?
1.50%
For a VA loan for a Reservest/ National Guard as a subsequent use, how much will the funding fee be if they put 5- less than 10% down?
1.75%
For a VA loan for a Veteran as a subsequent use, how much will the funding fee be if they put less than 5% down?
3.30%
For a VA loan for a Reservest/ National Guard as a subsequent use, how much will the funding fee be if they put 5- less than 10% down?
3.30%
If a veteran borrower has a service-connected disability of _____% or more, they are never charged a funding fee regardless of whether they are a Reservist, National Guard member, or a Veteran of the other branches of the military.
10
True or false:
The Veteran’s benefit can also be used by a surviving spouse if the surviving spouse had a Veteran spouse die while in active duty or the Veteran spouse died from a service-connected disability.
True
True or false:
Funding fees have to be paid out of pocket by the veteran; they can not be financed into the total loan amount being borrowed.
False
Funding fees do not have to be paid out of pocket by the veteran; they can be financed into the total loan amount being borrowed.
The VA only uses the ____________ when calculating debt to income.
Back-end or DTI ratio
The maximum back-end debt to income ratio is ____ percent on a VA loan
41
This is also used to determine if a veteran has the ability to repay the loan.
Residual Income
This is the amount of net income remaining (after deduction of debts and obligations and monthly shelter expenses) to cover family living expenses such as food, health care, clothing and gasoline.
Residual Income
The acceptable thresholds for residual income are based on the _________ that the Veteran lives in.
Region
These VA thresholds are based on the information supplied by the _________ ___________ _________that is published by the Department of Labor.
Consumer Expenditures Survey
The Consumer Expenditures Survey is published by the _______ ______ ________.
Department of Labor
When determining a borrower’s residual income, the underwriter will have to take into consideration all members of the household, including the veteran’s ______________.
Dependents
When a VA appraisal is completed, it is underwritten by a ______________.
LAPP (Lender Approved Processing Program).
This must be submitted in conjunction with the appraisal report when originating a VA loan.
Certificate of Reasonable Value (CRV).
Another name for Certificate of Reasonable Value (CRV).
Notice of Value
The VA maintains that a ___ percent maximum origination charge may be charged on a VA loan.
1
Reasonable and customary fees can be charged for a VA loan including: (9)
- Appraisal fee
- Recording fees
- Credit report fee
- Prepaid items
- Flood determination
- Survey
- Title examination
- Title insurance
- Other fees authorized by the VA
It is unacceptable for a lender to charge any fees other than the _____ percent origination fee on a VA loan.
1
True or false:
The lender has the right to charge the Veteran for any attorney’s fees or escrow service fees associated with the settlement of the loan.
False
The VA IRRRL or VA Interest Rate Reduction Refinance Loan is similar to the ________ _________ but is offered as a VA to VA no-cash out refinance loan.
FHA streamline
This type of VA refinance loan does require an additional funding fee and the veteran cannot receive any additional funds out of their property.
VA IRRRL or VA Interest Rate Reduction Refinance Loan
Do VA IRRRL or VA Interest Rate Reduction Refinance Loans, require an appraisal?
No
What is the funding fee on an Interest Rate Reduction Refinance Loan (IRRRL)?
.50% for everyone
True or false:
The funding fee on an Interest Rate Reduction Refinance Loan (IRRRL) can vary depending on credit.
False. .50% for everyone
Do Interest Rate Reduction Refinance Loan’s require an appraisal?
No
Do Interest Rate Reduction Refinance Loan’s require an underwriting package?
No
The 2 ways Interest Rate Reduction Refinance Loan’s (IRRRL) can be done with no money out of pocket.
- By including all costs in the new loan
2. By funding the new loan at an interest rate high enough to enable the lender to pay the costs.
With an Interest Rate Reduction Refinance Loan’s (IRRRL) can the borrower receive any cash back from the loan proceeds?
No.
What is the Maximum Debt to Income on a USDA Loan?
29%/41%
What is the Minimum Down Payment on a USDA Loan?
0% (100% financing available) on purchase transactions
What is the Minimum Credit Score on a USDA Loan?
N/A
Is Monthly Mortgage Insurance required on a USDA Loan?
No. They have a guarantee fee.
Is Upfront Mortgage Insurance required on a USDA Loan?
No. They have a guarantee fee.
What are the Income Limits on a USDA Loan?
115% of the median
Is an Appraisal required on a USDA Loan?
Yes
Are Gift Funds Allowed for Down Payment on a USDA Loan?
No down payment required
How long does an applicant need to wait after a Chapter 7 Discharge on a USDA Loan?
2 years
How long does an applicant need to wait after a Chapter 13 Filing on a USDA Loan?
1 year
What are the Reserves Required on a USDA Loan?
No reserves required
What are the Seller Concessions on a USDA Loan?
Unrestricted amount
The U.S. Department of Agriculture (USDA) loan is a type of mortgage that is available in what kind of areas?
Rural
USDA loans offer many benefits to the borrowers. What are the top 4?
- 100 percent financing
- Lower-than-market interest rates
- Lower PMI rate than any other loan program.
- No down payment
True or false:
USDA approved lenders can offer 15-30 year loans for USDA borrowers.
False. 30 Year loans only
What is a USDA Direct Loan?
A loan offered to low- very low income applicants that must go directly through the USDA.
The USDA guarantees this kind of loan.
USDA
The USDA program provides a ______ percent loan note guarantee to approved lenders.
90
Why does the USDA program provide only a 90 percent loan note guarantee to approved lenders?
In order to reduce the risk of extending a 100 percent loan to eligible rural homebuyers.
The guarantee fee on a USDA is broken up into two parts. What are they?
- The monthly guarantee fee.
2. The initial guarantee fee.
On USDA loans the initial guarantee fee is how much?
1%
On a USDA Loan, How much is the monthly guarantee fee?
.35%
On a USDA Loan, can the initial guarantee fee be added into the loan amount?
Yes
True or false:
On a USDA Loan, if the initial guarantee fee is added into the loan amount, LTV cannot go over 100%
False.
The initial guarantee fee can be added into the loan amount and CAN push the LTV over 100 percent.
True or false:
The USDA only has an unlimited amount of money they can lend.
False.
The USDA only has a set amount of money they can lend on a yearly basis.
Often by the end of _________ the USDA they have hit there limit and suspend lending until the beginning of the next year.
October
A late or defective acceptance is considered a ___________.
Counteroffer
Unlike a lease or license, an __________ may last forever, but it does not give the holder the right to possess, take from, improve upon, or sell the land.
Easement
A right-of-way.
Easement
A right of entry for any purpose relating to the dominant estate.
