General Mortgage Flashcards
Loan to Value (LTV) =
1st Loan Amount / Purchase price OR appraised value, whichever is LESS
CLTV
1st Loan Amount + 2nd Loan Amount / Purchase price OR appraised value, whichever is LESS
TLTV
1st mortgage + total HELOC/2nd mortgage, divided by the value
PITI
Principal, Interest, Taxes, Insurance
Table Funding
Any loan that is funded by a wholesale lender for a mortgage broker (brokers cannot underwrite or fund loans).
Mortgage Banker
Any company that can underwrite or fund loans. Mortgage brokers cannot fund or underwrite loans.
Yield Spread Premium
Money paid from the wholesaler to the broker.
Extended lock agreement
Cannot be issued by a broker and must contain 4 items: program, interest rate, cost and expiration date.
Delinquent loan
Any loan over 30 days due
Discount Point
1% of the loan amount and can only be used for reduction of interest rate.
Premium pricing
Used to help the borrower pay their closing costs. The premium results from the interest rate being increased.
Right of Rescission
3 business days, not including the day the documents are signed. 2 copies of the rescission form must be given to all borrowers and owners of the property.
If any of the borrowers or owners rescind, you must refund all costs paid by the borrower within __ days.
20
If a mistake is made on the Right of Rescission, the rescission period extends to __ years.
3
Junior Lien
2nd mortgage or HELOC.
Repurchase
An investor requiring the originating lender to buy the loan back because of fraud, unacceptable underwriting, or appraisal.
Liens
1st mortgage, 2nd mortgage, IRS tax lien, judgments, mechanics liens.
Early Payment Default
The borrower does not make the 1st, 2nd, or possibly the third payment. This is most likely fraud.
Federal Mortgage Loan
Any loan originated and closed under Fannie Mae, Freddie Mac, FHA, VA or USDA requirements.
What is the maximum LTV of any loan that can be sold to Fannie Mae or Freddie Mac?
97%
What is the max housing & overall ratios for conventional conforming loans?
28% housing
36% overall
Can you have a conventional conforming loan with a term over 30 years?
No
Are prepayment penalties or assumptions allows on a conventional conforming loan?
No
Non-Conforming Loan
Any loan that cannot be sold to Fannie Mae or Freddie Mac. Also, Jumbo or any loans that are using non verified income.
Nontraditional Loan
Any loan that is not a 30 year fixed.
USDA Loans (United States Department of Agriculture)
Population requirement?
Max LTV?
Underwriting Ratios?
- In areas of less than 35,000 people
- 100% financing. Income limitations to be eligible.
- 29/41 Underwriting Ratios (Housing/Total)
USDA Loans - What is the guarantee fee? Who underwrites and funds these loans?
Guarantee Fee - government mortgage insurance is required for the life of the loan.
USDA must underwrite and fund all loans.
What is the maximum LTV on a VA loan?
100%
What is the maximum guarantee authorized by the VA?
25% of the purchase price or appraised value (whichever is lower)
What are VA loan limits
Fannie or Freddie loan limits
What is the overall maximum ratio for VA loans? What other income calculation is there?
41% (back end) - housing expense ratio is not used
Residual income calculation. Number of people living in the home, times the VA established factor, plus the mortgage payment and other debt payments - must be less than the net income.
Things to remember about Reverse Mortgages.
What is Negative Amortization?
The mortgage balance goes up every month, because the interest is not paid (no mortgage payments are required) and the borrowers are paid each month.
Do reverse mortgages have escrows?
No. The borrower is responsible to pay their own taxes and insurance.
What is the minimum age to qualify for a reverse mortgage?
62
Mandatory counseling before they can apply.
Reverse Mortgages.
What is a non-recourse mortgage?
If the mortgage balance is higher than the value at the end of the loan, FHA absorbs the loss.
What are the 3 requirements the borrowers must fulfill to maintain a Reverse Mortgage (The borrower could lose their home if they don’t do the following):
- The property must be their primary residence.
