General Mortgage Knowledge Flashcards
A _________________ 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 (GEM)
A conventional mortgage requires Private Mortgage Insurance on loans with less than a ___% down payment.
20%
FNMA is known as
The Federal National Mortgage Association or Fannie Mae
Non-conforming loans _______ be sold on the secondary market.
Cannot
A conventional mortgage requires a minimum __% down payment for first-time home buyers.
3%
FHA insured loan requires ___% down payment (can be a gift).
3.5%
Non-conforming loans include, among other things: _______, ________ and ____________.
Jumbo loans, Alt-A loans and Subprime mortgages
GNMA is known as
The Government National Mortgage Association or Ginnie Mae
The party transferring contractual rights to another is known as the _________.
assignor
The ______________ Clause prevents the lender from requesting a deficiency judgment against the borrower when the proceeds of the foreclosure are insufficient to pay off the mortgage lien.
Mortgage Exculpatory Clause
The nationwide maximum loan amount for a reverse mortgage is ________.
$726,525
On a conventional loan __% of the down payment amount must come from the borrower’s own funds.
5%
An Adjustable-Rate Mortgage (ARM) consists of two parts: an ______ which fluctuates and a ______ which is fixed.
index / margin
_________ are the riskiest loans and are associated with poor credit scores.
Subprime
The mortgage alienation clause is a provision in a mortgage enabling a lender to demand ______________ if the borrower _________ the loan.
full repayment / transfers
A ____________ is partially amortized. Monthly payments are usually calculated as if it was a 30-year term but the balance of the loan will come due before that time and has to be paid in one lump sum; 5, 7 and 10-year terms are popular.
Balloon Mortgage
FHA’s reverse mortgage is called a ____________________.
Home Equity Conversion Mortgage (HECM)
Private Mortgage Insurance is a policy that allows lenders to recover part of the loss in the event of borrower _________ or loss in ____________.
default / collateral value
A ___________ has periodic payments that do not fully amortize the loan by the end of the loan term –The final payment is larger than the others and is known as a _________.
Balloon loan / Balloon payment
The _______ is a fixed percentage rate (typically 2% to 3%) that is added to the specified index at each adjustment period to determine the fully indexed rate.
margin
Fannie Mae’s automated underwriting system is known as ____________.
Desktop Underwriter (DU)
The 2020 maximum conforming loan limit was raised from $484,350 to ________.
$510,400
Fannie Mae does not purchase most _______ mortgages.
balloon mortgages
Ginnie Mae _______ buy or sell loans or issue mortgage-backed securities (MBS).
does not
If more than one individual is applying for the same mortgage, the lender should determine the single applicable credit score for each individual borrower and then select the ____________ from the group as the “representative” credit score for the mortgage.
lowest applicable score
Fannie Mae will NOT accept a co-borrower’s income for qualifying purposes, unless the co-borrower also ______________.
signs the mortgage note
The maximum term for a Fannie Mae loan is ________.
30 years
The prepayment penalty clause requires the borrower to:
Pay a fee if the loan is paid off early.
A loan that exceeds Fannie and Freddie’s maximum loan amount (aka non-confirming loans) are also known as __________.
A jumbo loan
There are three types of rate CAPS on most ARM loans: The ________ CAP applies to only the first rate adjustment, the ________ CAP applies to all subsequent adjustment periods, and the ______ CAP sets the maximum number of percentage points that the rate can increase for the life of the loan.
initial CAP / periodic CAP / life CAP
Fannie Mae requires a borrower to have a ___________ number or a ____________ number.
social security number / Individual Taxpayer Identification Number
The ______________ Method is the most common Government Land Survey Method.
Lot and Block
A _________________ is a form of revolving credit in which the home serves as collateral. The amount of the available credit line usually depends on the borrower’s equity in the home (appraised value — loan balance = borrower’s equity).
Home Equity Line of Credit (HELOC)
The lender who loans the money directly to a borrower is participating in the ________ mortgage market.
Primary mortgage market
__________ is when you pledge property as collateral for loan while maintaining possession. When you purchase a house or car, you __________ it. You use it as collateral but keep possession of it.
Hypothecation / Hypothecate
_______________ is when the homeowner fails to keep the home insured. The lender has the right to buy and charge insurance to cover lender’s interest in home. Typically expensive. Covers lender; not homeowner or contents of home.
Force Placed Insurance
A 360/180 loan is a balloon loan amortized over __ years with a lump sum payment due after __ years.
