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MLO Study Guide > General Mortgage Knowledge (20%) > Flashcards

General Mortgage Knowledge (20%) Flashcards

1
Q

One of the most well-known types of reverse mortgages

A

Home Equity Conversion Mortgage, or HECM.

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2
Q

Types of Reverse Mortgages

A

Home Equity Conversion Mortgage (HECM): Proprietary Reverse Mortgage: Single-Purpose Reverse Mortgage:

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3
Q

HELOCs generally have two phases:

A

draw period and a repayment phase.

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4
Q

Home Equity Loan

A

A HELOC has some similarities to a home equity loan, but with a few key differences. First, as far as similarities go, both options: ● Tap into the equity of a home. ● Use a borrower’s home as collateral until the loan is repaid.

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5
Q

As far as the differences,

A

HELOCs can be withdrawn from up to a credit limit during the draw period, use a variable rate with occasional fixed rate at the beginning, and payments are made only on the amount that is borrowed after funds are drawn. With a home equity loan, on the other hand, the borrower gets paid a lump sum at the beginning, rather than having a revolving line of credit, and the interest rate is usually fixed. Payments are made periodically over a specific time frame.

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6
Q

2–1 Buydown:

A

A specific type of financing that lowers the interest rate for the first two years on a mortgage before reaching a permanent rate for the remainder of the term.

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7
Q

Accrued Interest:

A

This refers to the amount of interest incurred, as of a specific date, on a mortgage loan but has yet to be paid out.

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8
Q

Assumable Loan:

A

This consists of a type of financing arrangement where a mortgage that is outstanding is transferred from the current owner to a new buyer, along with the terms. When a buyer assumes the owner’s debt, they can avoid trying to obtain their own mortgage. This type of loan is attractive to a buyer when interest rates go up significantly. By assuming the previous mortgage, they hang onto the original interest rate, as well.

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9
Q

Average Prime Offer Rate:

A

This is the average annual percentage rate interest rate for loans that are low-risk and have similar points and terms. The APOR is collected for several different loan terms for both fixed and adjustable rate mortgages.

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10
Q

If a borrower defaults on a loan, which clause gives permission to the lender to proceed with foreclosure?

A

Acceleration clause

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11
Q

What are the lowest payment options for an adjustable rate mortgage?

A

The minimum amount

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12
Q

What is the purpose of the Market Conditions Addendum?

A

Provide a lender with understandable market trends and conditions in a subject neighborhood.

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13
Q

The ECOA prevents discrimination against the following:

A

Disabilities

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14
Q

What does the acronym PFC stand for?

A

Prepaid Finance Charges

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15
Q

There is a certain risk involved when an agent may not have his client’s best interest at heart. What is this risk called?

A

Principal-Agent Risk

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16
Q

What is the federal regulation that implements the Real Estate Settlement Procedures Act?

A

Regulation X

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17
Q

The Right to Rescind is not available on what type of purchase?

A

Commercial purchase

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18
Q

What is not included on the HUD-1 Settlement Statement?

A

Housing Expense Ratio

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19
Q

What is the result of a property that is appraised higher than the market value?

A

An inflated appraisal

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20
Q

Which law prohibits a lender from making written or oral statements to applicants that would discourage them from pursuing an application when a reasonable person would actually pursue it?

A

ECOA

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21
Q

How many days prior to closing is a lender required to provide a HUD-1 Settlement Statement to a borrower?

A

One day

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22
Q

When must the appraisal disclosure be delivered?

A

When a complete application is taken in

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23
Q

What is the variance adjustment percentage that is allowed for appraisals according to Freddie Mac and Fannie Mae?

A

20%

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24
Q

Where is the cost of a loan shown as an annual percentage rate?

A

TIL disclosure statement

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25
Q

What disclosure would show whether a loan has a balloon payment or not?

A

Truth in Lending

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26
Q

Which rule prohibits compensation based on loan terms or things like interest rate and loan-to-value.