- They must maintain the property.
- Taxes and insurance must be paid by the borrower.
Reverse Mortgages. What are the 3 factors in determining the amount of the mortgage and monthly payouts to the borrower?
- Age of the borrower
- LTV
- Interest Rate
2nd Liens (Purchase Money Seconds)
What are the most common terms?
What is the main reason for this type of loan?
80/15/5 or 80/10/10
(ex. 80% LTV on first lien, 15 or 10 = the amount of the 2nd mortgage, 5 or 10 = the amount of down payment
No monthly mortgage insurance
HELOC. What term length are these typically? Interest rate?
8 - 10 years.
Floating interest rate, usually based on prime rate.
No principal payment required unless the borrower chooses to pay, but the balance will be due at the end of the loan.
When does a borrower pay interest on a HELOC?
When they draw part of the proceeds. Then each month they will pay interest on the balance they have drawn.
HELOC example. Value of property is $200,000 and their first mortgage is $100,000. What would the HELOC amount be?
Lender will go to 80% LTV.
$200,000 x 80% = $160,000
$160,000 - $100,000 (first mortgage) = $60,000 HELOC
2nd Mortgages.
When are proceeds paid out? When are payments due? Term length?
All the proceeds are paid out at the closing. They will start monthly P&I payments, usually within 45 days. The term is 15 years and can be an ARM or fixed-rate mortgage.
2nd Mortgages.
What is a subordination agreement?
If a borrower has a first mortgage, as well as a second mortgage with another lender.
If the borrower wants to refinance the first mortgage, they have to obtain a signed Subordination Agreement from the second mortgage lender, which says the second mortgage lender will stay in 2nd position while the 1st is refinanced.
What are the 2 types of construction programs?
- Construction Loan with a Permanent Take Out
- Construction Perm
What is a Construction Loan with a Permanent Takeout?
The consumer obtains a construction loan from a lender. The construction lender will request a Permanent Take Out before making the construction Loan. Your company will take an application and process as a new loan. If approved, a commitment letter will be issued to the borrower.
What is a Construction Perm Loan?
When the construction is done, if the borrower meets the requirements of the commitment letter, your company will pay off the construction loan and the borrower starts making payment son the permanent loan.
Construction Loans - what is required to be paid each month during construction?
Interest. No principal payment is required, but the borrower can pay principal if they want to pay the loan down.
Main difference between ECOA and FCRA?
ECOA is about a credit application and FCRA is about the credit report.
What is the FACT Act all about?
Identity Theft.
If you own more than __% of a business being used in a transaction must you disclose it?
1% (AFBA)
Per AFBA, when must the business ownership be disclosed?
Best Answer: Immediately
Other Option: Prior to Doc Signing
4 words that mean the same in NMLS related to docs?
- Doc signing,
- Loan consummation
- Loan settlement
- Loan closing
Civil Rights Act relates to?
Always relates to race.
What are 2 other words for an escrow account?
- Impound Account
2. Reserve Account
What are the 6 items necessary to make a credit decision? (to make a complete loan application)
- Name(s) of borrower
- SSN for each borrower
- Gross monthly income of borrower(s)
- Loan amount sought
- Address of subject property
- Estimate of property value
What can you put in place of a property address on the 1003 if you don’t know that yet?
TBD or UNK
cannot put N/A
Initial disclosures must be sent out within 3 business days after a complete loan application UNLESS:
- The applicant withdraws or
- The lender turns down the loan before the 3 business day period ends
What are the different initial disclosures?
- Home Loan Toolkit (purchases only)
- Loan Estimate (TILA)
- Mortgage Servicing Disclosure Statement (lenders intentions - RESPA)
- List of HUD Approved Home Counselors, at least 10 (RESPA)
What are 2 other names of the Home Loan Toolkit?
- Know Before You Owe Booklet
2. Special Information Booklet
What are the 2 possible disclosures a borrower will receive before settlement?
