Loan terminology Flashcards
Leasehold estates
Leasehold estates- typically a tenant holding some rights to a property.
- estate for years
- tenancy at will
- tenancy at sufferance
Title
Legal concepts signifying ownership. 4 degrees of ownership * right to sell, mortgage, giveaway, dispose * right to occupy * right to using any legal manner * right to control entry
Freehold estates
Property owner or group of owners possessing all four rights. 2 types
- The simple absolute- most complete and most common form of property ownership.
- Life estate- during life Possess his rights to a property and after death transfer his rights to the person of his choosing.
Tenants in common
Joint tenants
Tenants by the entireties
Tenants in common- typically for business partners. Only way for two or more owners to hold title that allows them to specify who can inherit the share upon death.
Joint tenants- Survivorship of the tenant and related or unrelated
Tenants by the entireties- Reserved for husband and wife only
Tenants in common
Inheritability, any share of ownership, Owners may buy and sell, any number of owners
Joint tenants
Survivorship, equal shares, no changing owners, any number of owners
Tenants by the entireties
Survivorship, equal shares only, no change in owners, husband and wife only
Tenants in common
Inheritability, any share of ownership, Owners may buy and sell, any number of owners
Joint tenants
Survivorship, equal shares, no changing owners, any number of owners
Tenants by the entireties
Survivorship, equal shares only, no change in owners, husband and wife only
Deed in Lieu of foreclosure
Mortgagor takes all interest in property in Lieu of filing foreclosure action against borrower.
What act prevents steering ?
HOEPA
What is Mortgage low-balling?
Deliberately quoting lower YSP than brokers are willing to honor.
RESPA focuses on…
Only mortgage transactions
TILA covers…
most consumer credit, including mortgages
FCRA covers…
Collecting consumer credit info, while promoting privacy and accuracy
FACTA Covers…
Allows consumers to request and get a free annual credit report as well as covering issues such as identity theft
Key law in preventing predatory lending practices ?
HOEPA
ECOA does not require what disclosure
Disclosure to the applicant about right to dispute credit agency information
What fees cannot be increased after being disclosed unless they have changed circumstance?
- fees paid to creditor or affiliate
- mortgage broker Or affiliate
- Fees to 3 party unaffiliated For settlement fees or other services related if borrower wasn’t permitted to shop For.
- Transfer taxes
TILA/RESPA disclosures purpose…
Is to facilitate borrowers effort to shop for the best loan.
RemindIng borrowers to shop around through informed disclosures.
As a part of the ECOA adverse action a lender is required to…
- information in their credit report used to reach decision (if report was used)
- CRA used to get credit report
- inform borrower right to request with in 60 days to receive credit report
** credit score report is NOT required
Reg Z is in what act?
And covers…
TILA
Prohibitions on MLO compensation to prevent abusive practices. Like steering.
Section 35 loans
High cost mortgages
Lender can ask for what items?
- list of any accounts liable for
- provide names and addresses for designers of accounts
- provide names in which credit was previously requested but a LENDER may not ASK for names previously requested credit only credit received
Can a lender refuse an APPLICATION if borrower mentions providing false information?
YES
Under HOEPA section 35 loans when are prepayment penalties permissible?
They apply in the first 2yrs as long as no penalty applies after 2yrs
Disclosures HOEPA requires…
- disclosure for reason for asking race
- disclosure that borrower is entitled to copy of appraisal
- provision of the ECOA notice on credit action
Disclosures RESPA requires…
At time of application
- no before you owe workbook
- loan estimate (within 3 days after application unless denied prior)
- lender provides a list of recommended settlement service providers
Disclosures before settlement
- affiliated business arrangement disclosure (if lender is an interested party)
- Advance copy of the closing disclosure 3days prior to settlement
Disclosures at or after settlement
- escrow statement
- disclosures after settlement* loan servicer delivers annual escrow statement
- Service transfer statement if loan sells
RESPA
Year it was enacted…
Purpose…
1974
Purpose is for mortgage loans only to provide proper disclosures so people have a clear understanding of what they are responsible for in borrowing a loan secured by a dwelling.
RESPA loans do not cover reverse mortgages, HELOCs and mobile home loan not secured by land.
TILA
Year enacted…
Amendment to…
Purpose…
1968
Amendment to RESPA
Promote informed use of credit. Gives the right to cancel credit and imposes limitations on home equity programs that are deemed to be high cost.
