MCE Flashcards
1
Q
What is the required pass rate for the NMLS Test and how long is it?
A
75% of 115 questions. The test has 120 questions with 5 questions that are ungraded.
2
Q
What is important to remember about taking the test?
A
Read the questions twice, slowly, but do not take over 30 seconds per question the first time through
3
Q
What is the requirement under Fair Lending, Fair Housing, and ECOA?
A
All consumers have the right to apply for a loan unless they are under 18 years of age
4
Q
Which Law and Regulation is Home Ownership Equity Protect Act (HOEPA) under?
A
Truth in Lending Act (TILA) and REG Z
5
Q
Which items are restricted under HOEPA?
A
Predatory Lending, Abusive Lending Practices, Negative Amortization, Prepayment Penalties, Balloon Lending, Subprime Lending, Equity Stripping, and not meeting Ability to Repay (ATR) requirements
6
Q
What is the minimum period for a Balloon mortgage?
A
A 30-year amortized loan that is due in 60 months
7
Q
What is the Average Prime Offered Rate?
A
APOR – an index that is published weekly. It is added to High-Cost and Higher-Priced Triggers.
8
Q
Who publishes the APOR Index?
A
FFIEC, the Federal Financial Institutions Examination Council
9
Q
What is the Regulation for High-Cost Loans?
A
Section 1026.32
10
Q
What are the three triggers for High-Cost Lending?
A
6.5% on a first Mortgage, 8.5% on a second Mortgage, and a 5% fee trigger for loans over $20,000
11
Q
What are the triggers for Higher-Priced lending?
A
1.5% for first Mortgages, 3.5% for 2nd mortgages and no fee trigger
12
Q
How do you calculate whether a loan exceeds the Higher-Priced mortgage limits?
A
Add the APOR index to 1.5% on a first mortgage. The Annual Percentage Rate (APR) cannot exceed the two numbers together.
13
Q
What are the requirements for a High-Cost Loan?
A
Tax and insurance escrows for the first five years of the loan, mandatory counseling and possibly two appraisals. Cannot use an Appraisal Waiver from Fannie or Freddie. No Balloons are allowed.
14
Q
What are the requirements for a Higher-Priced Loan?
A
Tax and insurance escrows for the first five years of the loan. Cannot use an Appraisal Waiver from Fannie or Freddie.
15
Q
Prepayment Penalties are not allowed by which agencies?
A
Fannie Mae, Freddie Mac, USDA, FHA, and VA
16
Q
What is collateral?
A
Property that is used as security against a debt
17
Q
What is Net Monthly Income?
A
Take-home pay after taxes and payroll deductions
18
Q
What is a non-liquid asset?
A
A type of asset that is not easily turned into cash. Real estate is considered non-liquid
19
Q
What are the five parts of ECOA?
A
Age, Discrimination, Underwriting, Appraisal, and Adverse Action
20
Q
What is the minimum age under ECOA to obtain a mortgage loan?
A
18 years or older
21
Q
ECOA has discriminatory items. What can’t you do with them?
A
You cannot use them to make or decline a loan
22
Q
What are the discriminatory items under ECOA?
A
Sex, Marital Status, Race, Color, Age, Religion, National Origin, Public Assistance, and Sexual Orientation
23
Q
What can you ask on Marital Status?
A
Married, unmarried, or separated
24
Q
Which four areas should you never ask about?
A
Race, Color, Religion, and Nationality
25
What is the requirement for Public Assistance?
It must be considered, even though you may not be able to use it for qualifying
26
How long, after a complete underwriting package is delivered to the underwriter, does a decision have to be made?
30 days, but this may be extended if the package is not complete
27
How many days before closing must the appraisal be delivered to the borrower?
Three business days before, unless there is an appraisal waiver issued, then the borrower must be informed that an appraisal will not be done unless they request it
28
How long after a loan is declined or cancelled must an Adverse Action notice be sent?
30 days from the decision, explaining the reason
29
Under the Fair Housing Act, what are three protected bases that are different from those covered by ECOA?
Disability, Familial Status, and Age
30
Why is Disability considered discriminatory under the Fair Housing Act?
You cannot discriminate against a borrower because they are physically or mentally disabled
31
Why is Familial Status considered under Fair Housing Act?
You cannot discriminate because of the size of family or if a woman is pregnant
32
Why is age not considered discriminatory under Fair Housing Act?
Reverse mortgages require a borrower to be 62 years of age or older, and a 55 and over subdivision requires the borrower or purchaser of property to be 55 and over
33
What is the Reg Letter for Fair Credit Reporting Act?
REG V
34
How many free credit reports does every consumer have the right to get each year?
At least one
35
Which credit score do you use when considering a borrower?
Three credit scores are issued on each credit report for each borrower: High, Middle, and Low. You will use the Middle unless the program states differently.
36
Which credit score do you use if the loan is declined because of credit and there are three borrowers?
Lowest of the Middle score for all the borrowers. Example: Borrower 1 has a score of 780, borrower 2 has a credit score of 720, and borrower 3 has credit score of 660. You would use 660.
37
What additional information is required on the Credit Score Disclosure?
Listing of all three national credit agencies, with contact information, so the borrower can contact them in case of an error or dispute. Agencies are Experian, TransUnion, and Equifax
38
What are the three national credit agencies?
Experian, TransUnion, and Equifax
39
Which law did the Fact Act amend?
Fair Credit Report Act (FCRA)
40
What is a fraud alert?
An alert put on the credit report, indicating the borrower may have had their identity stolen or credit card or bank accounts compromised
41
What happens with a credit freeze?
No one will be able to access the borrower’s credit without them unfreezing their account.Credit issuers will be able to report credit payments
42
What is the cost for a fraud alert or credit freeze?
Zero cost and should be applied to all three credit agencies
43
What is Truncation?
When credit card, debit card, or bank deposit receipts are given, they cannot show more than the last four digits of the account numbers
44
What are the two parts of Red Flag Rules?
(1) Before the request for change of personal information, the company must send a letter or email asking if the person requested the change. (2) All employees are to be trained on how to identify a breach of security and what the company’s requirement is once the breach has been detected
45
Which agency regulates Red Flags?
Federal Trade Commission (FTC)
46
What is a Homeowner’s Warranty?
A warranty and insurance program that insures a new home for ten years against major structural defects
47
If a breach is determined, what is the requirement?
It must be reported to Compliance Officer or Senior Officer and, 30 days from that point, the company must send a notice to all people in their database notifying them of the breach and what the company has done to protect them
48
What does GLB stand for?
Gramm-Leach-Bliley
49
What is the REG for Gramm-Leach-Bliley?
REG P
50
What is the main emphasis of Gramm-Leach-Bliley?