- Affiliated Business Arrangement (AfBA) Disclosure (1% - not 10%)
- Closing Disclosure (3 days prior to consummation - TILA)
What 2 disclosures are received at settlement?
- Finalized Closing Disclosure (TILA)
2. Initial Escrow Statement (or within 45 days of closing)
What can the Initial Escrow Statement also be referred to as?
Hello Letter
What documents can be received by the borrower after settlement?
- Annual Escrow Statement (if they chose to escrow)
2. Servicing Transfer Statement
What can the Servicing Transfer Statement also be referred to as?
Goodbye Letter
How many days notice must a borrower have before a lender transfers service?
15 days prior to transfer (no penalty for 1st 60 days)
What fees may be charged prior to delivering the Loan Estimate?
credit report fee ONLY
How many days must the terms be available on a loan estimate?
10 business days
Who is responsible for providing the Closing Disclosure for the borrower?
The bank/lender
Who is responsible for providing the Closing Disclosure to the seller?
Settlement Agent (title agent)
What are the 3 valid change in circumstances that would prompt a new closing disclosure and 3 day wait period?
- Changes in the loans APR (1/8th% regular, 1/4th% irregular transactions)
- Change in the loan product
- The addition of a prepayment penalty
What 8 types of information must a lender confirm to establish a borrower’s ATR (ability to repay)?
- Current income or assets
- Current employment status
- Borrower’s credit history
- Monthly payment for mortgage
- Borrower’s monthly payments on other simultaneous mortgage loans
- Monthly payments for other mortgage-related expenses
- Other debts of the borrower
- Monthly debt payments compared to the borrowers monthly income (DTI cannot exceed 43%)
What is blockbusting? (also known as panic selling)
Trying to induce owners to sell their homes by suggesting that the ethnic or racial composition of the neighborhood is changing, with the implication that property values will decline.
What is steering?
Channeling prospective real estate buyers or tenants to particular neighborhoods based on their race, religion or ethic background
What is redlining?
Refusal to make loans on property located in a particular neighborhood for discriminatory reasons.
Who commits the discriminatory practice of blockbusting & steering?
Real estate agents
Redlining is the law that led to the creation of ____?
HMDA
What are Fannie & Freddie’s standard loan application form numbers?
Fannie Mae - 1003
Freddie Mac - Form 65
What are the 2 types of underwriting?
Automated - Information fed into automated underwriting system (AUS)
Manual - Done by individual who works for lender
Are conventional loans insured or guaranteed by a government entity?
No.
Insured = FHA Guaranteed = VA/USDA
What is the late fee on a conventional loan?
5% of the P&I only
Veteran eligibility is based on length of service with required documentation. What are the 2 possible documents?
- DD-214 (discharge papers)
2. COE (Certificate of Eligibility)
What is a VA appraisal also called?
Certificate of Reasonable Value (CRV)
Notice of Value (NOV)
When is the variable funding fee waived on a VA loan?
Waived for disabled veterans and surviving spouses.
What is the occupancy requirement on a VA loan?
Must occupy as principal residence within 60 days of closing loan, for at least 12 months
What is the max a lender can charge on a VA loan?
Flat fee of up to 1% to cover lender costs
What is the late fee on a VA loan?
4% of the P&I only
Who administers USDA loans?
Department of Agriculture
Max loan amount on USDA loans?
None
Is there a prepayment penalty fee on USDA loans?
No
What is the late fee on a USDA loan?
4% of the P&I only
Max seller concessions on a conventional loan?
3%
Max seller concessions on a FHA loan?
6%
Max seller concessions on a VA loan?
4%
What are USDA loans also called?
Section 502 Loans
What are the 3 types of appraisal approaches?
- Sales Comparison Approach/Market Approach
- Cost Approach/Replacement Cost Approach
- Income Approach (capitalization approach)
What is the sales comparison approach/market approach for appraisals?