Easement
A right to support of land and buildings
Easement
A right of light and air
Easement
A right to water
Easement
A right to do some act that would otherwise amount to a nuisance.
Easement
A right to place or keep something on the servient estate.
Easement
Written settlement agreement that will always accompany deed in lieu.
Deed-in-Lieu of Foreclosure
When the Lender waives the right to collect any deficiency based on a promissory note.
Deed-in-Lieu of Foreclosure
An _______________ cannot defeat the transfer of possession, but it remains after the property or right is transferred.
Encumbrance
In regards to a
Fixed-Period Adjustable-Rate Mortgage- The amount by which the interest rate can adjust after the fixed period is usually subject to an interest rate_______ _________.
cap structure
Permitting one to retain a loan of money after it has become due and payable is __________ it.
Forbearing
That is, _________________, within the meaning of usury laws, is the giving of further time for the return of payment of money after the date upon which it became due.
Forbearance
When the buyer will include an inspection contingency, requiring the home to be inspected for physical damages or problems before the sales contract is binding. This is considered a:
Contingency clause
True or false:
The buyer will have the right to rescind if a contingency is not met.
True
The rights of ingress and egress are often secured by __________.
Easements
A legal right to a limited use of another’s property.
Easement
______________ and _________ guidelines are typically more stringent than other loan programs, therefor not all borrowers will qualify for these loans.
Fannie Mae and Freddie Mac
Examples of who may fall into the conventional/non-conforming category. (5)
- Less than perfect credit
- Less than two years of job history
- Non-traditional types of income
- Higher DTI’s
- Loan amounts that exceed the loan limits
A jumbo loan is a loan that exceeds $____________.
$453,100
Jumbo loans are treated as ________ but _________ _______ loans.
conventional, non- conforming
Subprime loans were originally designed for borrowers who had ___________________.
Less than perfect credit.
These loans have all but disappeared because they are one of the main causes of the mortgage meltdown.
Subprime loans
These loans were manually underwritten; they had little or no amortization or included negative amortization features.
Subprime loans
This type of loan had low credit requirements, didn’t provide private mortgage insurance or escrow features.
Subprime loans.
A lot of these types of loans had little verification of what the borrower was presenting as their income, assets or employment which made them incredibly risky for the lenders.
Subprime loans
These loans usually came with much higher interest rates (higher risk, higher interest) and usually the borrower could not afford the loan.
Subprime loans
True or false:
Most subprime loans are nonexistent at this point but it’s possible they will resurface.
True
NINA – No Income/No Asset Mortgages - Often referred to as “No Doc” mortgages. The borrower is not required to provide any financial information regarding their income or their assets. This is an example of what kind of loan?
Subprime
SISA- State Income/Stated Asset – SISSA loans only require the borrower to state their income and asset situation but do not require the verifications of the income or asset information. This is an example of what kind of loan?
Subprime
SIFA or SIVA – Stated Income/Full Asset or Stated Income/Verified Asset – SIFA or SIVA loans only require the borrower to state their income but provide asset information. This is an example of what kind of loan?
Subprime loans
No Doc - No additional income documents are required.
Low-Doc – Minimal income documents are required.
These are examples of what kind of loans?
Subprime
The Interagency Guidance on Nontraditional Mortgage Product Risks was published by federal financial regulatory agencies in what year?
2006
The Interagency Guidance on Nontraditional Mortgage Product Risks was published by who in 2006?
federal financial regulatory agencies
Why was The Interagency Guidance on Nontraditional Mortgage Product Risks written?
To provide guidance to lenders regarding nontraditional mortgage products.
This was written in 2006 to provide guidance to lenders regarding nontraditional mortgage products.
The Interagency Guidance on Nontraditional Mortgage Product Risks
The _______________________does not exactly pertain to subprime mortgage lending but it does outline good underwriting practices and consumer protection principles that all institutions should consider.
Interagency Guidance on Nontraditional Mortgage Product Risks
This Guidance defines nontraditional mortgage products as products that allow borrowers to defer principal and in some cases interest.
Interagency Guidance on Nontraditional Mortgage Product Risks
This Guidance defines nontraditional mortgage products as products with interest only features and products that have the potential for negative amortization, including products with flexible payment options.
Interagency Guidance on Nontraditional Mortgage Product Risks
This Guidance is concerned about payment shock, competitive pressures, and ceding underwriting standards to third-party organizations
Interagency Guidance on Nontraditional Mortgage Product Risks
What is payment shock?
When a borrower’s payment suddenly increases.
This happens in situations where the interest rate is variable or there is an introductory interest rate on a loan. The change in the interest rate causes the borrowers payment to increase and in some situations the borrower can no longer afford to pay their mortgage because the interest rate is so high. This causes the borrower to then default on the loan.
Payment shock
While implementing qualifying standards for nontraditional mortgage products, institutions should take into consideration the impact of ___________ ___________.
Payment shock
These products are not appropriate for borrowers that have high loan to value, high debt to income ratios and low credit scores.
Nontraditional
An analysis of the borrower’s repayment capacity should be conducted, including an evaluation of the borrower’s ability to repay the debt at the loans_______ __________ rate, while avoiding an over-reliance on credit scores.
Fully indexed
If a lender is going to allow no or low document loans or simultaneous seconds, the lender should document risk mitigating features such as high credit scores, lower LTVs, lower DTIs, credit enhancements and mortgage insurance. This is called what?
Risk layering
The Interagency Guidance on Nontraditional Mortgage Product Risks indicates that a loan with minimum owner equity, like a simultaneous second lien loan, should generally not have a payment structure that allows for delayed or negative ____________.
amortization
What is a simultaneous second?
A loan that takes second position.
This is a loan that takes second position. A common types of second liens are:
Home equity lines of credit (HELOCs)
A second lien is also called a: into a second mortgage.
Second Mortgage
When a lender originates both a first and a second lien loan at the same time.
Simultaneous second.
Lenders do this to avoid Private Mortgage Insurance by financing the 20% down payment into a second mortgage. This is called a:
Simultaneous second
The Interagency Guidance on Nontraditional Mortgage Product Risks is also called this.
The Guidance
The _______________ encourages that mortgage loan underwriting standards should address a substantial payment increase when determining whether a borrower has the ability to repay a nontraditional mortgage loan.
Guidance
A year after the Interagency Guidance on Nontraditional Mortgage Product Risks was published, the same financial regulatory agencies issued the ___________________.
Statement on Subprime Mortgage Lending.
The purpose of this statement was to promote consumer protection standards as well as encourage lenders to ensure that borrowers only obtain loans that they can afford to repay.
Statement on Subprime Mortgage Lending.
This statement includes guidelines for defining predatory lending, underwriting standards, establishing control systems and consumer protection.
