Glossary Flashcards
1
Q
1003
A
A Fannie Mae loan application form designed by Fannie Mae and Freddie Mac is used by lenders to obtain personal financial information from borrowers who apply for a mortgage loan secured by a one-to-four-unit residential real estate. Also known as Uniform Residential Loan Application (URLA). It has been widely adopted by mortgage lenders as a standard loan application form and is often pronounced “ten-oh-three.” Freddie Mac also uses the same application form, referring to it as the Freddie Mac From 65.
2
Q
1031 Exchange
A
A 1031 exchange allows residents and non-resident United States federal taxpayers to defer capital gains and recaptured depreciation taxes when exchanging real or personal property held for productive use in a trade, business, or for investment. The tax otherwise paid in a traditional sale is deferred indefinitely until the replacement property is sold or another 1031 exchange is initaitated.
3
Q
2-1 Buydown
A
A 2-1 buydown is a type of financing that lowers the interest rate on a mortgage for the first two years before reaching a permanent rate. Sellers and builders may offer buydown options to make a property more attractive to buyers, making payments during the initial period to the lender to subsidize the difference.
4
Q
4601-T
A
An IRS Form used to receive pat tax returns, W-2, and 1099 transcripts that are on file with the IRS. IT is used to validate income documentation for underwriting and quality control purposes.
5
Q
Abstract of Title
A
A concise statement, usually prepared for a mortgagee or purchaser of real property, summarizing the history of a piece of loan, including all conveyances, interests, liens, and encumbrances that affect title to the property. A good and merchantable abstract of title shows clear and marketable title, rather than showing only the history of the property.
6
Q
Acceleration Clause
A
A loan-agreement provision that requires the debtor to pay off the balance sooner than the due date if some specified event occurs, such as failure to pay an installment or to maintain insurance.
7
Q
Accrued Interest
A
Interest that is earned but not yet paid. For example: If your payment is August 1, you are paying interest for the previous month. Unlike rent, it is paid for the month, you are going to live in eh apartment.
8
Q
Acquisition Costs
A
The original cost of an asset.
9
Q
Adjustable-Rate Mortgage (ARM)
A
A mortgage in which the lender can periodically adjust the mortgage interest rate in accordance with fluctuations in an external market index. Also known as Variable Rate Mortgage (VRM)
10
Q
Adjusted Basis
A
Basis increased by capital improvements and decreased by depreciation deduductions.
11
Q
Adjustment Interval
A
On an Adjustable Rate Mortgage (ARM), the time between changes in the interest rate and/or monthly payment. Typically, one, three, or five years depending on the index.
12
Q
Adjustment Period
A
Time between the adjustment dates for an Adjustable Rate Mortgage (ARM).
13
Q
Affiliated Business Arrangement (AfBA)
A
An arrangement in which a person refers a business to a real estate service involving a federally related mortgage loan that has either an affiliated relationship with as little as 1% ownership interest. Such persons directly or indirectly refer business to that provider and may influence the selection of that provider. An MLO that is also a Licensed Real Estate Agent requires an Affiliated Business Arrangments (AfBA) disclosure. AfBA is a violation of Section 8 of the Real Estate Settlement Procedures Act (RESPA), If not disclosed to the borrower with three business days of informing the borrower of the conflict of interest.
14
Q
Agreement of Sale
A
An agreement that obligates someone to sell and may include a corresponding obligation for someone else to buy.
15
Q
Alienation Clause
A
An alienation clause is a provision in the contract signed with the lender that states that the borrower must pay the mortgage in full before the borrower can transfer the property to another person. This is also knowns as a due-on-sale clause.
16
Q
Alternative Documenation
A
A method of documenting a loan file by using information such as pay stubs, W-2 forms, tax returns, and bank stubs instead of waiting on verification sent to third parties for confirmation of statements made on the application.
17
Q
American Land Title Association (ALTA)
A
The mission of ALTA is to improve the skills and knowledge of providers in the real property transaction, effectively advocate member concerns, and standardize products for industry use.
18
Q
Amortization
A
The act or result of gradually extinguishing a debt, such as a mortgage, usually by contributing payments or principal each time a periodic interest payment is due.
19
Q
Amortization Term
A
The length of time it will take to memorize the mortgage loan expressed in months. For example, a 30-year mortgage is a 360-month amortization term.
20
Q
Annual Percentage Rate (APR)
A
the actual cost of borrowing money expressed in the form of an annualized interest rate.
21
Q
Annuity
A
A fixed sum of money payable periodically, usually monthly or annually. These payments terminate upon the death of the designated beneficiary. Also, a right, often acquired under life-insurance con-tract, to receive fixed payments periodically for a specified duration.
22
Q
Appraisal Fee
A
The determination of what constitutes a fair price for something or how its condition can be fairly stated at ta point in time.
23
Q
Appraiser
A
An impartial person who estimates the value of something such as real estate
24
Q
Appreciation
A
An increase in an asset’s value (often because of inflation).
25
Arbitration
A dispute-resolution process in which the disputing parties choose one or more neutral third parties to make a final and binding decision resolving the dispute. A third party may be chosen directly by mutual agreement, or indirectly by agreeing to have an arbitration organization select the third party.