Privacy of consumers’ personal information
51
What does NPPI stand for?
Non-Public Personal Information
52
What is “Opt-Out” under GLB?
The consumer has the right to opt-out of a company sharing, selling, or giving their NPPI to anyone. The Opt-out stays on as long as their name is in the company’s data base
53
What is Phishing or Pre- Texting?
Obtaining personal information by illegal process, like a text, claiming to be from the IRS, asking for your SSN
54
What is required under Safe- Guard Rules?
Whenever you are not using your files, they are to be locked up in a desk drawer or filing cabinet. If your files are on a computer, there must be a lock out after a few minutes
55
What regulates Safe-Guard Rules?
FTC – Federal Trade Commission
56
What is the required retention of Loan Information?
Three years for all loan files and five years for the CD
57
When does the HMDA data have to be reported?
In 2019, by March 1st of each year. In 2020, it is quarterly
58
What does PENCIL stand for?
P= Property address; E=Estimated value; N= Name; C = Credit or Social Security Number; I = Income; L = Loan amount
59
When is an application considered a loan?
When you have collected all the items in PENCIL
60
What agency regulates and enforces Do-Not- Call?
FTC – Federal Trade Commission
61
How often do you have to pull new data from the Do-Not-Call website if you are using the data to solicit consumers?
The data cannot exceed 31 days. The data incudes phone numbers for any person that registers their phone number with DNC
62
How long are you to retain your solicitation records?
Two years from the date of solicitation
63
What times can you solicit?
8:00am – 9:00pm, depending on where the person being solicited is located
64
What are the two exemptions for solicitations under Do-Not-Call?
18 months for someone with whom you have an existing business relationship and 90 days for a Pre-qualification
65
What is an in-house Do-Not-Call List?
If a consumer sends a letter or an email to the company indicating they want no solicitations, the company must put that person on an internal do-not-call list, so not one contacts that person. This overrides the 18 month and 90- day exemption
66
What are the eight items covered under TILA?
1) MDIA – Mortgage Disclosure Improvement Act; 2) Advertising; 3) HOEPA; 4) Loan Estimate (LE); 5) Annual Percentage Rate; (APR) 6) Qualified Mortgage (QM); 7) Loan Officer Compensation; 8) CHARM Booklet
67
What Does MDIA stand for?
Mortgage Disclosure Improvement Act
68
What does Mortgage Disclosure Improvement Act (MDIA) cover?
MDIA is a part of Reg Z and covers timing and delivery requirements for initial disclosures, LE, intent to proceed, and changes to the mortgage loan program, prepayment penalty, or APR calculations. MDIA also addresses when the CD needs to be Issued, as well as the waiting period.
69
What is a Changed Circumstance?
Any borrower-requested change due to an extraordinary event beyond anyone’s control. A new LE must be received by the borrower within three business days from the change.
70
What are the requirements for advertising under TILA?
All marketing materials must have the company name, company NMLS number, phone number, address, equal housing logo, and an APR. All advertising must be kept for two years from the last date used.
71
What is the definition of Annual Percentage Rate (APR)?
APR is expressed as a percentage that represents the total costs paid over the term of a loan. This includes any fees or mortgage insurance associated with the transaction.
72
What does APR stand for?
Annual Percentage Rate – the cost of the loan over the life of the loan, quoted as a percentage rate
73
What is Safe Harbor?
If you meet either of the two options under QM that showed you proved Ability to Repay requirement, you are protected from a lawsuit
74
What is the punishment if you do not meet QM Standards?
Up to three years interest, all loan costs, and legal costs for both sides
75
If an MLO is paid commissions, what can the commissions based on?
Basis points under your Loan Originator Agreement, times the loan amount. No termsor costs of the loan can be counted
76
What does UDAAP stand for?
Unfair, Deceptive, or Abusive Acts or Practices
77
What Does Unfair, Deceptive, or Abusive Acts or Practices state?
It is unlawful for any provider of consumer financial products or services or a service provider to engage in any unfair, deceptive, or abusive act or practice
78
If a company pays a bonus or retirement donation, what are the criteria for determining the amount?
Number of loans, dollar amount originated for a specific time, and/or the closing rate on your applications. Bonuses are limited to 10% of the last 12 months’ compensation
79
What does Reg N Cover?
Mortgage Acts and Practices
80
What does Mortgage Acts and Practices require?
If you don’t have a program or rate, do not advertise it, and do not use Bait and Switch tactics, or language or terms that would indicate to a borrower you do not want them to apply
81
What is Bait and Switch?
Advertising a lower rate or a program that may not exist to entice consumers, and then when they call, you offer them another less-attractive program
82
What is not included in Digital Delivery?
Faxing or e-mail. Docu-sign or E-sign are acceptable where the person can be verified, and the documentsare time-stamped as they are sent back and forth
83
What are the requirements for Digital Delivery?
The borrower must give you written approval, have the right to go back to hard copy, and you must determine, to the best of your ability, if the borrower is technically able to do the process
84
What does CFPB stand for?
Consumer Financial Protection Bureau
85
What are duties of the Consumer Financial Protection Bureau?
They have the power to write, implement regulations, investigate, and issues fines or other penalties as needed
86
Who does the CFPB answer to?
The President
87
What is a Consumer?
Someone who obtains a financial product or service from a financial institution that is to be used primarily for personal, family, or household purposes, like applying for a loan (whether they accept the loan or not)
88
How many days do you have to send an adverse action notice?
30 days, mailed or verbal
89
TILA Trigger terms
Balance, term, APR (rate), payment
90
Flood Insurance
Stays until the loan is paid off
91
How many months reserves are needed for non-owner- occupied properties?
6 months
92
What is excessive value?
An appraisal term to express a value higher than the highest in the neighborhood
93
What is the flood insurance requirement?
Enough to cover the loan amount
94
What is the hazard insurance requirement?
Enough to cover the loan amount
95
What are the payment options for ARMs?
15 years, 30 years, Negative/ Minimum
96
Servicing loan estimates need to be given within what time frame?
3 days
97
What are the manufactured home financing requirements?
Home must be on a permanent foundation and the land must be tied to the property. The HUD Data Plate led as real must be on the home
98
What is the VA back-end ratio?
41%, including housing, utilities, and all other debts
99
How much hazard insurance is required on a reverse mortgage?
100% of the loan amount
100
What is the minimum down payment?
FHA: 3.5% Conventional: 3%
101
What does the cost approach include?
Depreciation, Square Footage, and Replacement Cost
102
With the Sales Comparison Approach, what adjustments are allowed?
Net adjustments of 15% and gross adjustments of 25% to comparables
103
What do riders include?