Statement on Subprime Mortgage Lending
The Statement on Subprime Mortgage Lending standards are specifically concerned with certain ARM products, that typically have these 5 characteristics:
- Low initial payments that adjusts to a variable index rate plus a margin for the remaining term of the loan.
- No payment or rate caps
- Limited or no documentation of borrowers’ income.
- Product features likely to result in frequent refinancing
- Substantial penalties
This Statement encourages lenders to give borrowers the necessary facts to understand the terms, costs, and risks associated with subprime products.
Statement on Subprime Mortgage Lending
According to the Statement on Subprime Mortgage Lending, MLOs should inform consumers of these 5 facts:
- Payment Shock
- Prepayment Penalties
- Balloon Payments
- Cost of Reduced Documentation Loans
- Responsibility for Taxes and Insurance
Making loans based predominantly on the foreclosure or liquidation value of a borrower’s collateral rather than on the borrower’s ability to repay the mortgage according to its terms. This is an example of what?
Predatory lending.
Inducing a borrower to repeatedly refinance a loan to charge high points and fees each time the loan is refinanced (known as “loan flipping” or “equity skimming”). This is an example of what?
Predatory lending
Engaging in fraud or deception to conceal the true nature of the mortgage loan obligation, or ancillary products, from an unsuspecting or unsophisticated borrower. This is an example of what?
Predatory lending
It is where the borrower supplies the lender with their overall financial picture, including debt, income and assets.
Pre-Qualifying
Loan ___________________ does include an analysis of the borrower’s credit report and an in-depth look at the borrower’s income ability to purchase a home.
Pre-Qualification
An _______________ is anything produced with the intent to sell a credit plan.
Advertisement
• Newspapers and magazine ads • Leaflets and flyers • Catalogs • Radio, TV, or public address systems • Signs or displays • Billboards • Point of sale literature • Price tags • Cash register receipts • Online, internet or social media • Websites These are all examples of what?
Advertisements
Things that are not considered _____________ are rate sheets use for internal purposes, education and state-required material unless it is combined with a sales offer, and brochures that explain details about a mortgage, if it is generic and does not offer completing a loan application.
Advertisements
If a creditor advertises directly to a borrower they are required to:
• Advertise only terms that are the____________ terms that the creditor will offer in credit plans
Specific
If a creditor advertises directly to a borrower they are required to:
• The ad must state the finance charge rate using the term ______ ________ ______.
Annual Percentage Rate or APR
If a creditor advertises directly to a borrower they are required to:
• If the APR might increase after the _________________ of the loan, the ad must be specific on this detail
Consummation
If a creditor advertises directly to a borrower they are required to:
• A simple annual or periodic rate applied to an unpaid balance may be advertised in ______________ with the APR, but not more _______________ than the APR
Conjunction, conspicuous
If the loan rate is present in the advertisement, the ___________ must also be disclosed.
Annual percentage rate (APR)
This is a phrase that represents the attractive features of the credit plan within the advertisement.
Trigger term
- 10 percent down payment
- $1000 down
- 80 percent financing
In an advertisement, these terms are considered what?
Trigger terms
- Trade-in with $5,000 appraised value
- Monthly payments less than $500 on all loan plans
- Pay $32.11 per $1000 borrowed
- $850 per month
In an advertisement, these terms are considered what?
Trigger terms
If trigger terms are found in an advertisement, the ad must also disclose all 6 of the following:
- The price of the home
- The amount of the down payment required
- The number of payments necessary to repay the loan
- The amount of the monthly payment for the entire term of the loan
- Due dates or period of payments scheduled to repay
- The APR
- Easy monthly payments
- Low down payments
- Pay bi-weekly
- Terms to fit any budget
- Financing available
- FHA or VA loans available
These are examples of what when it comes to advertisements?
Terms that do not have to have an APR listed
If a creditor is advertising an adjustable rate credit plan there are additional requirements for their advertising. What is the additional requirement?
The advertisement must say that the APR may increase or is subject to change.
True or false:
If a creditor is going to advertise, they are required to advertise every type of credit plan that is available?
False
True or false:
When advertising, creditors cannot hide more consumer-friendly plans in order to bait and switch products with borrowers.
True
True or false:
If a plan is advertised, the creditor does not always have to honor that advertisement.
False.
If a plan is advertised, the creditor must honor that advertisement.
If a borrower asks about a credit plan and the costs associated with it, the MLO must disclose the APR. APR must be listed ________.
First
The Mortgage Acts and Practice Rule or MAP Rule was created in _________.
2011
This rule was created in 2011 to prohibit misrepresentation in a commercial communication about any term(s) of a mortgage credit product.
The Mortgage Acts and Practice Rule, or MAP Rule.
There are three important terms to remember when discussing the Mortgage Acts and Practice Rule or MAP Rule:
Term
Mortgage credit product
Commercial communication
It is a violation of the what Rule for any person to make any material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product.
Mortgage Acts and Practice Rule or MAP Rule
Misrepresentations about the interest charged for the mortgage credit product, the amount of interest, consumer’s payments, loan amount, or total amount due is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
Misrepresentations about whether the difference between the interest owed and the interest paid is added to the total amount due from the consumer, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation about the annual percentage rate, simple annual rate, periodic rate, or any other rate is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation about the existence, nature, or amount of fees or costs to the consumer associated with the mortgage credit product, including but not limited to misrepresentations that no fees are charged, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the cost, payment terms, or other terms associated with any additional product or feature that is or may be sold in conjunction with the mortgage credit product, including but not limited to credit insurance or credit disability insurance is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning whether separate payment of taxes or insurance is required, or the extent to which payment for taxes or insurance is included in the loan
payments, loan amount, or total amount due from the consumer, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning any prepayment penalty associated with the mortgage credit product, including but not
limited to misrepresentations concerning the existence, nature, amount, or terms of such
penalty, are a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the variability of interest, payments, or other terms of the mortgage credit product, including but not limited to misrepresentations using the word “fixed”, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning any comparison between any rate or payment that will be available for a period less than the full length of
the mortgage credit product; and
any actual or hypothetical rate or payment is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the type of mortgage credit product, including but not limited to misrepresentations that the product is or involves a fully amortizing mortgage is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the amount of the obligation, or the existence, nature, or amount of cash or credit available to the consumer in connection with the mortgage credit product, including but not limited to misrepresentations that the consumer will receive a certain amount of cash or credit as part of a mortgage credit transaction, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the existence, number, amount, or timing of any minimum or required payments, including but not limited to misrepresentations about any payments or that no payments are required in a reverse mortgage or other mortgage credit product, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the potential for default under the mortgage credit product, including but not limited to misrepresentations concerning the circumstances under which the consumer could default for nonpayment of taxes, insurance, or maintenance, or for failure to meet other obligations, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the effectiveness of the mortgage credit product in helping the consumer resolve difficulties in paying debts, including but not limited to misrepresentations that any mortgage credit product can reduce, eliminate, or restructure debt or result in a waiver or forgiveness, in whole or in part, of the consumer’s existing obligation with any person, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the association of the mortgage credit product or any provider of such product with any other person or program, including but not limited to misrepresentations that the provider is, or is affiliated with, any governmental entity or other
organization, is a violation of what Rule?