Compares property being appraised with other similar properties (comparables or comps) sold recently in the same market area; best for residential properties
Minimum of 3 comps required by most lenders
What is the cost approach/replacement cost approach for appraisals?
Best for relatively new construction, vacant land and unusual or special purpose properties that do not produce income.
Also used when evaluating the cost to replace property that was damaged due to natural disasters.
What is the income approach (capitalization approach) for appraisals?
Estimates value by analyzing current or potential revenue compared to other similar properties; best for commercial or investment properties
Which value is used in a transaction - appraised value or sales price?
The lower of the 2
Self-employed borrowers need personal and business tax returns for a minimum of __ years?
2 years
What type of income does the borrower not have to list if they don’t want to?
Alimony, child support and/or maintenance
based on what law? ECOA
What type of income may be “grossed up” by 25%?
Tax free income/Public Assistance (includes social security, disability, etc.)
What percentage of rental income is used?
75% (to allow for vacancy loss of 25%)
Convert hourly wages to monthly.
Hourly rate x Hours Worked/Week x 52 / 12
Convert weekly salary to monthly
Weekly pay x 52 / 12
Convert bi-weekly salary to monthly
Bi-weekly pay x 26 / 12
Convert semi-monthly (or bi-monthly) salary to monthly
Pay x 24 / 12
What is another name for the front-end ratio?
Housing Expense Ratio (HER)
What is the front-end ratio/HER formula?
PITI / Gross Monthly Income
What is another name for the back-end ratio?
Total Obligations Ratio (TOR)
What is the back-end ratio/TOR formula?
PITI + Debt / Gross Monthly Income
What are 2 things you must be licensed loan originator to do?
- Take a residential mortgage loan application
2. Offers or negotiates terms of a residential mortgage loan for compensation or gain
What are some examples of things you do NOT have to be a licensed MLO to do?
- Perform administrative or clerical tasks for licensee
- Extending credit on timeshare plans
- Negotiating mortgage loans for yourself or immediate family members
- A loan process or underwriter who DOES NOT represent to the public through advertising
- Attorneys who negotiate loan terms as an ancillary service and who aren’t compensated by a loan originator or lender
Who does a registered loan originator work for?
Employee of a depository institution (bank)
Who does a state-licensed originator work for?
Licensed by their state, registered with the NMLSR and isn’t employed by a depository institution
When can an MLO applicant have a felony on their record?
If it was more than 7 years ago and NOT a felony involving an act of fraud, dishonesty, breach of trust, or money laundering
What is the breakdown of the 20 hours of NMLS-approved prelicensign eduction?
- Federal Law & Regulation (3 hours)
- Ethics (3 hours)
- Lending standards for non traditional mortgage products (2 hours)
- Electives (12 hours)
How many hours of CE must you complete each year?
8 hours
What is the breakdown of the 8 hours of CE required each year?
- Federal Law & Regulation (3 hours)
- Ethics (2 hours)
- Nontraditional mortgage products (2 hours)
- Elective (1 hour)
What is the successive year rule?
A licensed MLO may only receive credit for a CE course in the year in which the course is taken.
What are the state regulatory authority minimum requirements?
- effective supervision and enforcement of the law
- ensuring MLOs are registered with NMLS
- report violation
- conduct investigations
- access to records
- issue licenses to conduct business
- deny, suspend, condition or revoke licenses
- minimum net worth, surety bond or state recovery fund (3 protection options)
Do state and federal regulating authorities have the authority to impose a prison sentence?
NO (the district attorney sends you to prison)
What is the maximum penalty for violating the SAFE Act?
$28,474
The SAFE Act was amended in 2018 with the passage of the Economic Growth, Regulatory Relife, and Consumer Protection Act of 2018 to mandate that all states implement _________?
Transitional Authority (Temporary Authority) to MLOs seeking to become licensed in other states or who seek to move from a bank to a non-bank lender
Under temporary authority, how many days can an individual be allowed to originate loans while completing any state-specific requirements for licensure?
120 days