PUD, ARM, Balloon Payment, Prepayment Penalty
104
What is a Hybrid Loan?
A loan that performs like a fixed and adjustable-rate loan. It has a fixed rate for an initial period before turning into an ARM.
105
What is a non-warrantable condo?
FNMA will not do the loan; Condo-conversion= non warrantable HOA, 51% owner occupied
106
FHA loans are only for what types of properties?
Owner-Occupied Properties
107
What is a grace period?
A period of extra time allowed for making a payment without incurring a late penalty
108
What is the UFMIP %?
0.0175
109
How is monthly MIP calculation done?
On base loan amount before UFMIP
110
What is the active-duty vet first-time funding fee at 100%?
0.023
111
What is the FHA loan minimum living time before resale?
91 days from consummation with second appraisal
112
How is a GLBA notice delivery given out?
Mailed, given personally, or faxed
113
How do tenants in common mortgages work?
Each owner has their own share of the property that they can pass on in their will
114
What information is covered in the privacy rule of GLBA?
Non-public information, including any information an individual gives you to get a financial product or service; i.e., credit reports, banking info, unlisted home telephone numbers
115
What is on the deed of trust agreement?
Metes and bounds, legal description, attached riders, name of borrower
116
What is an ongoing business relationship?
Customer
117
How long is the FIRREA statute of limitations loan fraud?
10 years
118
How often must the aggregate accounting escrow be reviewed?
Every 12 months, cushion up to 2 months
119
What is a Chain of Title?
The ownership history of a piece of land, from its first owner to the present one
120
Which types of loans are Assumable?
VA, FHA if stated in the deed
121
How much is title insurance coverage on reverse?
150% of original loan amount
122
What is AQB?
National appraiser group
123
What is settlement service per RESPA?
Title insurance, appraisal, relator commission, credit report, title report, termite certificate
124
What percentage of a VA loan is guaranteed?
Up to 50% of a loan up to $45,000. Between $45,000 and $144,000, the minimum is $22,500 and the max of up to 40% of the loan up to $36,000
125
What is a notice of transfer?
Includes toll free number of new and old servicer and effective date, 15 days before transfer
126
When are LE requirements not required?
They are not required on commercial loans, loans denied within three days, or bridge/swing loans
127
What is a “due on sale” clause?
A clause in a loan or promissory note that stipulates that the full balance of the loan may be called due (repaid in full) upon sale or transfer of ownership of the property used to secure the note
128
How often do telemarketers update the DNC?
31 days
129
After someone requests you to put them on your DNC list, how many days do you have to do so?
30 days
130
How long does a conventional loan owner agree to occupy the property?
1 year
131
What are the guidelines for appraisers?
USPAP
132
Where is the Prepayment penalty disclosed?
Rider to trust deed LE/CD
133
Which loan requires a large final loan payment, as it does not fully amortize?
Balloon
134
What is included in typical property inspections?
Verification that required repairs have been made, termite, well, septic, and roof
135
How does ownership transfer amongst Joint Tenants?
Ownership automatically transferred on death to other owners, cannot be a corporation
136
What is the required fire/hazard insurance amount?
Enough to cover the loan amount
137
What is LIBOR?
London Inter Bank Offered Rate
138
What is the max seller paid closing costs for Conventional, FHA/USD, and VA loans?
Conv: <10% - 3%; 10-25% - 6%; 25%+ - 9%; FAA/USD: 6%; VA: 4%
139
What is the right of rescission?
A right, set forth by TILA, of a borrower to cancel a home equity or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee, within three days of closing
140
Which form states that the borrower must occupy the property as primary residence within 60 days?
FNMA FHLML Form 3072
141
What are the different appraisal types?
Cost: Cost to replace; usually newer construction
Income: Income producing properties
Sales Comparison (Market): Compare to other similar properties
142
When was the Dodd-Frank Act created?
2010
143
What are Mortgage-Backed Securities?
A type of asset-backed security that is secured by a mortgage or collection of mortgages
144
Lower-cost MI with loan level price adjustment
Borrower with high credit scores. The borrower can have lower MI but FNMA will pay less for the loan
145
What does plain language title insurance do?
Protects the buyer: 1.) Rights of claims of 3rd parties;
2.) Easements or claims of it not in the public record;
3.) Forced removal of existing structure;
4.) Mechanics lien coverage (unrecorded)
146
What is the appraiser trainee period?
12 months
147
Who are the big players on the Secondary Market?
FNMA, FHLMC, and GNMA
148
Someone on the DNC list contacts you. How long can you continue to call?
3 months
149
What are the high-cost limits with APR and point fees?
APR: 6.5% on 1st or 8.5% on 1st less than 501c or 2nd
Points Fees: 5% + on $20,000+ loan or 8% on less than $20,000
150
Where can acceptable down payments come from?
Selling an asset; an employer; family member; fiancé
151
Which financial and non-financial companies are covered by the Bank Secrecy Act?
Banks, Credit Unions, Mortgage Bankers, and Mortgage Brokers
152
Who is required to take the AML and Fraud Training?
All staff and management
153
How often does the AML and fraud training have to be done?
Once a year
154
Does fraud or money laundering have to be proven or just detected?
Only detected
155
If AML or fraud is detected, who do you report it to?
Compliance Officer or Senior Officer
156
What is the name of the report that is to be filed if fraud or AML is detected?
SAR – Suspicious Activity Report
157
Which government agency is responsible for the Bank Secrecy Act?
FinCEN - Financial Crimes Enforcement Network
158
If a SAR is reported, how long does the file have to be kept in a secure place?
Five years
159
Can the borrower be told a SAR has been reported on them?
No – information on SARs is to be kept confidential for a five-year period
160
Who is allowed to see the file once it has been reported as a SAR?
Police Authority or anyone approved by FinCEN to seethe information
161
Who is the person responsible for SAR files and releasing information?
Compliance Officer or Senior Officer
162
What is the penalty for violating the Bank Secrecy Act?
A person convicted of money laundering can face up to 20 years in prison and a fine of up to $500,000
163
What is required under the U.S. Patriot Act?
All borrowers are required to show personal identification: either a driver’s license or passport
164
What does OFAC stand for?
Office of Foreign Asset Control
165
What is required if a borrower is on the OFAC watch list?
The lender must call OFAC and report the person and ask what is to be done with the loan
166
What does HPA stand for?
Homeowners Protection Act
167
What is required under the Homeowners Protection Act?
All loans about 80% LTV must have mortgage insurance if they are Conventional Conforming Loans
168
What is the purpose of Private Mortgage Insurance?
To provide security to the lender in case of default. Also allows borrower to make a smaller down payment
169
What does MIP stand for?