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the product is or relates to a government benefit, or is endorsed, sponsored by, or affiliated with any government or other program, including but not limited to using formats, symbols, or logos that resemble those of such entity, organization, or program, is a violation of this Rule.
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the source of any commercial communication, including but not limited to misrepresentations that a commercial communication is made by or on behalf of the consumer’s current mortgage lender or servicer, is a violation of this Rule.
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the right of the consumer to reside in the dwelling that is the subject of the mortgage credit product, or the duration of such right, including but not limited to misrepresentations concerning how long or under what conditions a consumer with a reverse mortgage can stay in the dwelling is a violation of this Rule.
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the consumer’s ability or likelihood to obtain any mortgage credit product or term, including but not limited to misrepresentations concerning whether the consumer has been preapproved or guaranteed for any such product or term, is a violation of this Rule.
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the consumer’s ability or likelihood to obtain a refinancing or modification of any mortgage credit product or term, including but not limited to misrepresentations concerning whether the consumer has been preapproved or guaranteed for any such refinancing or modification, is a violation of this Rule.
Mortgage Acts and Practice Rule or MAP Rule
The misrepresentation concerning the availability, nature, or substance of counseling services or any other expert advice offered to the consumer regarding any mortgage credit product or term, including but not limited to the qualifications of those offering the services or advice.
Mortgage Acts and Practice Rule or MAP Rule
Please note all covered commercial communications must be kept for a minimum of _________ from the date that the communication was made to the consumer to comply with the MAP Rule.
2 years
Most of the time an MLO is going to present ________ options to the borrower that they think will be suitable.
3
According to the Truth in Lending Act (TILA) an application is the collection of 6 pieces of information. The six pieces of information that constitute an application are:
- Name of the borrower
- Social Security Number
- Loan amount requested
- The borrower’s income
- Subject property address
- Estimated property value
This is one of the two major pillars of federal law that governs the origination of mortgages.
Truth In Lending Act (TILA Regulation Z)
The purpose of __________is to disclose the APR, loan costs, disclose payments and protect consumers from predatory lending practices.
Truth In Lending Act (TILA Regulation Z)
This includes the implementation of some specific disclosures, the definition of applications and the requirements for timeframes on application.
Truth In Lending Act (TILA Regulation Z)
________holds within it many rules, including Loan Originator Compensation.
Truth In Lending Act (TILA Regulation Z)
The backbone of the origination process is the loan application. This document is known as the ________ _________ _________ _______or the _______.
Uniform Residential Loan Application or the 1003.
The 1003 was created by ____________ __________ _________ ____________.
Federal Housing Finance Agency (FHFA)
Fannie Mae numbers their form ______. The exact same form is numbered by Freddie Mac as Form 65.
1003
Fannie Mae numbers their form 1003. The exact same form is numbered by Freddie Mac as Form _____.
65
This form is where all the information regarding the borrower appears. It is part of the MLOs job to make sure that this is as complete and accurate as possible.
Uniform Residential Loan Application or the 1003.
The _________ section of the 1003 includes the pertinent facts about the loan the applicant is applying for.
First
On a form 1003, this is the box where an agency case number (when applicable) and the lender case number/loan number must be placed.
First
When filling out a 1003, the loan amount, interest rate, term, and type of amortization must be noted in this section.
First section
This is an application from the borrower to the lender and is an application for a specific loan product so all the information must be clear and accurate so that when the loan enters the underwriting process the underwriter knows what loan this borrower is seeking.
Uniform Residential Loan Application or the 1003.
This section of the 1003 is all the information regarding the property.
Second
This section of the 1003 includes the property address; it also includes the number of units.
Second
RESPA (Real Estate Settlement Procedures Act, Regulation X) defines a residential property to be a ___-____ family single-family dwelling.
1-4
If the property is more than ___units, then it is considered a commercial property and the borrower will need to obtain a commercial loan.
4
The_______ ___________ is (sometimes) a very detailed description of where the property is located, based on plat maps (books) in that county.
Legal Description
True or false:
If the property is in town, or a subdivision, it could be very simply stated as LOT 148, Brighton Knoll Subdivision. This tells the recorder (who will record the mortgage deed) the documents can be found pertaining to this property.
True
If this information is not available at the time of application, it can be filled in later once the information is received in the processing stage.
Legal description
The _________ of the loan can be purchase, refinance, construction, construction-permanent, or other.
Purpose
On a 1003, the _______ is basically: what will the loan funds be used for?
Purpose
On a 1003, the 2 most common “purpose” of a Loan are?
Purchase or refinance
On a 1003 section 2, This line will ask if this property will be a primary residence, a secondary residence or an investment property?
Property will be:
On section 2 of a 1003- In case of a construction loan this section asks important details about the lot, including the original cost and year the lot was acquired.
Complete this Line if Construction or construction-permanent loan:
In section 2 on a 1003-This line will ask about the borrower’s ownership in the property, questions like when it was acquired, the original cost, amount of existing mortgages, purpose of the refinance, a description of any improvements that are going to be made or were made and the cost.
Complete this Line if Refinance Loan:
In section 2 of the 1003- This section is important because it gives important details about the current state of the home and the purpose of the borrower in obtaining the refinance. What is this line called?
Complete this Line if Refinance Loan:
In section 2 of a 1003- For a purchase transaction, this is where the MLO needs to know the names(s) of who all will hold ownership in this house, even if it is just one borrower, they might have a spouse or a significant other who will also hold ownership in the property. What is this line called?
Title Will be Held in What Name:
In section 2 of a 1003-There are a lot of ways that a title can be held, is it a single owner, or is it a married couple with rights of survivorship? A property can be “vested” in many ways. What is this line called?
Manner in Which Title Will Be Held:
In section 2 of 1003- This is an important section in purchase transactions; it needs to be filled out because the processor and the underwriter will need to verify the down payment funds are there prior to closing. What is this line called?
Source of Down Payment:
In section 3 of the 1003- The most common is the property falls into Fee Simple – this means that the borrower owns the land as well as the house on the land. A property could also be a leasehold – this means that the borrower leases the land but own the dwelling secured by the loan (Hawaii, North or South Dakota, and Massachusetts are some states that have leaseholds). The lease must have sufficient time remaining to cover the length of the mortgage. What is this line called?