26
Adjustable-Rate Mortgage Disclosure
Describes the features of the Adjustable Rate Mortgage (ARM) loan which must be presented to the consumer within 3 days of application.
27
Adjustable-Rate Mortgage Handbook (CHARM)
The consumer Handbook to Adjust-Rate Mortgages must be presented within 3 applications.
28
Asbestos
A soft gray mineral that was used as a building material in the pat. It is no longer in use but can still be found in some older homes. When asbestos dust is inhaled it can cause serious diseases of the lungs.
29
Assessed Value
The value of an asset is determined by an appraiser for tax purposes.
30
Assessment
Determination of the rate or amount of something, such as a tax or damages.
31
Assessor
An official who evaluates or makes assessments, especially for purposes of taxation.
32
Asset
An owned item that has value.
33
Assignment
The transfer of rights or property
34
Assignment of Mortgage/ Assigned Loan
An Assignment in which a mortgage lender or borrower transfers the mortgage to a third party.
35
Assumption (of Mortgage or Trust Deed)/Assumable
The acquisition of real property coupled with the assumption of personal liability for debt secured by that property. Assumption is not allowed by Fannie Mae, Freddie Mac or USDA FHA and VA do allow for assumptions in certain situation.
36
Assumption Fee
The fee paid to a lender when an assumption takes place. It is unusually paid by the purchaser.
37
Average Prime Offer Rate
The Average Prime Offer Rate (APOR) is an annual percentage rate that is based on average interest rates, fees, and other terms on mortgages offered to highly qualified borrowers.
38
Balance Sheet
A statement of financial position as of the statement's date, disclosing the value of assets, liabilities, and equity.
39
Balloon Mortgage
A mortgage requiring periodic payments for a specified time and a lump-sum payment of the outstanding balance at maturity. The minimum term for a balloon mortgage under HOEPA is five (5) years.
40
Balloon Payment
A final loan payment that is usually much larger than the preceding regular payments. this payment discharges the principal balance of the loan.
41
Bait and Switch
The action (generally illegal) of advertising goods which are an apparent bargain, with the intention of substituting inferior or more expensive goods.
42
Basis Point
Basis Points are used in computing and calculating the interest rate in a real estate transaction. One basis point is equal to 1/100th of 1%, or 0.01%, and is used to denote the percentage change in a financial instrument.
43
Bankruptcy
A statuary procedure by which a usually insolvent debtor obtains financial relief and undergoes a judicially supervised reorganization or liquidation of the debtor's assets for the benefit or lenders. Chapter 11 or 13 remains on the credit report for 7 years, a Chapter 7 or 10 years.
44
Blanket Mortgage
A mortgage that covers an aggregation of property or that secures indebtedness previously existing in various forms. For example; a mortgage covering two or more properties that are pledged to support debt.
45
Bona fide
Made in good faith without fraud or decit.
46
Bona-Fide Nonprofit Organization
Bona fide nonprofit organization means any organization that is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time.
47
Borrower (Mortgagor)
Someone who mortgages property.
48
Borrowers Signature Authorization
A form signed by the applicant authorization the lender to obtain and verify information and documentation from third parties that is needed in connection with the application for a mortgage loan.
49
Bridge Loan
A short-term loan that uses the borrower's equity to make a down payment on a new home. The Bridge Loan will be paid upon the sale of the existing home.
50
Building Code
A law or regulation setting forth standards for the construction, maintenance, occupancy, use, or appearance of building and dwelling units.
51
Buy-Down
Money paid by the buyer of a house to reduce the mortgage-interest payments.
52
Buy-Down Account for Temporary Buydowns
The account in which funds are held so they can be applied as each payment comes due for an interest rate buy-down plan.
53
Buyer's Broker/Agent
A real estate broker who acts as the agent of a purchaser of property. Statues in many states permit prospective buyers to retain a licensed real estate agent. In some states, a buyer's broker is treated as the subagent of the broker with whom the owner listed property for sale and not eh agent of the buyer.
54
Buyer's Market
A market in which supply significantly exceeds demand, resulting in lower prices.
55
Call Option
An option to buy something at a fixed rate price even if the market rises; the right to require another to sell.
56
Capacity
Gross income X the Debt to Income (DTI) ratio=the maximum mortgage and debt payments, the borrower can afford.
57
Cash Flow
The movement of cash through a business as a measure of profitability or liquidity.
58
Cash Out Refinance
Cash-out refinance gives the borrower a lump sum when they close their refinance loan. The loan proceeds are first used to pay off the borrower's existing mortgages(s), including closing costs and any prepaid items (for example real estate taxes or homeowners insurance); any remaining funds are the borrower to use as they wish.
59
Cashier's Check
A check drawn by a bank payable to another person. This is evidence that the payee has authorization from the bank for the amount of money represented by the check.
60
Certificate of Deposit
A banker's certificate acknowledging the receipt of money and promising to repay the depositor.
61
Certificate of Eligibility
A certificate issued by the Department of Veterans Affairs (VA) certifying a veteran's maximum benefits for a VA loan. This certificate is also known as the Certificate of Entitlement.