30 years / 15 years
Conforming loans meet ________ and _________’s standards and can be sold on the secondary market.
Fannie Mae and Freddie Mac’s
The ________________ deed is a method used to transfer title for a property following full repayment of a loan.
Mortgage reconveyance deed
The margin is expressed in _________ where ___ points = 1%.
basis points / 100 points
Fannie Mae is the _______ institutional investor in the secondary mortgage market.
Largest
The mortgage ____________ Clause requires that the loan balance is paid off when the title is transferred.
Due-on-sale Clause
The mortgage acceleration clause allows the lender to call the entire __________ if the borrower is in default.
loan balance due / default.
The ______________ Method is the most accurate Government Land Survey Method.
Metes and Bounds
Fannie Mae requires ___________ such as a cashier’s check from a bank or reputable financial institution to pay the closing costs; personal checks are not acceptable.
guaranteed funds
_________ loans are characterized by reduced documentation, high ratios or limited assets.
Alt-A
A conventional mortgage is not ______ or _____ by the government.
insured or guaranteed
PITI is _______, _______, ______ and _______, ______ and _______________.
Principal, Interest, Taxes and Hazard, Flood and Mortgage Insurance
A _________ is one example of a fully amortized loan. During the first few years of the loan, most of the monthly P&I is going toward paying the interest. Payments during the last few years are almost entirely principal repayment.
Fixed-Rate Mortgage
Late fees are usually 4% or 5% of the _________, not the PITI.
Debt Service
In an ARM the index + margin = ____________
Fully Indexed Rate
Government loans (FHA, VA, USDA) have a __% late fee of the P and I amount only.
4%
______________ and the _______________ are two common indices.
U.S. Treasury Securities rate / London Inter-Bank Offered Rate (LIBOR)
A ___________ is a combination of fixed and adjustable rates and/or interest only. For example 5/25 fixed for five years and adjust for the 25 years until the loan is paid off.
Hybrid Mortgage
A __________ is a negatively amortizing loan for homeowners of primary residences who are 62 years or older and have a large percentage of their current mortgage paid off. They are non-recourse loans, and the lenders cannot file a deficiency judgment against the heirs. The heirs are not personally liable for the note.
Reverse Mortgage
________ is the process of fully paying off a loan in regular payments over a specified period of time.
Amortization
FHLMC is known as
The Federal Home Loan Mortgage Corporation or Freddie Mac
__________ is the practice of approving loans with multiple layers of risk, which may significantly increase the risks to both the lending institution and the borrower.
Risk layering
A ___________ is usually 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.
Wraparound Mortgage
Most ARMs use CAPS to prevent _________.
Payment shock
The monthly principal and interest payment is known as _______________.
P&I or the Debt Service
The purpose of Fannie Mae is to buy mortgages and notes from the primary lenders so that ________ remains in circulation.
money
Fannie Mae does NOT purchase mortgages on ________ properties
agricultural
At a minimum, __ months of bank statements are required in order to count cash in the bank as an asset.
2 months
A teaser rate is an introductory rate that is ______ than the fully indexed rate at the time of closing.
Lower
A traditional Mortgage is defined as a ________.
30 year fixed
The grantor is the _______ of a property.
owner
The ________________ allows the lender to increase the interest rate of the loan under certain conditions.
Mortgage escalation clause
In a reverse mortgage, the _________ rises as ______ shrinks (rising debt, falling equity).
Balance of loan / equity
A conventional mortgage has a __% late fee of the P and I amount only.
5%
The party receiving the contractual rights is known as the _________.
assignee
Fannie Mae requires only a __ year history to be reviewed for all credit and public record information.
7 year
Fannie Mae emphasizes the borrower’s continuity of stable ___________ vs. stability of __________.
continuity of stable income vs. stability of employment
The grantee is the party _________ the title transfer.
receiving
A ______________ is 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 (VBM)
In an ARM, an introductory rate that is lower than the fully indexed rate at the time of closing is called a ________.
teaser rate
A _________ Mortgage covers multiple tracts of land.
Blanket Mortgage
Late fees are either 4% or 5% of the _________, not the PITI.
debt service (P&I)
The _____ is a known, fluctuating, published economic indicator outside of the control of the lender.
Index
PITI is also called the ______________ expense.
monthly housing
Fannie Mae will purchase mortgages secured by residential properties in _____, ________ or _____ areas.
urban, suburban or rural
Late fees are either __% or __% of the debt service, not the PITI.