The Estate Will be Held In:
On a form 1003- The _________ section is the borrower information section.
Third
On a 1003- This section includes the name of the borrower, the name of the co- borrower (if applicable), their social security numbers, home phone, date of birth, years in school, whether they are married, unmarried, or separated. It also must include the number of dependents and their ages, their present address and whether they own or rent that property (plus the # of years they have rented the property).
Third
Only borrowers who are married can be included on the same ______ and be considered co- borrowers.
1003
If there are two unmarried borrowers, two separate 1003s are required to be filled out with each of the borrower’s information. These two borrowers are called, _______________.
Co-mortgagors
True or false:
If 2 people, that are not married, apply for a Mortgage Loan, only one 1003 needs to be filled out.
False. One per person.
The Equal Credit Opportunity Act (ECOA, Regulation B) was created to do what?
Prevent discrimination in lending
This act was created to prevent discrimination in Lending.
The Equal Credit Opportunity Act (ECOA, Regulation B)
This Act prohibits discrimination based upon race, religion, natural origin, sex, marital status, and age.
The Equal Credit Opportunity Act (ECOA, Regulation B)
This act requires that an MLO can only ask about marital status if the application is for joint credit.
The Equal Credit Opportunity Act (ECOA, Regulation B)
This Act requires that an MLO can only ask about marital status if the credit transaction is secured (like a mortgage is) but they can only use the terms “married,” “unmarried”, and “separated”.
The Equal Credit Opportunity Act (ECOA, Regulation B)
Section 4 of the 1003 is the __________ section.
Employment
On a 1003- This is the section where the borrower’s employer (whether they are self-employed or not), the number of years they’ve been at their job (If it has been less than 2 years, the previous employment information must be obtained), the number of years that the borrower has been in the same profession, the position type/title/type of business that the borrower is in and the phone number for their employer.
Employment- section 4
On form 1003-This section is where the borrower’s income information and the borrower’s housing liabilities will be included. This is where all types of income may be filled in.
Monthly Income and Combined Housing Expense. Section 5
On for 1003- this section includes income, base employment income, overtime income, bonuses, commissions, dividends/interest from investments net rental income (if the borrower has rental property) and any other income that the borrower wants to be considered.
Monthly Income and Combined Housing Expense. Section 5
This Act prohibits a lender from requiring the disclosure of any type of child support, alimony, or separate maintenance.
The Equal Credit Opportunity Act (ECOA, Regulation B)
Under this Act, an MLO cannot ask a borrower whether they receive any type of child support, alimony, or separate maintenance, but the MLO can ask whether there is any other income that the borrower would like to consider for repayment of debt.
The Equal Credit Opportunity Act (ECOA, Regulation B)
Under ECOA, an MLO cannot ask a borrower whether they receive any type of child support, alimony, or separate maintenance, but the MLO can ask what?
Whether there is any other income that the borrower would like to consider for repayment of debt.
True or false:
If the borrower pays child support, alimony or separate maintenance they must disclose that information because it is considered a liability and must be taken into consideration when determining their ability to repay the loan.
True
On a form 1003- on the__________ side of the chart, is where the current monthly housing expenses go and the proposed monthly housing expenses will go.
Right-hand
On form 1003- Rent, or the first mortgage (P&I - principal and interest), any other financing (like a second mortgage), hazard insurance, real estate taxes, any mortgage insurance, and any homeowners association dues are examples of what?
Monthly housing expenses.
These are the parts that generally make up a mortgage payment.
PITI (principal, interest,taxes and insurance)
PI or P&I
Principal and Interest
PIT
Principal, interest and taxes.
Section 6 on form 1003.
Assets and liabilities section.
This section is where a borrower will need to disclose any assets and all liabilities that they have.
Section VI- Assets and liabilities section.
These are what the borrowers own, not necessarily things that are free and clear, but what they own.
Assets
Houses, cars, life insurance, stocks and bonds and 401K accounts are examples of a borrowers _________.
Assets
On form 1003, This total line should be more than the amount the borrower needs to bring to closing.
Subtotal liquid assets
On form 1003- All assets that are listed under the liquid assets section will need to be documented with a source (where did it come from) and seasoning (was it in the bank for at least 60 days).
Subtotal liquid assets
On form 1003- _____________are what the borrowers OWE, which means there is a loan against these items
Liabilities.
Mortgage loan debt, automobile loans or leases, credit cards with balances outstanding, commercial loans, as well as amounts owed to alimony, child support or separate maintenance payments as l examples of what?
Liabilities
______ ________ is assets minus the liabilities.
Net worth
This gives the borrower’s financial worth.
Net worth
On form 1003- This is where all properties owned are listed, or subject property (if a refinance transaction) is listed to show the market value, amount of the lien, the gross rental income, mortgage payments, insurance, maintenance, taxes and other, and listing the NET rental income after vacancy factor.
Schedule of Real Estate Owned.
On form 1003-This is a quick snapshot of the loan. This includes the costs of the loan and any cash to or from the borrower. This will let the MLO know how much money the borrower needs to bring to closing (if applicable) or it will let the MLO know how much money the borrower is receiving at closing. Keep in mind that that this is only an estimate and not final numbers.
Details of Transaction Section 7
On form 1003- This section is a series of important questions that require a yes or no answer to from the borrower (and co-borrower). It is important to read these questions to the borrower and let them answer the questions accordingly. The questions and their answers are reviewed by the underwriter and give the underwriter key information about the borrower. For example: “Are you obligated to pay alimony, child support or separate maintenance?” If the answer is yes, the underwriter is going to then go look to see that that information was disclosed as a liability and that it does not affect the borrower’s ability to repay the loan.
Section 8-Declarations
On form 1003- this section requires the borrower (and co-borrower) acknowledge and agree that the information contained in the application is accurate. It requires the borrower’s signatures as well as the date to indicate the date that it was signed.
Section 9- Acknowledgement and agreement section
On form 1003-This section includes a statement that the borrower should read, and requests that the borrower furnish information regarding their ethnicity, race, and sex. This information is obtained to complying with the Home Mortgage Disclosure Act (HMDA, Regulation C).
Section 10- Information for government monitoring purposes
On form 1003- The section also requires the MLO indicate how the application was taken (face-to-face or telephonic interview, submitted by fax or mail, or via e-mail or the internet). It requires the MLO sign their name, print their name, include the NMLS ID#, their phone number, the company that they work for, the companies NMLS ID# and the companies address.