62
Certificate of Occupancy
A document indicating that a building complies with zoning and building ordinances and is ready to be occupied. A certificate of occupancy is often required before the title can be transferred and the building occupied.
63
Certificate of Reasonable Value (CRV)
An appraisal issued by the Department of Veterans Affairs (VA) showing the property's fair market value.
64
Certificate of Title
A document indicating the ownership of real or personal property. This document also identifies any liens or other encumbrances.
65
Certificate of Veteran Status
Certificate given to veterans or reservists who have served 90 days of continuous active duty (including training time), which enables veterans to obtain lower down payments on VA loans.
66
Chain of Title
The ownership history of a piece of land, from its first owner to the present one. For the holder to have a good title, every prior negotiation must have been proper. If the necessary endorsement is missing or forged, the chain of title is broken, and no later transferee can become a holder.
67
Change Orders
A modification of the original construction plans ordered by the property owner or general contractor.
68
Clear Title
A title free from any encumbrances, burdens or other limitations. I.e. a good and marketable title.
69
Civil Rights Act (1964)
Is a landmark civil rights and labor law in the United States that outlaws discrimination based on race, color, religion, sex, or national origin. It prohibits unequal application of voter registration requirements, and racial separation in schools, employment, and public accommodations. Enacted July 2, 1964
70
Change Frequency
Change in the frequency of payment or interest rate of Adjustable Rate Mortgage. (ARM)
71
Closing/Settlement
The final transaction between the buyer and seller whereby the conveyance of documents is concluded, and the money and property are transferred.
72
Closing Agent
An agent who represents the buyer and seller in the negotiation and closing of real property transactions by handling financial calculations and transfer of documents.
73
Closing Costs
The expenses that must be paid, usually in a lump sum at closing, apart from the purchase price and interest. These may include taxes, title insurance, and attorney's fees, and any other cost assessed to the borrower to obtain the loan.
74
Closing Date
The date scheduled for the singing of the documents on the real estate transaction.
75
Closing Statement
A written breakdown of the costs
76
Cloud on Title
A detect or potential defect in the owner's title to a piece of land arising from some claim or encumbrance, such as a lien, an easement, or a court order.
77
Co-Borrower
Any borrower in addition to the primary borrower whose name appears on the application. The co-borrowers along with the borrower's income, assets, liabilities, and credit history are considered in determining creditworthiness.
78
Collateral
Property that is pledged as security against a debt, such as a mortgage.
79
Combined Loan-to-Value (CLTV)
Ratio of the total mortgage liens against the property tot eh lesser or either the appraised value or the sales price. On a refinance, it is first mortgage and the amount of the HELOC, or second mortgage drawn divided by the value.
80
Commission
The fee paid to an agent for a transaction usually as a percentage of the money received from the transaction.
81
Commitment
A binding offer by a lender to make a loan under certain terms or conditions to a borrower. Includes the amount of the mortgage, the interest rate, and repayment terms.
82
Common Areas
The common area (ex. hallways, lobby, workout facilities) that all tenants may use, though the landlord retains control over and responsibility for it.
83
Community Property State
In community property states, the assets of each spouse are considered assets of the marital unit. The assets of each partner in the relationship are not legally separate from those of the spouse. That is, while a couple is married, creditors of one spouse, with certain restrictions, can seize the assets of both spouses.
84
Community Reinvestments Act (1977)
Intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low to moderate-income neighborhoods, consistent with safe and sound banking operations.
85
Comparables
An abbreviation for "comparable properties" used in the appraisal process. Comparables are properties similar to the property under consideration. They have reasonably the same size, location, and amenities and have recently been sold. They must be similar property within one mile of the subject property and no more than 6 months old. Comparables help the appraiser determine the approximate fair market value of the subject property.
86
Concession
The voluntary yielding to a demand for the sake of a settlement. In a real estate transaction, something given up or agreed to in sale negotiations. For example, the sellers may agree to help pay for closing costs.
87
Condition
A stipulation or prerequisite in a sales contract. If a court construes a contractual term to be a condition, then its breach will entitle the party to whom it is made to be discharged from all liabilities under the contract.
88
Condominium
A single real estate unit in a multi-unit development in which a person has both separate ownership of a unit and a common interest, along with the development's other owners, in the common areas.
89
Conforming Loan
A mortgage loan meeting the guidelines are under the maximum amount of loans that Fannie Mae and Freddie Mac are legally allowed to buy.
90
Construction Mortgage
a mortgage used to finance a construction project.
91
Consumer Credit
Credit advanced to consumers for the purchase of goods or services.
92
Consumer Financial Protection Bureau (CFPB)
An independent federal agency that regulates consumer financial products and services. The Bureau protects consumers by restricting unfair and deceptive business practices, by promoting financial education, taking consumer complaints, and enforcing federal consumer-financial-protection laws. It was established by the Dodd-Frank Act in 2010 and began operating in 2011.
93
Consumer Reporting Agency (Credit Bureau)
An independent firm that collects, compiles and reports the credit activities of individuals which is made available, for a fee, to lenders or credit issuing entitles investigating the creditworthiness of those applying for credit. Consumers may also access reports from each of the three major reporting agencies for free as required by law.