TILA Year enacted... Amendment to... Purpose... What regulation is important in TILA
1968
Amendment to RESPA
Promote informed use of credit. Gives the right to cancel credit and imposes limitations on home equity programs that are deemed to be high cost.
Reg Z prevents use of advertising language in lending that doesn’t clearly convey terms.
HOEPA
Year enacted…
Amendment to what act…
What is it’s purpose…
1994
TILA
Purpose is to create disclosures and limitations when dealing With high cost mortgages.
HOEPA
Year enacted…
Amendment to what act…
What is it’s purpose…
1994
TILA
Federal predatory law aimed at protecting consumer with high cost loans. Things like pyramiding fees are predatory.
ECOA
What is it’s purpose…
Requires lenders and creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, the receipt by an applicant of income from public assistance programs, or the exercise by an applicant in good faith of any other right under the consumer credit protection act
RESPA
Year it was enacted…
Purpose…
1974
Purpose is for mortgage loans only to provide proper disclosures so people have a clear understanding of what they are responsible for in borrowing a loan secured by a dwelling. Allows consumer to shop for best loan product.
RESPA loans do not cover reverse mortgages, HELOCs and mobile home loan not secured by land.
Rotaries four-way test is…
- What is the right and proper course of action?
- Is it fair to all parties?
- Will it be all good with my customer and business associates?
- If the situation was reversed, would I consider my choice a fair decision?
GLB
what is it for…
Enacted to protect consumer information to help stop identity theft by, restricting unauthorized collection and distribution of consumer information. Requires institutions to safeguard sensitive financial information. Safeguards privacy allowing consumers to manage their financial information.
Mortgage disclosure improvement act…
Requires MLO’s and lenders to present GFENTIL disclosure before a fee can be collected, homebuyer must receive appraisal at least three days prior to closing.
What is HER?
Front end ratio which means
Monthly housing expense(PITI) divided by gross monthly income.
What’s is TOR?
Back end ratio which is debt on credit report + PITI divided by gross monthly income.
10 payments or less do not count
What’s is TOR?
Back end ratio which is debt on credit report + PITI divided by gross monthly income.
10 payments or less do not count
Lease also counts all the time regardless of # of payments.
Prepaids
Homeowners insurance
Closing costs
Appraisal
Title insurance
Reserves
Tax reserve or property tax
Flood zone
High zones A and V
Mandatory flood insurance with minimum of 100k max of 250k
Moderate c or x
What is the principle of substitution?
Principle of substitution can be found in all three valuation methods. Buyer is only willing to pay as much for a property as it would cost to purchase an equally desirable one.
What is the principle of substitution?
A purchaser will only pay the amount of money to purchase a property for which they can buy an equally desirable property
HUD functions and activities?
Fair housing act FHA
overseas federal housing finance administration FHFA
FHA loan program
Regulates housing industry business
Who was NMLS licensing system and registry was developed by?
The conference of state bank supervisors and the American Association of residential mortgage regulators.
After chapter 7, 11 and 13 bankruptcy a loan can be borrowed how long after
4yrs for ch. 7
2yrs For ch. 11
2yrs for ch. 13
Promissory Note
Vs
Loan
Gives a promise to repay the loan. Note shows: *Amount of total loan *interest rate *monthly amount paid *late charge for late payment *how long borrower has to repay
Loan describes what happens if you fail to repay or keep that promise.
It gives a pathway to foreclosure to recoup loss ffor default in loan payments.
What loans are right to rescission given on?
Refinances, home equity loans and HELOCS
Name non conforming loans?
Jumbo loans
Subprime loans
Loans that don’t meet Fannie Freddie guidelines
What is the difference between a deed and a deed of trust and deed of reconveyance?
A deed shows the right to a property. (Conveys ownership)
A deed of trust or deed of settlement shows collateralization and does not show ownership. Deed is recorded as placing a property for repayment of a loan. (Lien created)
A lien is released through a deed of reconveyance. (Lien released)
A mortgage gives permission for foreclosure if defaulted.
Seller concessions limits on FHA, investment properties and Conventional?
What is a concession?
FHA Capped at 6% Investment properties capped at 2% Conventional: 3% for a less than. A 10% down payment. 6% for 10%-24.9% 9% for 25% or more.
A concession is what a seller can contribute to closing cost. It is a percentage of the sale price. Seller cannot contribute to a down payment.