Section 10- Information for government monitoring purposes
_______ requires that financial institution collect and report specific data. This specific data is used to protect borrowers from discriminatory lending practices as the data can be used to determine whether a financial institution is lending fairly in all areas that they serve.
HMDA
________ prohibits discrimination based on protect classes and prohibits an MLO from asking about a borrowers’ ethnicity, race and sex except for the purpose of completing this government monitoring section for HMDA.
ECOA
This document must be provided at the time of the application or within 3 business days of application. This document must contain a good faith estimate of loan costs and transaction terms and be in writing and contain information required under TRID.
Loan Estimate
This document must be delivered or placed in the mail no later than the 7th business days before consummation of the transaction. It can be delivered by hand, by mail or electronically with permission from the borrower to obtain electronic disclosures.
Loan estimate
The TILA-RESPA Integrated Disclosure Rule (TRID) implemented it in 2015 and it replaced the Good Faith estimate and the initial Truth in Lending Disclosure. The purpose of the disclosure was to simplify and clarify the disclosures into one disclosure that was easier and clearer for a consumer to understand.
Loan Estimate
This document is the six pieces of information: name, income, social security number, subject property address, an estimate of the value of the property, and the mortgage loan amount sought.
Application. 1003
________ includes both the Loan Estimate and Closing Disclosures. They are replacements for older disclosures required by TILA and RESPA.
TRID
This disclosure implemented some new rules regarding how an MLO and their lender can do business. One of those things is that a creditor cannot require or condition that the consumer submit any documents verifying information related to the application before providing the Loan Estimate.
TRID
Under this disclosure- creditors are not allowed to impose any fee on a consumer related to the consumer’s application for a mortgage transaction until the consumer has received the LE and has indicated an intent to proceed with the transaction. This includes application fees, appraisal fees, underwriting fee as well as any other fees imposed on the consumer. The only exception to the rule is for a bona-fide and reasonable fee for obtaining a consumer’s credit report.
TRID
Under this disclosure- A consumer indicates an intent to proceed with the transaction when the consumer communicates, in any manner, that the consumer choses to proceed after the LE is delivered. This can include oral communication, written communication, communication via e-mail or the signing of a pre-printed form after receipt of the LE. A consumer’s silence is not indicative of an intent to proceed. The creditor is required to document the communication of the intent to proceed.
TRID
On the Loan Estimate, this is a way to verify that the Loan Estimate was sent in compliance with TRID’s rules (at the time of or within 3 business days of application).
The date issued
When the interest rate for a loan is locked for a particular period of time.
Rate lock
This section of the Loan Estimate goes into the basics of the loan, that includes the loan amount, the interest rate, the monthly principal & interest payment, whether the loan has a prepayment penalty, or a balloon payment.
Loan terms
On the Loan Estimate, Next to each of the first three disclosed terms is a yes or no question – what are they?
- Can this amount increase after closing?
- Can the interest rate change after closing?
- Can the monthly principal and interest payment go up?
On the Loan Estimate- This section not only gives the numbers, but gives the borrower information that is important to understanding those terms and in making their choice about the mortgage loan.
Loan Terms
On the Loan Estimate- This section is there to show the borrower what their payment will look like over the course of the loan.
Projected payments
This Act applies specifically to private mortgage insurance (PMI). According to this Act, a borrower can request that PMI be dropped from their loan once they have obtained 20 percent equity in their property. Further, it requires servicers drop PMI from the borrower’s loan (without a request from the borrower) when the borrower has obtained 22 percent equity in their property or at 78 percent LTV.
The Homeowner’s Protection Act
This section of the Loan Estimate, breaks down the escrow account – it includes the amount at this time that will be included in the payment for taxes and insurance. It also gives the borrower a breakdown of what is included in the escrow.
The projected payments section
On the loan estimate- This section adds up all the costs that will be broken down in page 2. There is also an Estimated Cash to Close, this shows the amount of money the borrower will either bring to closing or receive at closing depending on the situation. In this scenario, this is a purchase transaction and the borrower will need to bring their down payment as well as their closing costs.
Estimated Closing Costs
Page Two of the Loan Estimate is the ________ _________ details. It is broken out in to Loan Costs, Other Costs and Calculating Cash to Close. This is where the Loan Estimate goes into detail about the costs of the loan.
Closing cost
This section of the Loan Estimate includes A. Origination Charges, B. Services you cannot shop for, C. Services you can shop for and D. Total Loan Costs.
Loan Costs section
The ____________ charge includes the compensation to the lender and Mortgage Loan Originator, as well as the amount of discount points being used to buy down the interest rate.
Origination
____________ __________ are the cost to lower the borrower’s interest rate in exchange for an upfront fee.
Discount points
_____________ _______ lower the borrower’s closing costs in exchange for a higher interest rate.
Lender credits
Some lenders use this word to refer to any upfront fee that is calculated as a percentage of the borrower’s loan amount, whether or not they receive a lower interest rate.
Point
Some lenders also offer __________ __________ that are not connected to the interest rate, sometimes as a temporary offer or to compensate for a problem.
Lender credits
Services that a borrower cannot shop can include these 6 fees:
- appraisal fees
- credit report fees
- flood determination fees
- flood monitoring fees
- tax monitoring fees
- tax status research fees.
If a borrower can shop from a list of providers TRID imposes a ____ percent cumulative fee tolerance. This means that the sum of the fees cannot increase more than this percent from their original disclosure on the LE and their disclosure on the CD.
10
If a borrower can shop from a list of providers ________ imposes a 10 percent cumulative fee tolerance. This means that the sum of the fees cannot increase more than 10 percent from their original disclosure on the LE and their disclosure on the CD.
TRID
__________ also gives a no tolerance to services that a borrower can shop for that are not on a provider’s list such as a hazard insurance provider, meaning that these fees can increase by any amount from their disclosure on the LE to the CD without penalty.
TRID
TRID also gives a _______ tolerance to services that a borrower can shop for that are not on a provider’s list such as a hazard insurance provider, meaning that these fees can increase by any amount from their disclosure on the LE to the CD without penalty.
No
On this section of the Loan Estimate, this includes Taxes and Other Government Fees. These fees generally fall into the 10 percent fee tolerance (except transfer taxes – which is zero tolerance).
Other costs
On the loan estimate, These fall under the no fee tolerance category. It is an amount required by the Lender, that the borrower must pay in advance and are prorated. Rent is paid in advance. Mortgage interest is always paid in arrears.
Prepaids
Interest paid in advance. This exists because in a mortgage situation the interest is paid in arrears.
Prepaid interest
In most situations at the time of closing the borrower must make an initial payment into their escrow account to make sure that they have enough to pay property taxes and insurance when they come due. What is this section called on the Loan Estimate?