Mortgage Insurance Premium for FHA Loans
170
Under the Homeowners Protection Act, what is available to the borrower at 80% LTV?
The borrower can request that the PMI be dropped, but it is at the option of the lender
171
When is PMI required to be dropped under the Homeowners Protection
78% Loan to Value (LTV)
172
What does QM stand for?
Qualified Mortgage
173
What is one of the options for a loan to meet QM standards?
Approved eligible from Fannie Mae or Freddie Mac and higher-priced lending standards are met
174
What is the penalty if you close a Conventional Conforming loan without QM approval?
Up to three years interest, all loan costs, and legal costs for both sides of the lawsuit
175
What does Safe Harbor mean?
The lender has proven the borrower has the Ability to Repay (ATR)
176
What does LO Comp stand for?
Loan Officer Compensation
177
What law is LO Comp covered under?
TILA – Truth in Lending Act
178
What can commissions be paid on?
Basis points of the loan amount.
ex: 80 basis point loan officer X a $200,000 = $1,600 commission
179
What items can LO Compensation be paid on?
Loan amount only
180
What is the limit of bonus money that can be paid to MLO?
10% of the last twelve months compensation
181
What are the two ways that compensation can be paid?
By the customer or the mortgage company, but not both
182
What does TRID stand for?
TILA, RESPA Integrated Disclosure
183
What are the two booklets required within three business days of the signed application?
Loan Tool Kit for all purchases and CHARM booklet for all ARM Products
184
What is the requirement for the Intent to Proceed?
When the borrower brings the signed Intent to Proceed to the company, the borrower indicates they are obligated to the loan
185
When can an appraisal be ordered?
When the borrower signs and delivers the Intent to Proceed
186
How many days from the signed application are the initial disclosures, including the LE, to be delivered?
Three business days
187
How many days does the borrower have to wait to close after the signed Intent to Proceed is delivered to the lender?
Seven business days
188
How many days does a new Loan Estimate (LE) have to be delivered after a Changed Circumstance?
Three business days
189
How many business days before closing is the Final Loan Estimate (LE) required to be received by the borrower?
No less than four business days
190
How many business days before the closing does the borrower have to receive the Initial Closing Disclosure?
Three business days
191
What are the three things that would require a new CD and a three- business day delay in the closing?
One of the following: Mortgage program changes, prepayment penalty is added, or the APR tolerances are exceeded (1/8% on a fixed or 1/4% on an ARM)
192
What is the definition of Consummation?
When the borrower becomes obligated to the loan
193
What is a business day for the closing?
Any day the business is open, not including Sunday or federal holidays
194
What are the three stages of a mortgage loan life cycle?
Borrowers consideration, the primary market, and the secondary market
195
What items are considered ZERO tolerance items?
Appraisal, origination fee, lender fee, and transfer taxes
196
What are the three categories for fees on the LE?
Zero tolerance, 10% tolerance, and no tolerance
197
What is covered under 10% tolerance?
Title policy or lender required inspection or recording fees
198
What does 10% tolerance mean?
When you quote title or lender required inspection or recording fees, and the amount is higher than quoted, the borrower is liable for 10% and you are responsible for the balance
199
When is an MLO or company not liable under the 10% tolerance?
When the borrower selects their own title or inspection company
200
What does no tolerance mean?
No liability for the MLO and company because the borrower selects the items
201
What items are included in the no tolerance items on the LE?
Attorney’s fees, realtor fees, homeowners insurance, escrows, per diem interest
202
How do you calculate per diem interest?
Principal balance times interest rate (note rate) divided by 360 days on conventional loans, or 365 on a government loan — gives interest per day
203
What is the Lien Priority?
The chronological order in which liens are filed against a property. Lenders want first priority.
204
What does HUD stand for?
Housing and Urban Development
205
What are the responsibilities of HUD?
Manage Federal Housing Administration (FHA) and monitor companies and MLOs for Fair Lending, Fair Housing, and complying with ECOA
206
What does ECOA Stand for?
Equal Credit Opportunity Act
207
What is the Reg letter for ECOA?
Reg B
208
What is the Reg Letter for Fair Credit Reporting Act?
Reg V
209
What is the Reg Letter for RESPA?
Reg X
210
What does RESPA stand for?
Real Estate Settlement Procedures Act
211
Which three laws does are regulated by the Federal Trade Commission (FTC)?
Red Flags, Safeguard Rules, and Do-Not-Call
212
On the Loan Estimate (LE), can the Interest Rate be quoted as a fraction? (i.e. 3 7/8%)?
No — only decimal format (i.e. 3.875%)
213
On the Loan Estimate, if “Yes” is shown for Loan Amount, Interest Rate and P&I payment, what does that mean?
The loan is an Adjustable-Rate Mortgage (ARM)
214
What is a Prepayment Penalty?
If you attempt to pay the loan off in the first two or three years, there could be a penalty
215
Who is required to complete the Loan ID on the Loan Estimate?
The company funding the loan
216
What items may be included in the escrow portion of your monthly mortgage payment?
Real Estate taxes, Homeowners Insurance, Flood Insurance, or HOA fees if the property is a condo
217
On the loan estimate, what is included in the estimated closing costs?
All the costs and fees that will be paid by the borrower at closing
218
When a borrower locks their loan, what does that mean?
The interest rate and fees are locked, as long as the loan is funded by the expiration date
219
What are the different lock options for loans?
15, 30, 45, or 60 days. The lock period will cost more as the lock gets longer
220
Can a mortgage broker issue an extended lock agreement?
No, only a lender that funds loans can issue an extended lock agreement
221
What is an extended lock?
A lock of interest rates and fees for a period longer than 60 days
222
What four items must be on an extended lock agreement?
Program, interest rate, cost of thelock, and the expiration date
223
How many days from the issue date of the loan estimate does the borrower have to bring the signed Intent to Proceed to the lender to protect their costs?
Ten business days
224
What happens if the borrower does not return the signed Intent to Proceed to the lender within 10 days of the issue date of the LE?
The costs of the loan are subject to change and the LE continues to be active
225
What must be put on the top- left side of page 3 of the Loan Estimate?
The lender that is funding the loan
226
What must be put on the top- right side of page 3 of the Loan Estimate?
If the loan is originated by a Mortgage Broker, their contact information is to be listed
227
What three comparisons are required on page 3 of the Loan Estimate?
Total cost for the first five years, Annual Percentage Rate (APR), and Total Interest Percentage (TIP)
228
What is Annual Percentage Rate (APR)?
The cost of the loan, including interest rate and all costs over the life of the loan
229
What does TIP stand for?
Total Interest Percentage
230
What does TIP tell you?