94
Contingency Clause
A clause within the sales contract stating that a certain condition must be met before a contract is legally binding and the sale can close. Real estate contracts often have a specific date by which the contingency must be met. EG the buyer will often include an inspection contingency, require the home to be inspected for physical damages or problems before the sales contract is binding. The buyer will have the right to rescind if the contingency is not met.
95
Conventional Mortgage
A mortgage in which the borrower gives a voluntary lien to the mortgage lender or other financial institute. These mortgages, which feature a fixed periodic payment and interest throughout the mortgage terms, are typically used for home financing.
96
Conversion Clause/Option
A provision in an Adjustable Rate Morgage (ARM) which allows the loan to be converted from an ARM to a fixed-rate mortgage at specified times during the term. Usually allowed at the end of the first adjustment period. Also, know as a Convertible ARM. Credit
97
Conveyance
The voluntary transfer of property.
98
Cooperative (Co-op) Project
A project in which a corporation holds the title to residential property and sells shares to individual buyers, who then receives a proprietary lease as their title.
99
Counteroffer
An offeree's new offer that varies the terms of the original offer and that t ordinarily rejects and terminates the original offer. A late or defective acceptance is considered a counteroffer.
100
Covenants
A formal agreement or promise to perform, or not perform, a particular act.
101
Credit
One's ability to borrow money.
102
Credit History
Information in the files of a credit bureau regarding an individual's debts and repayments (or non-repayment).
103
Credit Life Insurance
Life insurance on a borrower, usually in a consumer installment loan, in which the amount due is paid if the borrower dies.
104
Credit Report
A credit bureau's report on a person's financial status, including the approximate amounts and locations of a person's bank accounts, loans, other debts, bill-paying habits, defaults, bankruptcies, foreclosures, marital status, occupation, income, and lawsuits. It may indicate a High, Middle, or Low Credit Score.
105
Credit Score
Statistically derived numeric expression of a person's creditworthiness that is used by lenders to assess the likelihood that the individual will repay their debt. Payment history inquires and credit utilization are some of the factors determining a credit score.
106
Creditworthy
Financially sound enough that a lender will extend credit in the belief that default is unlikely.
107
Debt
Liability on a loan.
108
Declaration Page
The front page (or pages) of a policy that specifies the named insured, address, policy period, location or premises, policy limited, and other key information that varies from insured to insured. The declarations page is also known as the information page.
109
Delinquent Loan
Delinquency means that a borrower is behind on payments. Once a borrower is delinquent for a certain period of time, the lender will declare the loan to be in default. the entire loan balance will become due a that time.
110
DD-214
Known as the Certificate of Release or Discharge from Activity Duty, generally referred to as a "DD-214", is a document of the United States Department of Defense, issued upon a military service member's retirement, separation, or discharge from active duty in the Armed Forces of the United States.
111
Deed
A legal document that is signed and delivered from the seller to the borrower showing ownership of property.
112
Deed-in-Lieu of Foreclosure
Deed in which the mortgagor conveys all interest in the property to the mortgagee to satisfy a loan that is in default to avoid foreclosure proceedings. A written settlement agreement will always accompany deed-in-lieu. The lender waives the right to collect any deficiency based on a promissory note.
113
Deed of Reconveyance
A mortgage holder issues a deed of reconveyance to indicate that the borrower has been released from the mortgage debt. The deed transfers the property title from the lender, also called the beneficiary, to the borrower. This document is most commonly used when a mortgage has been paid in full.
114
Deed of Trust
A deed conveying the title of real property to a trustee as security until the grantor repays a loan. This type of deed resembles a mortgage. It is an alternative to a mortgage preferred by lenders because it is faster and chapter to foreclose.
115
Default
The omissions or failure to perform a legal or contractual duty, especially the failure to pay a debt when due.
116
Delinquency
A debt that is overdue in payment.
117
Department of Veterans Affairs (VA)
The cabinet-level department of the federal government responsible for operating programs that benefit veterans of military service and the families. It is headed by the Secretary of Veterans Affairs.
118
Depreciation
A reduction in the value or price of something, specifically, a decline in an asset's value because of use, wear, obsolescence, or age.
119
Discount Points
A fee equal to 1 percent of the loan amount that is prepaid interest on the mortgage loan. The more points, the lower the interest rate. Discount Points can only be used to reduce the interest rate. Borrowers can typically pay from 0-4 points.
120
Dodd-Frank Wall Street Reform & Consumer Protection Act
A 2010 federal statute that promotes the financial stability of the United States by improving accountability and transparency in the financial system. The statute affects nearly every federal agency with jurisdiction over finance or consumer protection and nearly every segment of the financial - services industry.
121
Double Selling
Double selling is a type of real estate or mortgage fraud that generally involves a mortgage broker. The mortgage broker takes the information from a potential borrower in order to obtain a mortgage loan. The borrower is usually in on the mortgage fraud scam.
122
Down Payment
A portion of the purchase price paid in cash (or its equivalent) at the time the sale agreement is executed.
123
Due-on-Sale Clause
A mortgage provision that gives a lender the option to accelerate the debt if the borrower transfers any part of the mortgage real estate without the lender's consent.