4% or 5%
Reverse mortgages require that the homeowner ______________ to ensure that the he/she understands how the program works.
meet with a counselor
The Secondary Market includes private investors or government agencies that _________________ real estate mortgages.
buy or sell
_________ is the choice by the lender not to take action even though the borrower is in default of the loan.
Forbearance
The monthly P&I payment is also known as the _________.
Debt Service
A _________________ occurs when a borrower obtains a mortgage from the seller to purchase a home.
Purchase Money Mortgage
Ginnie Mae guarantees investors the timely payment of _______________ on MBS backed by federally insured or guaranteed loans (like FHA or VA).
principal and interest
Net Tangible Benefit:
The cost (or commission earned) for the loan cannot outweigh the “benefit” that the borrower will receive.
Refinance loans must “make sense” for the consumer. They must provide some “benefit”.
Forbearance is the choice by the lender not to:
Take action even though the borrower is in default of the loan.
VA and USDA guaranteed loans do NOT require a _______.
down payment
Freddie Mac’s automated underwriting system is known as Freddie Mac’s __________ (formerly Loan Prospector).
Loan Product Advisor
______ limit how much the interest rate can change at each adjustment and over the life of the mortgage.
Rate caps
_________ is also known as a partially amortized loan.
Balloon loan
A reverse mortgage still requires ____ and ____ (not the loan estimate and closing disclosure).
GFE and TIL
_______ limit the number of % points interest rates can rise or fall.
Interest rate caps
Most borrowers in a reverse mortgage, receive their funds via the ______ method (getting a monthly check instead of paying a monthly check.
Tenure
A ______________ has a lower or more subordinate lien position than the senior mortgage.
junior mortgage (subsequent mortgages)
A mortgage subordination clause permits a senior mortgage to assume a __________ position.
junior lien
Non-conforming Loans do not meet _______ and ________ standards.
Fannie Mae and Freddie Mac’s
When a lender sells a mortgage loan to another lender this is called an _____________.
Assignment of mortgage.
Explain the adjustments on an ARM with CAPS = 5/2/6
5% indicates the percentage that the rate increases from the “start rate” at the FIRST adjustment period.
2% indicates the percentage
that the rate increases (or decreases) at every adjustment period thereafter.
6% indicates the maximum percentage that the rate can increase over the life of the loan.
___________ occurs when the monthly mortgage payment decreases the loan balance, by applying a portion of each payment to the principal.
Positive amortization
A ________ can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.
Package Mortgage
On a ______ Mortgage, there are no payments due from the borrower.
Reverse
A _______________ has the superior lien position.
senior mortgage (first mortgage)
A ___________ 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.
first-time home buyer
A loan with a 2/3/6 rate cap has a max first adjustment of __%, subsequent max adjustments of __% and a lifetime max adjustment of __%.
2% / 3% / 6%
__________ is when the seller extends credit to the buyer to finance the purchase of property.
Seller financing
Fannie Mae holds the ______ responsible for the quality of the appraisal.
lender
A __________ is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.
Term Mortgage
Fannie Mae requires the lender to obtain a ____________ for each borrower
on the loan application who has an individual credit record.
written credit report
A __________________ is a mortgage in which the payment starts low and increases over time. This is a specialized payment structure that allows the borrower to make a smaller payment in the early years of the mortgage, with payments increasing yearly, until they are sufficient to fully amortize the loan. The lower payments in the beginning usually cause negative amortization.
Graduated Payment Mortgage (GPM)
Title insurance protects the homeowner (mortgagor) and the lender (mortgagee) against ____________ that occurred in the past such as undisclosed liens, heirs, fraudulent documents, etc.
Defects in title
____________ occurs in a mortgage repayment plan in which the borrower makes payments that amount to less than the interest due. Unpaid interest is added to the outstanding loan balance, causing the outstanding loan balance to increase instead of decrease.
Negative amortization
Convertible ARMs:
give the borrower the right to convert from an ARM to a fixed rate loan.
A ________________ has the seller retain the existing mortgage (the buyer makes one larger payment; the seller pays the lender and keeps the difference).
seller-wraparound mortgage
Fannie Mae is the _____ institutional buyer of conventional mortgages in the secondary mortgage market.
largest
A 5/1 ARM has a fixed interest rate for __ years and adjusts ______ after that.
5 years / annually
