General Mortgage Knowledge Flashcards
Fannie Mae Full Name
Federal National Mortgage Association
Freddie Mac Full Name
Federal Home Loan Mortgage Corporation
Chartered by the federal government to buy mortgages originated by Savings Associations.
Freddie Mac
Fannie Mae Underwriting System
Desktop Underwriter
Freddie Mac Underwriting System
Loan Prospector
Most conventional mortgages are NOT
Assumable, they do not have a “due on sale clause”
On a conventional conforming loan. how much of the down payment is required from the borrower?
5%
Late fees are either 4% or 5% of the…
Principal and Interest, Not PITI
PITI is…
Principal, interest, Taxes, and Hazard, Flood, and Mortgage Insurance
Escrow impounds are collected by
The lender as part of the monthly mortgage payment,
Escrow impounds include…
Monthly amount for property taxes, hazard insurance and flood insurance, if required.
Fannie Mae requires the non-qualifying spouse to…
Sign the mortgage or any other
documentation required to evidence that the spouse is relinquishing all rights to the property.
Fannie Mae requires GUARANTEED FUNDS such as:
a cashier’s check from a bank or
reputable financial institution to pay the closing costs; personal checks are not
acceptable.
Fannie Mae emphasizes the borrowers:
continuity of stable income vs. stability of
employment.
Fannie Mae requires the borrower to have a:
social security number or Individual Taxpayer Identification Number.
Fannie Mae requires the lender to obtain a written…
credit report for each borrower
on the loan application who has an individual credit record.
Fannie Mae will not accept a co-borrower’s income for qualifying purposes, unless:
The co-borrower also signs the note.
Verification of Bank Balance:
Fannie Mae 1006
Verification of Payroll:
Fannie Mae 1005
A form that summarizes the applicant’s data and will usually be the top sheet in the loan package when it is sent to the underwriter.
Fannie Mae 1008 Tranmittal Summary
Fannie Mae will NOT purchase:
Most balloon mortgages
Fannie Mae will purchase mortgages secured by:
Residential Properties in urban, suburban or rural areas
Fannie Mae does NOT purchase mortgages on:
Agricultural-type properties
Fannie Mae recommends using how many credit score:
Two
Alt-A Loans are characterized by:
Reduced documentation, high rations, or limited assets
A senior mortgage (first mortgage) has what position?
Superior Lien Position
A junior mortgage (subsequent mortgage) has what position?
A subordinate lien position
There is an unlimited possible number of:
Junior Mortgages and no restriction terms
Two Common Indices
US Treasury Securities and LIBOR
A non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.
A Term Mortgage
In a reverse mortgage:
The balance of loan rises as equity shrinks
No income requirements in:
Reverse Mortgages
Reverse Mortgages require that the homeowner…
Meet with a counselor
A traditional Mortgage is defined as:
A 30 year fixed
A Package Mortgage can either be:
Amortizing or Non-Amortizing
A loan with an adjustable interest rate, but
with payments that never change; instead, as the rate increases or decreases, the
balance decreases slower of faster as payments are made
Variable Balance Mortgage
A type of seller financing in which the seller finances enough money to cover the existing loan balance as well as any additional
funds needed by the borrower.
A Wrap Around Mortgage
When the seller extends credit to the buyer to finance the purchase
of property.
Seller Financing
Given by the buyer to a
seller to secure part or all of the money borrowed to purchase the property. A
seller may take part of the purchase price as a mortgage to help the sale.
Seller Carry Back / Purchase Money Mortgage
This is a fixed rate mortgage set up like a 30-year conventional mortgage loan with payments that increase
regularly. It has a fixed interest rate and increasing payments so that the loan
balance is paid off more quickly.
Growing Equity Mortgage
Rate adjustment periods
Interval at which interest rate changes.
Interest rate caps
Limits the number % points interest rate can rise or fall
An ARM, an introductory rate that is lower than the fully indexed rate at the time of closing is called a…
Teaser rate
Purchase Money Mortgage
When a borrower obtains a mortgage from the seller to purchase a home.
Credit documents must be no more than..
120 days old on the date the note is signed
A first-time home buyer is someone who is purchasing an owner-occupied primary
residence and who has not had an ownership interest in an owner-occupied
property for the past…
Three years
A guarantor or co-signer is a credit applicant who does not have an ownership interest
in the security property, but who signs the mortgage note and thus..
has a joint liability
for the note with the borrower who is the owner of the note.