The total interest paid over the life of the loan
231
How is Total Interest Percentage calculated?
P&I payment, times the number of payments on the loan, then subtract the principal balance (total interest paid over the life of the loan), divided by the principal = TIP
232
When is the appraisal to be delivered to the borrower?
No less than three business days before the closing
233
Can a borrower appeal an appraisal?
Yes, with information that shows the reason; they cannot just say they feel the property is worth more
234
What is the rule on how much Homeowners Insurance is required?
The lower of the value of the property or the mortgage amount.
235
When must a Late Payment be applied?
After the 15th of the month, a fee of 5% of the P&I payment can be added to the amount due for the month
236
What items are required to refinance a loan?
Value of the property, credit, and income
237
What does Servicing mean?
The collection of monthly payments, paying the investor, and setting aside the escrow money into separate accounts other than operating accounts for the servicer. Paying taxes and insurances as they come due
238
Do the signatures on Loan Estimate obligate the borrower to the loan?
No, the signatures only indicate the borrower received a copy of the LE. The signed Intent to Proceed is the document that obligates the borrower.
239
What is a Mortgage Broker?
A company that originates a loan but cannot underwrite or fund a loan. A MB cannot claim they are a mortgage lender.
240
What type of properties are covered under the laws of TILA, RESPA, ECOA, and HMDA?
1-4 family residences. Any residential is not correct. Units more than 4 units may be residential but are not covered under the laws.
241
What is a third-party provider?
Any company that provides a service for the origination of a mortgage loan, like appraisals, title insurance, or credit reports
242
Can a mortgage be called a TPO?
Yes, they could be called a third-party originator
243
When can the foreclosure process begin?
When the loan is 120 days delinquent
244
What is covered under the Initial Escrow Disclosure?
How the escrows are collected and the servicer’s responsibilities
245
What circumstances can result in a declination?
Credit, insufficient assets, the borrower does not have sufficient income, or the appraisal is not high enough to make the loan
246
What is required to be in the Adverse Action notice?
The reason for the cancellation or declination
247
What is comparative evidence of Disparate Treatment?
When similar applicants receive different treatment that cannot be explained by non- discriminatory factors
248
What is evidence of Disparate Impact?
When a policy or practice negatively impacts individuals on a prohibited basis
249
What is the responsibility of a Cosigner?
They are as responsible as the borrowers when the loan becomes delinquent or goes into foreclosure. The cosigner’s credit will be affected the same as the borrower’s credit
250
What are the types on income eligible to be used in underwriting?
Any income that can be verified and has a two- year history and the potential of lasting for three years in the future
251
If the borrower refuses to volunteer their ethnicity, what are you to do as an MLO?
You cannot require the borrowers to provide the information, but you are required to complete the information based on your observation of the borrowers
252
What are the core items of the Truth in Lending Act (TILA)?
MDIA, Advertising, APR, LE, HOEPA, CHARM Booklet, QM, and LO Compensation
253
What are the limitations for seller/lender concessions?
3% on a conventional conforming loan over 90%, and 6% on loans between 75% and 90%
254
What are permissible fees and charges?
Any fees that the borrower is charged to obtain the loan and are disclosed on the LE
255
Which loans require a Right of Rescission?
Owner occupied primary residences
256
How many copies of the Right of Rescission are to be given to the borrowers and owners of the property?
Two copies to each person
257
How many of the people that were given the Right of Rescission are required to rescind the loan?
One person
258
When does the Right of Rescission start?
Three complete business days after the closing
259
What are the two fee thresholds?
3% on Qualified Mortgage, and 5% on a High Cost Loan
260
Where does the origination fee go on page 2 of the LE?
Under Loan Costs
261
What is required to be on the Annual Escrow Analysis report?
How much the borrower has paid in and how much was paid on their behalf for taxes and insurances and if there is an overage or shortage
262
What is required if there is an overage on the escrow analysis?
If the amount is over $50.00, the overage must be paid to the borrower within 30 days
263
What is required if there is a shortage on the escrow analysis?
The borrower must pay it in one lump sum within 30 days or spread it over the next 12 months
264
What is the Acceleration Clause?
If the borrower is delinquent and it reaches 120 days, the lender has the right to call the balance due
265
What is the Alienation Clause?
If the borrower sells their house and does not notify the lender or allow the new buyer to take over the mortgage, the lender has the right to start foreclosure
266
Which loan products will not allow assumptions?
Conventional conforming or USDA loans
267
Which loan products will allow assumptions?
FHA and VA, if the new buyer is approved by the lender. If it is a VA loan, the new buyer must be a veteran
268
What is an assumption?
The new buyer can take over the original borrower’s loan and continue to make the payments, but only on FHA and VA loans
269
What is required to be reported on your HMDA report?
All loans that meet the definition of a legal loan whether declined, approved, or cancelled
270
What is a Tri-Merge credit report?
A credit report that has information from Experian, TransUnion and Equifax
271
What is a Deed?
A written instrument by which land is conveyed
272
What are the penalties if you violate Dodd-Frank tier-two, Federal Consumer Financial laws?
$28,139 per day for each violation
273
What are the penalties if you violate Dodd-Frank tier-three, Federal Consumer Financial laws?
$1,127,779 maximum per violation
274
What are the requirements for Conventional Conforming loans over 80% LTV?
All loans over 80% must have escrows and PMI mortgage insurance
275
What is the definition of a Conventional Conforming Loan?
0.97
276
What are the debt-to-income ratios on a Conventional Conforming Loan?
28% for Housing (up-front) and 36% for overall debt (back-end)
277
Do Fannie Mae and Freddie Mac allow non- owner-occupied loans?
Yes, at lesser loan-to-value and may have increased rates and fees
278
What is the Underwriting system for Fannie Mae?
DU – Desktop Underwriter
279
What does Approve Eligible mean?
A loan that has been run through the Fannie or Freddie underwriting systems that says they will be accept the loan if the documents match what was put into the system
280
What are the debt-to-income ratios on FHA loans?
31% for housing and 43% for overall debt. (overall means mortgage payment and all other debt payments)
281
What is CAIVRS?
A database that shows liens, defaults, and debt owed to federal agencies, including government insured student loans. This needs to be checked for FHA loans
282
What is the upfront premium for FHA loans?
1.75%; this may be added into the loan amount
283
What is the renewal premium on FHA loans?
.85% of the loan amount divided by 12 = the amount added to the monthly payment
284
What is the maximum loan-to-value on VA loans?
100% if the veteran has 100% benefits
285
What is a DD214?
The document that tells you the veteran has benefits, but does not say how much
286
What is the COE?
Certificate of Eligibility, which provides proof of a veteran’s service and tells the lender that an applicant has met the minimum service requirement. This will determine the amount of down payment required, if any
287
Does VA insure or guaranty loans?