Initial Escrow Payment at Closing
This section on the Loan Estimate, can include any optional fees in this situation there is an optional owner’s title insurance policy. That means that this fee is not being required by the lender but that it might be something that the borrower should think about buying.
Other
On the loan estimate, This is a subtotal of both the Total Loan Costs and Total Other Costs, as well as any Lender Credits. The Lender Credit would be shown and then subtracted
Total closing costs
On the Loan Estimate, this section itemizes the total closing costs, any closing costs that are going to be financed into the loan, any down payment/funds from the borrower, any deposit already made, funds for the borrower, any seller credits and adjustments and other credits.
Estimated Cash to Close
Generally, a creditor can revise a Loan Estimate at any time before it provides the Closing Disclosure. However, the creditor must ensure that the consumer receives the final revised LE no later than ____ business days prior to closing
4
The creditor is permitted to rely on the charges disclosed on the revised _________ __________ to reset tolerances in more limited circumstances, meaning that a creditor can review a ________ ___________(same as above) if it stays within the original tolerances except when specific things occur.
Loan Estimate
An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or the transaction- is an example of what?
Changed circumstances
Information specific to the consumer or the transaction that the creditor relied upon when
providing the disclosures and that was inaccurate or changed after the disclosures were provided- is an example of what?
Changed circumstances
The appraisal comes back lower than originally expected and the borrower no longer qualifies for the original product but does qualify for a different product with different charges for example Mortgage Insurance- this situation is an example of what?
Changed circumstance
If a _____________ _____________ occurred, then it is possible that it may cause one or more third-party charges subject to the 10 percent cumulative tolerance to increase then the creditor can rely on a new revised LE and reset the tolerances
Changed circumstance
A creditor may also provide and use a revised LE and reset tolerances if a ____________ __________ affected the borrower’s creditworthiness or the value of the property and resulted in the consumer being ineligible for an estimated loan term previously disclosed
Changed circumstance
A new revised LE must be provided no later than ___ business days after the date of the changed circumstance.
3
A new revised LE must be provided before the creditor provides the Closing Disclosure and it must be provided at least ___ business days prior to consummation.
4
The _____ page of the Loan Estimate ties up the loose ends. It gives the borrower some additional information about the Lender and Loan Officer but it also gives the borrower some figures to compare to other possible loan products and lenders that the borrowers may be shopping.
3rd
This section on a loan estimate, gives the borrower the total amount they will have paid in 5 years versus the amount of principal they will have paid off, the Annual Percentage Rate, and the Total Interest Percentage.
Comparisons
This is the costs of the loan expressed as a rate. It is not the interest rate! It is the cost of credit expressed as a rate.
The Annual Percentage Rate (APR)
This is the total amount of interest that the borrower will pay over the loan term as a percentage of your loan amount.
Total Interest Percentage (TIP)
The “___ ______ _____” comparison shows how much the borrower will have paid over that 5 years versus how much of that is principal.
In 5 years
The _______ _______is the cost that the borrower pays each year to borrow money for a mortgage.
Interest Rate
The __________ reflects not only the interest rate, but also the points, fees, and other charges that the borrower must pay to get the loan.
APR
This section, on a Loan Estimate, indicates to the borrower is that the lender may order an appraisal to determine the property’s value and that the borrower may be charged for that appraisal. It also indicates to the borrower that they will be given a copy of the appraisal promptly even if the loan does not close.
Other Considerations
True or false:
The borrower is entitled to pay for their own appraisal at their own cost.
True
This section of the Loan Estimate, indicates to the borrower whether this loan is assumable or not.
Other considerations
On the Loan Estimate, this section indicates to the borrower that this loan requires homeowner’s insurance on the property. It also tells the borrower that they can obtain the insurance from a company of their choice that the lender finds acceptable.
Other considerations
On the Loan Estimate, this section will indicate when the lender can consider a payment late; in most situations, if it is late by 15 days or more. It also indicates the amount of the late fee, which in most situations is 5 percent of the monthly principal and interest payment.
Other Considerations
On this section of the Loan Estimate, this indicates that refinancing this loan depends on the future financial situation of the borrower, the property value and the market conditions. It says that the borrower may not be able to refinance the loan.
Other considerations
On the Loan Estimate, this section dissolves the need of another disclosure originally required by RESPA – because it informs the borrower whether the lender will service this loan or whether the loan will be transferred to another servicer.
Other Considerations
In the other considerations section of the LE there is a section regarding appraisals. The_______ ______ _______ went into effect in 2014 and requires that the lender notify the borrower within 3 business days of application of their right to receive an appraisal and then the lender is required to promptly upon completion or at least 3 business days before consummation whichever is earlier a copy of their appraisal.
ECOA Valuations Rule
This notification on the other considerations on the LE, satisfies the requirement to provide that notice of a right to receive a copy of the appraisal under ECOA.
ECOA Valuations Rule
Another initial disclosure that usually gets sent out at the same time as the 1003 and the Loan Estimate is the ______________________________. This form is used to obtain a copy of the borrower’s tax transcripts to determine whether they can qualify for a mortgage. It is used to verify their income. See the copy of the 4506-T provided to you in the index.
Request for Transcript of Tax Return (4506-T)
The ______ _________ _______is another disclosure required by TRID. This document must be provided to the borrower within 3 business days of application. It is a pamphlet created to help a borrower though the mortgage process. It helps the borrower determine what the borrower needs to do to get the best mortgage for their situation, explains closing costs and what it takes to purchase home and give suggestions on how to be a successful homeowner.
Home Loan Toolkit
This Act is a part of the Truth in Lending Act and generally governs High-Cost and Higher Priced home loans.
The Homeownership and Equity Protection Act (HOEPA)
Prior to making a High-Cost and Higher Priced home loan, the borrower must undergo homeownership counseling and the creditor must receive a written certification from the homeownership counselor that they have completed the required counseling. _________ home counseling rule does not only apply to High-Cost and Higher Priced mortgages but also applies to negative amortization loans.
HOEPA’s
Prior to making a _________ and ____________ home loan the borrower must undergo homeownership counseling and the creditor must receive a written certification from the homeownership counselor that they have completed the required counseling. HOEPA’s home counseling rule does not only apply to High-Cost and Higher Priced mortgages but also applies to negative amortization loans.
High-Cost and Higher Priced
Prior to making a High-Cost and Higher Priced home loan the borrower must undergo homeownership counseling and the creditor must receive a written certification from the homeownership counselor that they have completed the required counseling. HOEPA’s home counseling rule does not only apply to High-Cost and Higher Priced mortgages but also applies to __________ ____________ loans.