Choice by the lender not to take action even though the borrower is in default of the loan.
Forbearance
Requires that the loan balance is paid off when the
title is transferred.
Due-On-Sale Clause
Provision in a mortgage enabling a lender to
demand full repayment if the borrower transfers the loan.
Alienation Clause
Conforming loans typically do not provide for prepayment penalties. However, if the loan does contain a prepayment penalty,
It must be disclosed in the note and must be clearly disclosed on the Loan Estimate and Closing Disclosure.
Under federal law, prepayment penalties are now restricted solely to…
fixed-rate qualified mortgages and may not be charged after the first three years of the
loan term.
Method used to transfer title for a property following full repayment of a loan.
Reconveyance Deed
The mortgage defeasance clause requires the lender to send a…
Satisfaction of Mortgage notice to the borrower within sixty days of paying off the loan
Allows the borrower to pay all or part of the loan before it is due without penalty.
Prepayment Privilege Clause
Permits future additional advances from the same loan.
Open End Clayse
Partial Release
Allows the developer’s lien to be released as the parcel is sold.
An individual with power of attorney who is able to sign the contract if one of the parties is not able or competent to sign.
ATTORNEY-IN-FACT
The party tranferring contactual right to another
Assignor
The party recieving the contactual rights
Assignee
AN assignor can keep the…
Serving rights along with the mortgage and note to the asignee
The owner of a property
Grantor
Party recieving the title transfer
Grantee
Written instrument used to convey title or transfer ownership
Deed
May be placed in the deed and control the use of property
Deed Restrictions
A structure or portion of a structure that extends over the boundary line of a property onto another parcel
Enroachment
Loan program relying only on the value of the home and borrowers credit history.
No Doc
The borrower provided information on his/her income; however, no documentation was required, or verification on the
actual income figures was performed. Assets, employment and other requirements were verified by the lender.
Stated Income, Verified Assets (SIVA)
No income information was considered; however, assets were verified. Although income was not verified, the lender verified that the borrower was employed.
No Income, Verified Assets (NIVA)
The borrower provided information about his/her income and assets. However, no documentation was provided, and the lender performed no verification of the information. Although income was not verified, the lender verified that the
borrower was employed.
Stated Income, Stated Assets (SISA)
No income or assets
information was provided by the borrower, nor verified by the lender. Although
income was not verified, the lender verified that the borrower was employed.
No Income, No Assets (NINA)
Conforming loans require an underwriting analysis of a borrower’s debt
ratios – ratio of housing debt-to-income and ratio of total debt-to-income. In this type
of nontraditional loan, the borrower’s debt ratios were not considered.
No Ratio
the borrower may pay off the loan in full in order to avoid a
foreclosure sale of the property.
Redemption Period
Assumption in which the original borrower is released from all liability.
Novation
Has priority over all other liens and must be paid off first in the case of foreclosure.
Real Estate Tax Liens
Loss Mitigation Options Includes
Refinancing, Loan Modification, Short Sale, and deed in lieu
In evaluating flood insurance terms, the risk of flood potential are identified by
Special Flood Hazard Area
High Risk Flood ZOnes
A and V
Moderate Flood Zones
B or X
Low Risk Flood Zones
C or X
Flood Insurance must be purchased from..
the National Flood Insurance Program
Homeowners Insurance requires buyers to…
pay the first years insurance in full prior to closing
When a lender sells a mortgage loan to another lender, this is called…
Assignment of Mortgage
Occurs when a lender obtains funds for closing from a line of credit extended by a commercial bank
Warehouse funding
Allows a broker to originate and close a loan under his
or her name. After closing, the mortgage and note are immediately assigned to that investor.
Table Funding
When the lender deals directly with the borrower
without any middlemen.
Direct Investor
Is charged to the borrower at closing to cover the costs of determining whether or not the property is in a flood zone.
Flood Certification Fee
Work done by the borrower which has value. The work must be listed on
the appraisal to be eligible.
Sweat Equity
Sweat Equity is not…
An acceptable source of funds
Who pays for the title policies?
Either the seller or the borrower
Protects the homeowner (mortgagor) and the lender (mortgagee) against defects that occurred in the past: undisclosed liens, heirs, fraudulent
documents, etc.
Title Insurance
