Lending 101 Flashcards
What are the 4 C’s of lending
- Character
- Capacity
- Collateral
- Capital
What is meant by character?
Character is referring to the character of the client. Will the client pay. What is their attitude towards debt. How is their credit report.
What is meant by capacity?
Is the tenant able to pay. How is the quality of their income.
What is the DTI ratio
Debt to income. The denominator = verifiable monthly income. The numerator = all housing related expenses for PITIMI and HOA.
What is meant by collateral?
What the lender can use to enforce the ultimate payment of the debt.
What are the rules of collateral?
- more value than the loan
- easily recovered and sold
- permanent location
What is meant by capital?
The clients down payment.
How much is the recommended backup reserve?
2 months
Who makes the loan rules in the secondary market?
FNMA (fanni may) & FHLMC (freddy mac)
What does TIL (truth in lending) require lenders to do?
The TIL requires lenders to tell you the true cost of credit in % and $
What does the ECOA do
Prohibits illegal discrimination
What is the fair credit reporting act?
It requires credit reporting agencies be accurate, fix mistakes and errors, allows you to see credit reports, and allows you to place a statement in report.
What does CRA stand for?
Community Reinvestment Act
What does the CRA require?
It requires lenders to measure credit needs and fill those needs in the geography they gather deposits.
What is the HMDA
Home Mortgage Disclosure Act