124
Early Payment Default
Early Payment Default means, with respect to a Morgage Laon, the failure of the Mortgagor to make any of the first three Monthly Payments due under the Mortgage Loan on or before its scheduled Due Date.
125
Earnest Money Deposit
A deposit paid (often in escrow) by a prospective buyer to show a good-faith intention to complete the transaction, and ordinarily forfeited if the buyer defaults. It is generally a percentage of the purchase price and it rarely exceeds 10 percent.
126
Easement
An interest in land owned by another person, consisting of the right to use or control the land, or an area above or below it, for a specific limited purpose and egress easement for the right to access the land through the land of another. The land benefitting from an easement is called the dominant estate, while the land burdened by an easement is called the servient estate. Unlike a lease or license, an easement may last forever, but it does not give the holder the right to possess, take from improve upon, or sell the land.
The primary recognized easements are:
A Right of Way
A right of entry for any purpose relating to the dominant estate.
A right to support of land and buildings.s
A right of light and air.
A right to water
A right to do some act that would otherwise amount to a nuisance: and
A right to place or keep something on the servient estate.
127
Economic Obsolescence
Obsolescence that results from external economic factors, such as decreased demand or changed governmental regulation.
128
Effective Interest Rate
The actual annual rate, which incorporates compounding when calculating interest, rather than the stated rate or coupon rate.
129
Eminent Domain
The inherent power of a governmental entity to take privately owned property and convert it to public, use subject to reasonable compensation for the taking.
130
Employer-Assisted Housing
A program in which an employer assists its employees in purchasing homes by helping with the down payment, closing costs, or monthly payments.
131
Encroachment
An interference with an intrusion onto another's property.
132
Encumbrance
A claim or liability that is attached to the property and that may lessen its value, such as a lien or mortgage. An encumbrance cannot defeat the transfer of possession, but it remains after the property or right is transferred.
133
Entitlement
An absolute right to a benefit granted immediately upon legal requirement.
134
Equal Credit Opportunity Act (ECOA/Regulation B)
A federal statute that prohibits lenders from discriminating against credit applicants based on race, color, religion, national origin, age, sex, or marital status with respect to any aspect of a credit transaction.
135
Equitable Mortgage
A transaction that has the intent but not the form of a mortgage, and that a court of equity will treat as a mortgage.
136
Equity
the amount by which an interest in property exceeds secured claims or liens. The difference between the value of the property and all encumbrances on it.
137
Escrow
A legal document or property delivered by a promisor to a third party to be held by that third party for a given amount of time or until the occurrence of a condition at which time the third party is to hand over the document or property to the promise.
138
Escrow Account(s)
A bank account generally held in the name of the depositor and an escrow agent that is returnable to the depositor or paid to a third person on the fulfillment or specified conditions.
139
Escrow Agent
The third-party depositary of an escrow. An escrow holder is not a common-law agent because the holder does not act subject to the control of the parties to the escrow agreement.
140
Escrow Agreement
The instruction is given to the third-party depositary of an escrow holder, setting forth the rights and
141
Escrow Contract
The contract among buyer, seller, and escrow holder, setting forth the rights and responsibilities of each.
142
Escrow Holdback
An escrow holdback is a simple money set aside money set aside that assures the seller will finish agreed upon work at a later time.
143
Eviction
The act or process of legally dispossessing a person of land or rental property.
144
Exclusive Right to Sell listing
The Right to sell a principal's products or to act as the seller's real estate agent to the exclusion of all others, including the owner. The listing agreement upon which the broker gets commission even if seller is the one who sells the house during the agreement period or for a certain period thereafter.
145
Exclusive Agency Listing
A listing giving one agent the right to the only person, other than the owner, to sell the property during a specified period. A listing agreement upon which the broker does not get a commission if the seller sells the property themselves.
146
Executor
A person named by a testator to carry out the provisions of the testator's will.
147
Fair and Accurate Credit Transactions Act (FACT Act) 2003
A 2003 amendment to the Fair Credit Reporting Act providing free annual credit reports to consumers and establishing measures intended-to help prevent identity theft. One of the Act's better-known and more heavily litigated provisions prohibits merchants from printing the expiration date or more than the last five digits of the card number on a point-of-sale credit card or debit card receipts.
148
Fair Housing Act (FHA)
A 1968 federal statute that prohibits discrimination based on race, sex, religion, family status, or national origin in the sale or rental of a dwelling, especially in the refusal to sell or rent.
149
Fair Market Value
The price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm's-length transaction, the point at which, supply and demand intersect.
150
Fannie Mae/Freddie Mac Loan Limit
The loan limits as set y FHFA for Fannie Mae loans. These numbers are higher in Alaska, Hawaii, Guam and the U.S. Virgin Islands. They change yearly.
151
Federal Mortgage Loans
Federal Mortgage Loans are loans insured or guaranteed by the federal government. Examples are FHA, VA and USDA loans.
152
Federal National Mortgage Association (Fannie Mae/FNMA)
A privately owned and managed corporation chartered by the U.S. government that provides a secondary mortgage market for the purchase and sale of conventional conforming mortgages.