A

Loan Originator Compensation Rule

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27
Q

Mortgage servicing rules that are instituted by the CFPB provide an additional level of consumer protections related to:

A

Kickbacks and referrals

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28
Q

What is the maximum percentage the final APR can deviate from the initial APR on the closing disclosure before an additional waiting period is triggered?

A

⅛ percent

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29
Q

What type of loans do not apply to RESPA?

A

25 acres or more; business, commercial or agricultural; bridge loans; vacant lots when no proceeds will be used to build a residence; assumptions; sale of loan into a secondary market; loan conversions.

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30
Q

What is an Affiliated Business Agreement?

A

When a service provider has a business relationship or interest with another service provider.

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31
Q

What is the purpose of the Dodd-Frank Act?

A

Make the financial system more accountable and transparent; regulate institutions so that they don’t become too large to fail; prohibit government bailouts that are funded by taxpayers; end abusive financial services practices.

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32
Q

What is the SAFE Act?

A

Secure and Fair Enforcement for Mortgage Licensing Act. It requires federally regulated MLOs to become licensed at the federal and state level through the NMLS. 20 total hours of education: three hours federal, two hours ethics, two hours nontraditional mortgage marketplace An index A margin Adjustment caps Payment Amortization

33
Q

What is the RESPA?

A

RESPA stands for the Real Estate Settlement Procedures Act and its purpose is to help consumers become improved shoppers for different settlement services.

34
Q

What types of items fall under RESPA violations?

A

Q Fee-splitting, kickbacks, and markups

35
Q

What is the basis for ECOA?

A

The Equal Credit Opportunity Act, or ECOA, deal with discrimination and makes it unlawful to discriminate against any applicant based on race, color, religion, national origin, sex/gender, or marital status.

36
Q

What is the organization CFPB all about?

A

The Consumer Financial Protection Bureau, or CFPB, is responsible for the protection of the consumer in the financial sector. An independent agency of the United States government, it was established to prevent predatory mortgage lending and make it simpler for borrowers to understand the terms of a mortgage before the paperwork gets finalized.

37
Q

What is the significance of HOEPA?

A

The Home Ownerships and Equity Protection Act, or HOEPA, helps prevent predatory lending for high-cost loans

38
Q

What does HPML stand for?

A

High Priced Mortgage Loans

39
Q

What is the purpose of HMDA?

A

It is called the Home Mortgage Disclosure Act and it tracks sex, race, and nationality.

40
Q

Why was HPA created?

A

The homeowners Protection Act was established to facilitate the cancellation of PMI. FHA and VA loans are exempt from this.

41
Q

The main objective of the Secure and Fair Enforcement Act was to:

A

Enhance consumer protection and reduce fraud.

42
Q

What laws must a mortgage loan originator comply with when placing an advertisement for consumer credit?

A

The Truth in Lending Act and Regulation Z

43
Q

Under what law is the right of rescission defined under?

A

Under TILA, a borrower has the right to cancel a home equity loan or line of credit with a new lender within three business days. The right is provided on a no-questions-asked basis. All fees must be refunded by the lender within 20 days of the right of rescission being exercised.

44
Q

Which clause in a mortgage permits a lender to increase the interest rate?

A

Escalation

45
Q

What is the Telemarketing Sales Rule?

A

The requirements needed to be followed if a person has their name on a Do-Not-Call registry.

46
Q

What section of an appraisal report would discuss the economic setting of a property and the market forces that impact the value the property would hold?

A

The geographic and market analysis on an appraisal report.

47
Q

What term or phrase refers to the fact that NMLS approved credits in one state are applicable to the NMLS credits in another state?

A

Reciprocity of education

48
Q

Which department determines whether a participant in a third-party mortgage fraud transaction will be prosecuted and which statute the charges will occur under?

A

United States Department of Justice

49
Q

Which law are high cost loans associated with?

A

The Home Ownership and Equity Protection Act, or HOEPA

50
Q

When a lender takes advantage of a consumer who is ill-informed about fees, loan terms, and when to refinance in a way that is beneficial, it is known as:

A

Predatory lending

51
Q

Per Regulation B, how long should lenders retain certain documents and records?