Guaranty loans (up to a maximum of $144,000)
288
What is the debt-to-income ratio for VA loans?
41% overall – they don’t have a housing ratio
289
What are non-conforming loans?
Any loan that cannot be sold to Fannie Mae or Freddie Mac
290
Who sets the underwriting rules, programs, and pricing for non-Conforming loans?
The companies buying the loans
291
What is “payment shock”?
A borrower who is renting for $900 a month and now buying a home with a payment of $1,300 a month with no reserves to show where the extra $400 a month is coming from
292
What is a non-traditional loan?
Any loan that is not 30-year fixed
293
Is a 40-year amortized loan considered conforming or non-conforming?
Non-conforming – any loan above 30 year fixed cannot be sold to Fannie or Freddie
294
What is a Purchase Money Second?
A second mortgage that is used to eliminate Mortgage Insurance. Terms like 80/10/10 mean an 80% first mortgage, a 10% second, and a 10% down payment
295
Can the interest rate change on a fixed-rate mortgage?
No – it is fixed for the life of the loan
296
What are the five parts of an ARM loan?
Program, caps, margin, index, and fully-indexed rate
297
What program is a 5/1 ARM?
Initial interest rate fixed for 5 years and then an annual adjustment
298
What does a 2/5 cap mean?
The 2 is the adjustment cap, meaning the interest rate cannot go up or go down any more than 2%. The 5 is the life cap, which requires you to add the starting rate to the life cap of 5 which equals the highest the interest rate can go over the life of the loan
299
What is the margin on an ARM loan?
The only number on an ARM loan that does not change over the life of the loan and it is the floor, meaning the interest rate cannot go below the margin
300
What is the most common index today?
LIBOR – London Interbank Offered Rate
301
What two numbers do you add together to obtain the Fully- Indexed Rate?
Margin and index
302
How long before the interest adjustment is the first ARM disclosure to be sent to the borrower?
Seven months before the adjustment is required
303
What three items are required to calculate the mortgage payment?
Remaining balance, interest rate, and remaining term
304
Which law covers Balloon Loans and what is the minimum balloon?
HOEPA – Home Owners Equity Protection Act. The minimum balloon is five years
305
What does 360/180 mean?
15-year balloon
306
What are the five parts of a Reverse Mortgage?
Negative amortization, borrower pays their own taxes and insurance, must be 62 or older, mandatory counseling, a non- recourse mortgage
307
What does a non-recourse mortgage mean on a Reverse Mortgage?
At the end of the mortgage, if the balance is higher than the value, and the borrowers have passed, the government absorbs the deficiency
308
What is the minimum age to obtain a Reverse Mortgage?
62 years of age. If the spouse is only 60, the spouse cannot be on the loan
309
What does HELOC stand for?
Home Equity Line of Credit
310
Is interest charged if you do not draw any proceeds?
No, only after you draw money; you will then pay interest from the day of the draw till the end of the month, and pay interest on the balance at the end of each month
311
Are principal payments required on HELOCs?
They are at the option of the borrower whether to pay principal each month
312
Is the interest rate fixed or floating on HELOCs?
The interest rate floats, usually based on the Prime Rate
313
What is the difference between a 2nd mortgage and a HELOC?
On a 2nd, all the proceeds are paid out at closing, while on a HELOC, the borrower chooses when to draw principal
314
What are the two types of Construction Loans?
Construction with a Permanent take out, and Construction Permanent
315
How many loans are on a Construction Permanent?
One loan and one set of closing costs
316
In an Interest Only Loan, what is the amount you pay each month?
Only interest is paid, but the borrower must qualify for the full principal & interest payment
317
What would the balance be on an interest-only loan if the loan were $100,000 and it is 5 years later?
$100,000. The principal balance stays the same because you are only required to pay interest
318
What is Table Funding?
Any loan that the originating company is having the lender fund, predominately for Brokers
319
What are the APR Tolerances?
1/8% on a fixed rate loan, 1/4% on an ARM Loan. If you exceed either, a new LE or CD must be issued within three business days
320
What is Yield Spread Premium (YSP) and Servicing Released Premium (SRP)?
The amount a company receives from the lender that funds the loan
321
Which loans are considered Federal Loans?
Conventional conforming, FHA, VA, USDA
322
What is Premium Pricing?
The amount above PAR that can be used to pay the borrower’s closing costs. Not discount points, just costs and fees
323
What is Accrued Interest?
If your payment is due on May 1st, you are paying interest for April. Accrued interest is the interest you pay on the mortgage each month
324
What is a Conveyance?
Transfer of ownership via a Deed
325
What is a 2-1 Temporary Buydown? If the interest/note rate is 5%, what are the payment rates?
Usually for two years. A buydown account is established by the seller or the borrower. The first year the payment rate is 2% below the note rate and the second year it would 1% below the interest rate. The borrower is qualified at the note rate
326
What does SAFE stand for?
Secure and Fair Enforcement – the licensing law that covers all originating companies and Mortgage Loan Originators
327
Who must be registered with NMLS?
All MLOs employed by banks, credit unions, mortgage bankers, and mortgage brokers
328
What makes up the 8-hour CE course that is required each year?
3 hours of Law, 2 hours of ethics, 2 hours of non- traditional lending, and one hour of another mortgage topic
329
What are the requirements for gift funds for FHA loans?
Gift funds can come from the borrower’s family members, employer, close friend, or a charitable organization
330
What is the term of your license?
One calendar year: January 1st through December 31st
331
When do you have to pay your licensing renewal fees?
Between November 1st and and December 31st
332
What happens if you do not renew by December 31st?
Your license lapses and you must take a Late CE class and pay a renewal fee and penalties by March 1st. Until your license is reinstated, you cannot originate loans. If you do not complete your renewal by March 1st, your license is suspended
333
What is the consumer access website?
Once you are licensed, your information will be on the consumer access website so the consumer can check who you are working for and if you have any complaints or violations
334
What are the two groups that oversee NMLS?
CSBS – Conference of State Bank Supervisors and AARMR – American Association of Residential Mortgage Regulators
335
What does USC stand for and what does it do?
Uniform State Content - allows MLOs that pass the National Test to apply for a license in any state where your company is approved
336
What does the SAFE Act allow each state to do?
License mortgage bankers and mortgage brokers and complete audits and examinations of the companies if they suspect the consumer is at risk
337
What does sponsorship require you to do?
The company you will be employed by needs to request that your NMLS number be moved under their company NMLS number
338
When a company or MLO receives a notice of violation or complaint, what is the requirement?