153
Federal Home Loans Mortgage Corporation (Freddie Mac/ FHLMC)
A corporate that purchases both conventional conforming first mortgages from member of the Federal Reserve System and other approved banks.
154
Federal Housing Administration (FHA)
An agency in the U.S. Department of Housing and Urban Development responsible for facilitating FHA mortgage lending by insuring mortgage loans on houses meeting the agency's standards. The FHA was created in 1934.
155
Federal Reserve System (FRS)
The central bank that sets credit and monetary policy by fixing the reserves to be maintained by depository institutions, determining the discount rate charged by Federal Reserve Banks, and regulating the amount of credit that may be extended on any security. The Federal Reserve System was established by the Federal Reserve Act of 1913. It incorporates 12 central banks supervised by a Board of Governors whose members are appointed by the President and confirmed by the Senate.
156
Fee Simple
An interest in land that, being the broadest property interest allowed by law, endures until the current holder dies without heirs.
157
FHA
A mortgage that is insured fully or partially by the Federal Housing Administration (FHA).
158
FHA Mortgage Insurance
Current Federal Housing Administration (FHA) upfront mortgage insurance premiums are 1.75 percent of the loan size. If an FHA-backed mortgage is used for a purchase mortgage and your loan size. If an FHA - backed mortgage issued for a purchase mortgage and your loan size is $300,000, then your upfront Mortgage Insurance Premium (MIP) will be $5,250. The renewal premium aires by FHA product, generally .85 x mortgage amount divided by 12 = the monthly premium added to the monthly payment.
159
Finance Charge
A finance charge is a fee charged for the use of credit or the extension of existing credit. It may be a flat fee or a percentage of borrowings, with percentage-based finance charges being the most common. A finance charge is often an aggregated cost, including the cost of carrying the dept itself along with any related transaction fees, account maintenance fees or late fees charged by the lender.
160
FIRM Commitment
A promise from a lender to make a mortgage loan.
161
First Mortgage
A mortgage that is senior to all other mortgages or liens on the same property.
162
First - Time Home Buyer
An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse. If either meets the test, they are considered first-time homebuyers.
A single parent who has only owned with a former spouse wile married.
163
Fixed Installment
An individual who has had no ownership in a principal residence during the 3-year period ending on the
164
Fixed Period Adjustable Rate Mortgage
An adjustable rate mortgage with an initial fixed interest rate period. After the fixed interest rate expires, the interest rate starts to adjust based on an index plus a margin. The amount by which the interest rate can adjust after the fixed period is usually subject to an interest rate cap.
165
Fixed-Rate Mortgage (FRM)
A mortgage with an interest ate that remains the same over the life of the mortgage regardless of market conditions.
166
Flood Certificate Fee
Fee issued to the client which covers the cost of the assessment and is included in closing costs and fees.
167
Flood Insurance
Insurance that indemnifies against a loss caused by a flood. This type of insurance is often sold privately but subsidized by a federal government. Maximum coverage is $250,000.
168
Floor
An arm ARM loan, the margin is the floor and the lowest the interest rate can go over the life of the loan.
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Forbearance
The act of refraining from enforcing a right, obligation, or debt. Permitting one of retain a loan of money after it was become due and payable is forbearing it. Forbearance, 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.
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Forced Placed Insurance
Lien holders will put forced place insurance onto a mortgage property in cases where the borrower allows the coverage they were required to purchase to lapse. Lapses may be due to non-payment of premium, filing false claims, or other reasons. Forced place insurance will protect the property, the homeowner and the lien holder. Future mortgage payments will reflect the added cost of the insurance.
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Foreclosure
A legal proceeding to terminate a mortgagor's interest in a property, instituted by the lender (the mortgagee) either to gain title or to force a sale to satisfy the unpaid debt secured by the property.
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Foreiture
A destruction or deprivation of some estate or right because of the failure to perform some contractual obligation or condition. When a condition is not likely to occur until the obligee has relied on the expected exchange for example, performing or preparing to perform, a non-occurance of the condition results in the obligee's loss of it's reliance interest when the obligee loses the right to that exchange. This loss of reliance interest is often described as forfeiture.
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Fraud Enforcement and Recovery Act of 2009 (FERA)
The law enhanced criminal enforcement of federal fraud laws, especially regarding financial institutions, mortgages fraud, and securities fraud or commodities fraud. Enacted May 2009.
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Fully Amortized Mortgage
A mortgage in which the mortgagor pays the interest as well as a portion of the principal in the periodic payment. At maturity, the periodic payments will have completely repaid the loan. Also known as a self-liquidating mortgage. For example, 360 P&I payments on a 30-year loan will pay the loan in full.
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General Contractor
Someone who contracts for the completion of an estate project, including purchasing all materials, hiring and paying subcontractors, and coordinating all the work.
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HOEPA
Home Owners Equity Protection ACT
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HPML (Section 35 of TILA)
Higher Priced Mortgage Loan - The Dwelling has an APR that exceeds the Average Prime Offered Rate is higher than those in the neighbored.
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Higher Cost is what section of ?
Section 35 of TILA
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What is Regulation B of EBOA?