A

At least 25 months.

52
Q

What is another term for regulation C?

A

The Home Mortgage Disclosure Act

53
Q

Which act created in 1968 provides guidelines and restrictions regarding the selling, renting, and financing of real property?

A

The Civil Rights Act

54
Q

What factor is not protected in the Federal Fair Housing Act of 1968, which protects against dicrimination in residential credit?

A

Age is not protected

55
Q

What law/regulation requires that consumers must receive a free copy of their credit report if credit is denied based on details from this report?

A

The Fair Credit Reporting Act

56
Q

What document is required to be given to a borrower at closing under RESPA guidelines?

A

HUD-1 Settlement Statement

57
Q

What agency regulates the Truth in Lending Act, or TILA?

A

HUD

58
Q

Using a specific loan product to entice a borrower and then selling them something completely different is known as:

A

A bait and switch

59
Q

The purchase price of a property combined with the buyer-paid closing costs is collectively known as:

A

The acquisition cost

60
Q

Money that is paid by the lender to a mortgage broker for adding value to a loan is called:

A

Yield spread premium

61
Q

What agency enforces the Red Flag Rule?

A

The Federal Trade Commission

62
Q

What agencies enforce the “Do Not Call” registry?

A

The Federal Trade Commission, the Federal Communication Commission, and state law enforcement officials.

63
Q

Mortgages have a certain provision written into them that allows a lender to demand a full repayment if the owner defaults on the loan. What is this provision?

A

Acceleration Clause

64
Q

Which regulators set the guidelines for conforming loans?

A

Fannie Mae and Freddie Mac

65
Q

This particular regulation requires lenders to fully disclose information about APR to borrowers in any real estate transaction:

A

Regulation Z

66
Q

There are eight protected classes under the ECOA. What are they?

A

Race, sex/gender, color, naional origin, religion, age (if an applicant is old enough to enter a contract agreement), marital status, and disclosing income from public assistance like welfare, disability, or social security.

67
Q

What must a notice of incomplete application have on it?

A

The missing information needed; a reasonable time frame for submitting such information; notification that failure to provide needed information will result in the application no longer being considered.

68
Q

Under what law must a lender exclude alimony or child support as information needed.

A

ECOA/Regulation B

69
Q

What is the penalty for obtaining a credit report without prior authorization or when an employee of a reporting agency gives a credit report to an individual who is not authorised to have one?

A

$5,000, one year in jail, or both.

70
Q

What are the functions of the Bank Secrecy Act/Anti-Money Laundering?

A

Requires all financial institutions to keep thorough records of all financial transactions transactions greater than $10,000, MLOs are required to report suspicious activity that exceeds $5,000; a Suspicious Activity Report, or SAR, must be filed no later than 30 days after an issue is detected; the SAR must be maintained by the bank for five years.

71
Q

What are loans called that exceed the limits of a conforming loan?

A

Jumbo loans

72
Q

When an introductory rate is lower than the fully indexed rate at the time of closing, what is the introductory rate referred to as?

A

A teaser rate

73
Q

Who sets the introductory rates?

A

The lender

74
Q

What are the varying types of adjustable rate mortgages?

A

Interest-only; payment option; convertible; hybrid

75
Q

Mortgage fraud is a serious issue and investigated by the Federal Bureau of investigation, or FBI. It is punishable by:

A

Up to 30 years in prison and a one million dollar fine, or both.

76
Q

What is the number one ethical issue cited by the public during various surveys of professionals?

A

False or misleading representation of products and services during various advertisements and marketing campaigns.

77
Q

When an appraiser drives by a property, but does not actually inspect it, is known as:

A

A windshield appraisal

78
Q

What type of loan includes both real and personal property?

A

Package Mortgage

79
Q

What is it called when a lender closes a loan in their name, but uses the funds of another lender?

A

Table Funding

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