They must supply all documents in response to the complaint or violation within 30 days or they are assumed to be guilty and the state will assess the fines as they see fit
339
If an applicant for a license has a non- financial felony, what is the soonest they could apply for a license?
Seven years from the date of conviction
340
If an applicant for a license has a financial felony, what is the soonest they could apply for a license?
They cannot, as they are banned for life
341
If an applicant for a license has had a license revoked, what is the soonest they could apply for a license?
They cannot, as they are banned for life
342
What is the 1003?
Uniform Residential Loan Application: The document where you collect the data to assist in underwriting
343
When verifying assets for closing, what items are included?
Down payment and closing costs
344
Can long term/retirement assets be used for the two months’ reserve for escrows?
Yes, and they don’t have to be cashed; they just have to show they are available
345
What are the requirements for gift funds for conventional loans?
Gift funds can only come from a relative: spouse, child, other dependent, or anyone related by blood, marriage, adoption, or legal guardianship; and there can be no expectation of repayment
346
What are Concessions?
Voluntarily yielding to a demand for the sake of a settlement in a real-estate transaction, such as closing costs
347
What are the three questions you cannot ask on an application?
Religion, nationality, and whether they receive child support or alimony
348
How may MLOs accept loan applications?
Face to Face, on the phone, computer, or by mail
349
Who is allowed to offer and negotiate terms of a loan?
Only those who are licensed as an MLO working for a Mortgage Broker or Mortgage Banker
350
What is the "Authorization to Release Mortgage Information”?
A form which, when signed by the borrower(s), authorizes a third party to receive information about them and their mortgage, for things like verification of employment, deposits, etc
351
What methods are used to verify assets?
Two months bank statements, investment statements, and/or a Verification of Deposit
352
What methods are used to verify employment?
W-2, 1099, Tax returns with 4506T, and/or Verification of Employment
353
What are the mandatory items on the Loan Estimate (LE)?
Terms of the product, all costs and fees, comparisons, and mortgage process explanations
354
What information is required on the Adjustable- Rate Mortgage (ARM) disclosure?
Which type of program, caps(adjustment and life), margin, index, fully indexed rate, and how the adjustments are calculated
355
What does AML stand for?
Anti-Money Laundering
356
What does CHARM stand for?
Consumer Handbook on Adjustable Rate Mortgages
357
For a Reverse Mortgage, what must the disclosure tell the borrowers?
Negative Amortization, taxes and insurance to be paid by the borrower, must be 62 or older to apply for the mortgage, mandatory counseling, and the borrower could lose their home if they do not comply with all of the requirements of the loan
358
What are the five items included in the “Zero Tolerance” items on the LE?
Appraisal, origination fee, discounts, lender fee, and transfer taxes
359
What items are included in the 10% tolerance items?
Title, recording fees, lender required inspection. The borrower selects these and you no longer have any liability
360
Which items are included in no tolerance?
Realtor fees, Attorney fees, Escrows, Homeowners Insurance, Flood Insurance, Prepaid Interest
361
When do the early disclosures after application have to be delivered?
No more than three business days from signed application. If they are mailed, you must show proof that they were mailed within the three- day requirement
362
When does the early Closing Disclosure have to be delivered to the borrowers?
No less than three business days before closing
363
When do the fees and charges expire from the issue date of the Loan Estimate (LE)?
10 business days, if the signed Intent to Proceed has not been delivered to the lender
364
When would you not have to give an LE?
When you do not have all the items under PENCIL (property address, estimated value, name, credit, income, or loan amount)
365
Who created Credit Scoring?
The Fair Isaac Company. Credit scores are also knowns as FICO scores
366
What law requires the appraisal to be delivered three business days before closing?
ECOA – Equal Credit Opportunity Act
367
How many days after a “Changed Circumstance” has been determined must the new LE be issued?
Three business days
368
When does the Preferred Providers list (REG H) have to be delivered to the borrower?
Within three business days from when a conflict of interest has been determined
369
What are the valid delivery methods in delivering a Loan Estimate or Closing Disclosure?
Person to Person, Digital Delivery with written borrower approval, Mail, and Overnight, as long as you have proof that it was done in the three- business day requirement
370
How many business days before the closing is the Closing Disclosure to be delivered to the borrower?
Three business days
371
What does Consummation mean?
Once the borrower is obligated on the loan (funding date)
372
What items will require a new Closing Disclosure to be issued and a three-business day for the closing?
Program change, prepayment penalty added to the mortgage or the APR tolerances are exceeded (1/8% on a fixed or 1/4% on an ARM loan)
373
What is an MU4?
The application for MLO licensing used by the NMLS
374
How many counselors are required to be listed on the Homeownership Counseling?
10, and they must be in the borrower’s area
375
Is counseling required on the Homeownership Counseling Disclosure?
Counseling is not required, but it is recommended, and it is at the cost of the borrower
376
What is a surety bond?
A promise to be liable for the default of another. It is like malpractice insurance for a doctor
377
Can a borrower use Capital Gains for qualifying for a loan?
Yes, if they show two years’ history of income from capital gains and they can show that the income will continue for an additional three years
378
What type of income can be used for loan qualification?
Any income that can be verified and has at least two - three years continuation. Cash income cannot be used
379
Can rental income be used?
Only if it is claimed on the borrower’s income taxes
380
What percentage of income can be used on rental property?
75%; A 25% vacancy must be deducted from the gross rental income
381
When would a debt payment be required on a rental property?
If the rental income minus the 25% vacancy is less than the mortgage payment
382
What are the rules for counting overtime income?
Two years history and assurance the income will continue for two - three years in the future
383
How do you calculate bonus income if the bonus income reduced in the last two years?
You use last year’s bonus amount and provide assurance that the bonus income will continue in the future
384
How do you calculate bonus income if the bonus income increased over the last two years?
You average the last two years to determine the income and provide assurance that the bonus income will continue in the future
385
How do you calculate social security or disability income?
If the monthly amount paid has taxes taken out before being paid to the borrower, the amount received by the borrower can be grossed up by 25% (Ex. $1000 received can be counted as $1,250 for qualification purposes)
386
What is the calculation for determining the monthly income for an hourly waged borrower?
Hourly wage X the number of hours per week X 52 weeks / by 12 months = monthly income
387
What is the calculation for determining income for someone who is paid every other week?
Bi-weekly income X 26 pay periods / by 12 months = monthly income
388
What is the calculation for determining income for someone is paid on the 15th and 30th of the month?
Income paid on the 15th and the 30th X 24 pay periods / by 12 months
389
What is the Fannie Mae self- employed document to calculate income?
Fannie Mae form 1084
390
What is the Freddie Mac self- employed document to calculate income?
Freddie Mac Form 91
391
What information is on the credit report?