EBOA - The Equal Credit Opportunity Act
Purpose: To prevent discrimination on specified protected classes
Disclosure/Notice Required: Notice of Adverse Action, Appraisal Notice, ECOA Notice
Terms Related to this Law: Protected Class, adverse action: appraisal, disparate impact, disparate treatment
Entity for Enforcement: The CFPB
Other Complimentary Laws: The Home Mortgage Disclosure Act: Fair Housing Act
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RESPA and TILA are what kind of LAWS?
Disclosure Laws
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Regulation V is what?
The Fair Credit Reporting Act and the Fair and Accurate Credit Act.
Restricts use of credit reports and requires accuracy on credit reports.
Complimentary Law: FACTA
Disclosures: Risk-Based Pricing Disclosure
Entity Responsible for Enforcement: CFPB & Federal Trade Commission (FTC)
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The following two disclosures are required by RESPA, if applicable:
Borrower's Signature Authorization and GFE
1003 and 1008
1003 and AfBA
.LE and AfBA
.LE and AfBA
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What is the purpose of HMDA?
HMDA requires that financial institutions collect and report specific data. The data is collected and analyzed to prevent and detect discriminatory lending practices and to determine whether a financial institution is lending fairly in all areas they serve.
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he CHARM booklet was prepared by:
The Federal Reserve Board.
The Dept. of Housing and Urban Development.
the CFPB.
The Federal Housing Administration.
The CHARM handbook is prepared by the CFPB and is required under RESPA.
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Regulation B allows all of the following except:
1. Inquiring about paying child support and/or alimony
2. inquiries about citizenship and residency status.
3. inquiries about the ages of dependents.
4. using the terms husband or wife when inquiring about a potential co-borrower.
using the terms husband or wife when inquiring about a potential co-borrower.
Regulation B is also known as ECOA. ECOA requires that if the application is for joint credit, the lender can ask the applicant’s marital status, but may only use the terms: "married," "unmarried," and "separated." The term “unmarried” may be defined to include divorced, widowed, or never married.
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Regulation Z Requires?
The big thing under TILA is the APR. TILA regulates when the APR must be disclosed on advertisements and how it should be disclosed under TRID.
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If a loan officer were to take a loan application Tuesday at 1:00 p.m., what is the last day that the good faith estimate must be mailed or disclosed?
The same day, Tuesday before end of business
Within 3 days before 5pm
The next day, Wednesday before 5pm
Friday before midnight
The Loan Estimate must be disclosed within 3 business days of an application. This loan officer has three days from Tuesday to disclose.
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A lender just closed a loan for a borrower, after closing, they realize that there was a tolerance violation. Under TRID, how long does the lender have to provide a corrected CD to correct non-numerical errors and document refunds for tolerance violations?
10 calendar days
60 calendar days
30 calendar day
90 calendar days
If something changes after consummation, the lender is required to provide a corrected CD within thirty (30) days. Lenders are required to provide a corrected CD to correct non-numerical clerical errors and document refunds for tolerance violations within sixty (60) calendar days of consummation.
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Which Act requires the Home Loan Toolkit to be sent to the borrower on a purchase?
TILA
ECOA
APR Disclosure
TRID
TRID requires that the Home Loan Toolkit be provided on all purchase transactions within 3 days of application.
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The Privacy Rule of GLBA requires a lender to provide a borrower with a consumer privacy notice:
Three business days prior to closing
Each time the servicing is transferred
Three business days after application
Before disclosing information to non-affiliated third parties
GLBA requires privacy notices be provided before disclosing information to non-affiliated third parties.
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If an applicant has been denied credit, how long does the lender have to get a letter of adverse action to him/her?
30 days
It is not necessary to send a letter as long as the borrower knew before they applied they had bad credit.
10 days
15 days
Under ECOA, it is the lender’s responsibility to notify an applicant of any action taken on the applicant’s request for credit, whether favorable or adverse, within thirty (30) days of receiving the completed application.
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If a loan is a refinance, and the loan is improperly closed and funded in one day with no three-day rescission period, how long do the borrowers have to rescind the transaction?
3 years
3 days
1 day
1 week
If the required rescission notice is not provided to the borrower, or if there are errors on the disclosures, the borrower’s right to rescind expires three (3) years after the closing, transfer of the interest in the property, or sale of the property, whichever occurs first.
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How do you calculate Loan to Value (LTV)
Purchase price or Appraised Value, whichever is less, divided into the loan amount.
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How do you calculate Combined Loan to Value (CLTV)
1st mortgage plus the amount drawn from the HELOC, divided by the value.
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How do you calculate Total Loan to Value (TLTV)
1st Mortgage plus the total of the HELOC or 2nd Mortgage divided by the value.
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What is Table Funding
Funding of the loan at settlement, simultaneously transferring the loan to the lender.
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Mortgage Banker
Any company that can underwrite or fund loans (A mortgage Broker does not fund or underwrite loans.)
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Extended Lock Agreement
if issued, it protects the borrower from rising rates during the locked period. (Program, interest rate, cost and expiration date)
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Delinquent loan
30 Days past Due on loan payment
200
Discount Point
1% of the loan amount can be paid upfront and in addition to other origination fees to reduce the interest rate.