Negative amortization
Prior to making a High-Cost and Higher Priced home loan the borrower must undergo ____________ ________________ and the creditor must receive a written certification from the _____________ __________________that they have completed the required counseling. HOEPA’s home counseling rule does not only apply to High-Cost and Higher Priced mortgages but also applies to negative amortization loans.
Homeownership counseling, homeownership counselor
The list of housing counselors must be sent at application or within ___ business days after receiving the application.
3
After the _________________ Act of 2000, electronic signatures were used as a valid signature for financial transactions with the permission of the borrower. This Act also allows for electronic records to satisfy any federal statute.
The Electronic Signatures in Global and National Commerce Act (E-Sign Act)
Before a financial institution can use ________________and electronic records they are required to obtain permission from the borrower. This includes providing a disclosure to the consumer explaining their rights to obtain any record in a non-electronic form and the right to withdraw consent to the use of electronic records.
E-signatures
True or false:
The financial institution is not required to provide a statement of software and hardware requirements for access to and retention of electronic records.
False
During the underwriting and processing portion of the loan process the mortgage _____________ and the ______________ are going to work together to get the borrower approved for their chosen mortgage.
Underwriter, processor
The ________________ is going to analyze the borrowers profile while the ________________ collects verifications and documentation to help the underwriter do a thorough analysis of the borrower.
Underwriter, processor
- Money in a checking or savings account
- Investments in stocks, bonds, mutual funds, certificates of deposit, money market funds,
and trust accounts - Amounts vested in a retirement savings account
- The cash value of a vested life insurance policy
These are all examples of what?
Liquid assets
- Funds that have not been vested
- Funds that cannot be withdrawn under circumstances other than the account owner’s
retirement, employment termination or death - Stock held in an unlisted corporation
- Non-vested stock options and non-vested restricted stock
- Personal unsecured loans
- Interest party contributions
- Cash proceeds from a cash-out refinance transaction on the subject property
These are all examples of what?
Non acceptable sources of reserve
__________ are measured by the number of months of qualifying payment amount for the subject mortgage that the borrower could pay using his or her financial assets.
Reserves
The amount of ________ that are required on a loan are going to depend on the transaction, the occupancy status and amortization type of the subject property, the number of units in the subject property and the number of other financed properties the borrower currently owns
Reserves
In most situations loans are going to be underwritten by____________ or ______________, these AUS’s are going to let the underwriter know if reserves are required on a specific loan transaction.
DU (Desktop Underwriter) or LP (Loan Prospector)
If the loan is being ____________ ___________ (meaning the underwriter is not relying on an AUS to help with the analysis of the borrower) then it is going to be laid out in the requirements for that specific loan product with the borrower’s specific qualifications.
Manually underwritten
147
147
True or false.
All of the Bowers assets must be verified if they are required to close the loan transaction.
True
The underwriter is likely going to require a request for a ________ ________ _________. This is a form filled out by the borrowers depository institution that will refer to the borrower has those funds available to them.
Verification of deposit. VOD
For a reserve to be considered seasoned, and exceptable, the funds must be in the borrowers possession for how long?
60 days
True or false.
A deposit must be seasoned.
True
True or false. Gifted funds do not require authentication.
False. The underwriter will often require a letter from the person giving the gift, indicating that they will not be requiring the money to be repaid by the borrower
What are the two different types of income that can exist and be used in the mortgage industry?
Stable income and variable income
Base salary, consistent hourly wages, Social Security payments for retirement or long-term disability.
These are all examples of what kind of income?
Stable
What type of income is consistent month after month?
Stable
Commission, bonuses, overtime, fluctuating hourly wages, second job.
These are all examples of what type of income?
Variable
These types of income must be treated more carefully because they can fluctuate from month to month.
Variable
If the ______________ income is the declining but has stabilized, then the underwriter is going to use the lower amount of income to be safe
Variable
These two forms can be used to verify the borrowers income.
Tax returns, W-2
A form filled out by the borrower’s employer stating that they are indeed employed at that company and they do receive income from them.
VOE
For some bonus or overtime income, the underwriter must get a completed form _______ for the borrowers recent paystub and W-2 forms covering the most recent two year period.
1005
If the borrower receives commission, the underwriter is going to need To see a minimum of ____ years of commission.
2
If the commission income represents less than 25% of the borrowers total annual employment income, what two other forms are required by the underwriter?
- VOE
2. Pay stubs and W-2
If the commission income represents more than 25% of the borrowers annual income, then the underwriter is going to need to see copies of what two sets of documentation?
- Tax returns
2. VOE or paystub and W-2 combination
True or false?
If income does not have a defined expiration date the underwriter cannot conclude that the income is stable.
False.If the income does not have a defined expiration date, the underwriter can conclude that the income is stable.
Alimony or child support, distributions from retirement amount, mortgage differential payments.
These are all examples of what kind of income?
Types of income that do have defined expiration dates.
Notes receivable, public assistance, royalty payment income.
These are all examples of what kind of income?
Income that has a defined expiration date.
Social Security(excluding retirement in the long term disability) trust income and a VA benefits(not including retirement or long-term disability). These are all examples of what type of income?
Income that has a defined expiration date
If a borrower wants to include child-support as a source of income, it must be proven that it will be continued for how many more years?
3
3 examples of non-taxable income verification documents.
Award letters, policy agreements, or account statements.
Once the underwriter has determined that the income is nontaxable, the underwriter can gross up the income by adding _____ percent of the nontaxable income to the borrowers income.
25
Once the underwriter has determined that the income is nontaxable, the underwriter can _________ _______\the income by adding 25% of the non-taxable income to the borrowers income.
Gross up
If a rental income is derived from the subject property, the property must be one of the two following.
- A 2 to 4 unit principal residence in which the borrower occupies one of the units.
- A 1 to 4 unit investment property
If in income is derived from a ______________ property, then there is no restriction on the property type if it meets all of the requirements.
Non-subject
What two ways can a rental income be verified?
- Tax returns
2. A fully executed current lease agreement
If the subject property is the property where the income is generated, what additional addendum to the appraisal will be required?
Single-family comparable rent schedule
This form compares the rent generated by the subject property in comparison to other rental properties in the area.
Single-family comparable rent schedule
An individual who has a ______ percent or greater ownership interest in the business is self-employed.
25
The stability of the borrowers income, The location in nature of the borrowers business, the demand for the product or service offered by the business, the financial strength of the business and the ability to repay.
These are all examples of a factor that must be analyzed before approving a mortgage for what type of borrower?
Self-employed
How many years of history is the underwriter looking for from a self-employed borrower?
2
True or false.
The underwriter must prepare a written evaluation of its analysis of self-employed borrowers personal income including business income or loss, reported on the borrowers individual income tax returns.
True