Legal name, employment history, residency history, Social Security number, credit history, credit inquiries
392
Which credit score do you use to qualify the borrower?
You will always use the middle score for each borrower
393
How is the Credit Score established?
No one is sure of the formula, but payment history and credit utilization are two factors that are used. Credit utilization means the amount of credit that is available to you and how much of it you are using (The more you use, the lower the credit score)
394
How do you calculate “capacity”?
If you are using 43% overall ratio, multiply the gross income by 43% and the answer will be the maximum allowed for the mortgage payment and all monthly debt (ex. $5000 X .43 = $2,150)
395
How do you determine Debt- to-Income Ratio (DTI)?
Gross verified income divided into total monthly debt payments = Debt-to-Income Ratio
396
What do LTV, CLTV, and TLTV mean?
LTV = Loan-to-Value; CLTV = Combined Loan- to-Value; TLTV = Total Loan-to-Value
397
How do you calculate Loan-to-Value (LTV)?
Value or Purchase Price, whichever is lowest, divided into the Loan Amount = LTV (i.e., $500,000 value divided into $250,000 loan amount = 50%)
398
How do you calculate Combined Loan-to-Value (CLTV), assuming the borrower has a first mortgage and a $100,000 HELOC of which they have drawn $50,000?
Value is divided into the Loan Amount + the drawn HELOC = CLTV (ex. $500,000 value divided into $250,000 first mortgage + $50,000 drawn HELOC = 60%)
399
How do you calculate Total Loan-to-Value (TLTV), assuming the borrower has a first mortgage and a $100,000 HELOC of which they have drawn $50,000?
Value is divided into the Loan Amount + the HELOC amount = TLTV (ex $500,000 value divided into $250,000 first mortgage + $100,000 HELOC = 70%)
400
If a borrower wants a conventional conforming loan, has $5,000 monthly income and $500 in monthly debt payments, which payment income ratios would you use?
28% housing (front-end) and 36% overall (back-end)
401
If a borrower wants a conventional conforming loan, has $5,000 monthly income and $500 in monthly debt payments, what is the PITI that the borrower would qualify for?
$5,000 X 28% = $1,400 housing limit. $5,000 X 36% = $1,800 overall limit (includes housing and debt payments). You subtract the $500 debt payments from $1,800 = $1,300 for housing. You take the lower of $1,400 or $1,300 for PITI
402
What is another name for Front-End Ratio?
Housing Ratio – program ratio for housing X verified income
403
What is another name for Back-End Ratio?
Overall Ratio – program ratio for overall debt X verified income
404
What is the maximum overall debt if you are calculating the Qualified Mortgage limit?
43% of gross verified income
405
What factors should be used to determine if a borrower has the Ability to Repay?
Meeting QM standards is essential, so the MLO is required to find out and document a borrower’s income, assets, employment, credit history, and monthly expenses
406
What is the definition of Tangible Net Benefit?
MLOs cannot refinance without determining if the loan will benefit the borrower, by giving them benefits like a reduced interest rate, loan term, and/or monthly payment; debt consolidation; cash-out benefits, etc
407
What are the three occupancy types?
Primary, Secone home, Non-owner
408
Which of the occupancy types (primary, second home, or non-owner require Right of Rescission?
Primary residence only
409
What would raise a red flag with a Verification of Deposit?
If the average balance on the verification is different than the average on the bank statements
410
What is the purpose of an appraisal?
It is an opinion of value that is determined by the market approach
411
What is the Sales Comparison Approach in establishing the value?
An appraisal method that compares one property to comparables or other recently sold properties in the area with similar characteristics
412
When does the appraisal have to be delivered to the borrower?
No less than three business days before closing
413
What are the three Flood Zones that require Flood Insurance?
ZONE “A”, “V”, or “D”
414
What is Fair Market Value?
The price that a seller is willing to accept and a buyer is willing to pay on the open market
415
On the appraisal, if it says, “As-Is,” what does that mean?
The property does not require any repairs and is eligible to close
416
How is monthly interest calculated?
Principal balance X note or interest rate / 12 = Interest for the month. Should match up with the interest due on the payment slip
417
How is the new P&I payment calculated on each adjustment?
On an ARM loan at adjustment time, remaining principal balance X the new interest rate divided by remaining term = new P&I payment
418
How is Per Diem interest calculated?
Principal balance X the note or interest rate / by 360 days on conventional loans, or 365 days on government loans
419
How would you calculate the interest rate on a loan if you don’t know the interest rate?
Remaining balance divided into interest paid in the last twelve months = note rate. This is a very rough calculation
420
What is a Discount Point?
1% of the loan amount for each discount point to be used for interest rate reduction only. They can be paid by the seller, borrower, or their employer
421
What is not included in the APR and 3% fee limit on QM calculations?
Prepaids = Appraisal, credit report, title and prepaid interest
422
What fees and costs are shown on the Closing Disclosure?
All costs disclosed on the loan estimate and no more than a 10% tolerance
423
For an ARM, what is the limit on the amount that payments can increase or decrease over the life of the mortgage called?
Lifetime Payment Cap
424
Qualified Mortgage allows a maximum Debt-to- Income (DTI) to meet requirements. What is that percentage?
43% of the verified gross income = maximum debt-to-income, including mortgage payment + monthly debt payments
425
What does an Approved Eligible mean to meet QM requirements?
Based on the information submitted by the mortgage company into Fannie Or Freddie underwriting systems, it the information meets their requirements, the Approved Eligible means they will buy the loan
426
What is a Certified Appraiser?
The appraiser who can sign the appraisal attesting the final value
427
What does a Title Report tell you?
Who owns the property and what liens and encumbrances are against the property, including unpaid real estate taxes
428
Who is protected by the Title Insurance policy?
The lender and the borrower, that from the date of funding, there are no liens or encumbrances, thus ensuring that the lender and borrower are in the first position with their recorded mortgage
429
What are the balloon limits?
$250,000 on the property and $100,000 in person property
430
What portion of the property has to be in the flood plain as determined by FEMA?
Any portion of the house that is occupied. Garages and outside buildings not included
431
What does FEMA stand for?
Federal Emergency Management Agency
432
What are some examples of Involuntary Liens?
Tax liens, mechanics liens, judgments, and attachments
433
What does FHA stand for?
Federal Housing Agency – oversees and publishes guidelines for all FHA insured loans
434
What does FHAct stand for?
Federal Housing Act – governs discriminatory practices
435
What does PMI stand for?
Private Mortgage insurance – insurance for conventional loans over 80%
436
What does MIP stand for?
Mortgage Insurance Premium – FHA loan premium for mortgage insurance on all FHA loans