201
Premium Pricing
Utilized in helping the borrower pay their closing costs. The premium results from the interest rate being increased.
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Cash Out Refinance
Borrowing equity from the value of the home, thus increasing the loan amount owed against the home.
203
Rate and Term Refinance
An extension of the term or reduction of the interest rate to reduce the amount owed in the monthly payment
204
Right of Rescission
The option given to a borrower to cancel a HELOC or refinance. Borrower must act within 3 days of the closing,.
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Junior Liens
2nd Mortgage or HELOC.
206
Escrow Accounts
Accounts that are paid into by the borrower for taxes insurances and possibly HOA/POA fees. The money is the borrowers and not the mortgage companies.
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Repurchase
An investor requiring the originating lender to buy the loan back because of fraud, unacceptable underwriting or appraisal.
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Liens
Secures the repayment of a debt owed. Examples include 1st mortgage, 2nd mortgage, IRS tax lien, judgement and mechanics liens.
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Early Payment Default
A new borrower does not make the 1st, 2nd or possibly the 3rd payment. Fraud ma be the cause.
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PITI
Principal, Interest, Tax and Insurances.
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Gift Funds
Gift Funds are sometimes used as part of a borrowers down-payment. They are most often gifted from a relative and cannot be conditional of repayment.
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Temporary Buydown
The payment rate is 2% less the first year, 1% less the 2nd year, requiring a buy-down account held by the lender for the difference between the note rate and payment rate. The borrower must be approved at the note rate.
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Accrued Interest
When you make your monthly payment, the interest paid is for the month before.
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Conveyance
Transfer of ownership, usually a deed.
215
Secondary Market
Sale of closed loans to investors or Fannie May or Freddie Mac.
216
Assumable Loan
Allowing the buyer of a home ot take over the existing mortgage. Fannie Mae and Freddie Mac to not allow assumptions. FHA and VA will if the new buyer is approved by the lender. VA requires the new buyer to be a Veteran.
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Conventional Conforming:
Any Loans that can be sold to Fannie May or Freddie Mac
Terms of a conventional conforming loan are:
Maximum LTV - 97%
Any Loan Above 80% must have MI and Escrows
Payment to Income Ratios (28% for housing and 36% overall) (also known as the front and back end ratios)
No repayment terms over 30 yers
No Prepayment penalties or assumptions
Non-Owner occupied is allowed
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Non-Conforming Loan is:
Any loan that cannot be sold to Fannie Mae or Freddie Mac.
Jumbo Mortgages or any loan that has unverifiable income
219
Non-Traditional Loan is:
Any loan that is not a 30 year fixed.
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Government Backed Loan Programs
FHA - Federal Housing Administration
USDA - United States Department of Agriculture
VA Loans - Veterans Administration
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FHA - Federal Housing Administration
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Maximum LTV is 96.5%
31% for housing
43% overall underwriting ratios
MIP is required for the life of the loan if over 90% LTV
Seller concessions are limited to 6%
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All borrowers must be run through CAIVRS. It will tell the lender if the borrower has an open FHA loan, default on an FHA mortgage or government insured student loan. The borrower may not be eligible for another FHA loan.
The borrower must live int he home for at least 60 days
Upfront MIP (Mortgage Insurance Premium) is 1.75%, which may be added into the loan.
The MIP renewal is .85 of the loan amount divided by 12. Monthly MIP premium is to be added to the P&I payment.
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USDA - United States Department of Agriculure
Available for areas of less than 35,000 people.
100% financing. Income limitations area set for eligibility.
29% front end, 41% back end underwriting ratios.
MIP - Government insurance is require for the life of the loan.
USDA must underwrite and fund all USDA loans.
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VA Loans - Veterans Administration
The down payment on a VA loan is determined by obtaining the DD214 from the veteran.
Once the COE is issued, the amount of entitlement benefits that may be utilized by the Veteran may be calculated.
Maximum Loan to Value is 100%
The maximum guarantee authorized by the VA is 25% of the loan amount, up to $113,275. The maximum VA home loan limit is the same as the current Fannie Mae or Freddie Mac loan limits.
Overall underwriting ratio is 41%. Residual income is also utilized in VA loans.
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ARM - Adjustable Rate Mortgages -
| Name the 5 parts
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Program
CAPS
Margin
Index
Fully Indexed Rate
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ARM Program Example
a 5/1 ARM = Rate fixed for 5 years and then adjusts every year there after.
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CAPS
the limits the interest rate can adjust with each adjustment and over the life of the loan.
For example, 2/5,2% is the limit the interest rate can go up on each adjustment. 5% is the lifetime cap. The lifetime cap is added to the starting rate which is highest the rate can go over the life of the loan. If the starting rate was 4% and the lifetime cap is 5%, the highest the rate can go over the life of the loan is 9%.
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Margin
The only number on an ARM Loan that cannot change. It is also the floor, meaning the interest rate cannot go below the margin.
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Reverse Mortgage
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Negative amortization
Minimum Age to apply 62
Mandatory counseling
Non-recourse mortgage
Insurance and tax not included
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