MLO Flashcards
2-1 Buydown
A type of mortgage with a set of two initial temporary interest rates. In a 2-1 the interest for the first year is 2 percent lower than the permanent interest rate, and 1 percent lower for the second year. The initial interest rate reductions are either paid for by the borrower in order to help them qualify for a mortgage (their debt-to-income ratios would be based on the first-year reduced interest rate), or might be paid for by a builder as an incentive to purchase a home.
Accrued Interest
Interest earned since last settlement date but not yet due or payable
Actual notice
Notice which is not recorded in public records
Adverse Action
A refusal to great credit in the amount or on the terms requested in an application.
Amortization
Liquidation of a debt by regular, usually monthly, installments of principal and interest
Annual percentage rate(APR)
The actual interest rate, taking into account points and other finance charges, for the projected life of a mortgage
Appraiser
The individual performing an appraisal. When the property is connected to a mortgage loan, the lender chooses the appraiser and the borrower typically parts the fees.
Appraisal
An estimate of a property’s value as of a given date, determined by a qualified professional appraiser. The value may be based on replacement cost, the sales of comparable properties or the property’s income-producing ability.
Assigned Loan
Transfer of ownership of a mortgage from on person to another.
Assumable Load
A mortgage loan that can be taken over(assumed) by the buyer when a home is sold. An assumption of a mortgage is a transaction in which the buyer of real property takes over the seller’s existing mortgage; the seller remains liable unless released by the lender from the obligation(assumption with ovation). If the mortgage contains a due-on-sale clause, the loan may not be assumed without eh lender’s consent.
Average Prime Offer Rate (APOR)
annual percentage rate that is derived from the average interest rate, points, and other load pricing terms currently offered to consumers by representative samples of creditors for mortgage transactions that have low-risk pricing characteristics.
Business Day
a day on wich the creditors offices are open to the public for carrying on substantially all of its business functions.
Business Day in a mortgage rescission
All calender says except sundays and legal public holidays.
Capacity of a borrower
Borrower’s ability to make their mortgage payments on time. This depends on income and income stability (job history and security), assets and savings, and the amount of your income each month that is left over after housing cost, debts and other obligations.
Cash out refinance
A mortgage refinancing transaction in which the new mortgage amount is greater than the existing mortgage amount, plus loan settlement costs. The purpose of a cash-out refinance is to extract equity from the borrower’s home.
Chattel Mortgage
A mortgage on personal property.
Consumer Credit
Consumer credit is a debt that a person incurs when purchasing a good or service. COnsumer credit includes purchases obtained with credit cards, lines of credit and some loans.
Conveyance
Conveyance is the act of transferring an ownership interest in real property from one party to another. Conveyance also refers to the written instrument, such as a deed of lease that transfers legal title of a property from the seller to the buyer.
Creditor
any person or business who arranges for the extension, renewal, or continuation of credit.
Construction Loan
a short-term loan for financing improvements to real estate, such as the building of a new home. The lender advances funds to the borrower as needed while construction progresses. Upon completion of the construction, the borrower much obtain permanent financing or repay the construction loan in full.
Constructive Notice
Notice which is recorded in public records.
Daily Simple Interest
A simple interest mortgage calculates interest on a daily basis, as opposed to a traditional mortgage where interest is calculated on a monthly basis. On a simple-interest mortgage, the daily interest charge is calculated by dividing the interest rate by 365 days, and then multiplying that outstanding mortgage balance. If you multiply the daily interest charge by the number of days in the month, you will get the monthly interest charge. Because the total number of days counted in a simple- interest mortgage calculation is greater than a traditional mortgage calculation, the total interest paid on a simple interest mortgage will be slightly larger than a traditional mortgage.
Debt to income ratio assessment
The ratio between a borrower’s monthly payment obligations divided by gross monthly income.
Delinquent Load
The situation that arises when a mortgage payment is late.
Discount Points
a percentage of the loan amount paid to the lender to buy down the interest rate. Each point costs one percent of the lean amount.
disintermediation
withdrawal of funds out of savings accounts and into stocks, bonds and real estate
dwelling
a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes and individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.
Eary payment default
occurs when a mortgage payment is more than 90 days late or defaults during its first year. Strong indicator of mortgage fraud.
Easement
a right to the use of, or access to, land owned by another
elderly
age 62 or older
eminent domain
condemnation of private property for public good.
entitlement
the amount of money the VA promises to pay back the lender in case of borrower default. Lenders usually loan 4 times that amount.
escrow accounts
an account that a mortgage servicer establishes on behalf of a borrower to pay taxes, insurance premiums, or other charges when they are due. SOmetimes referred to as an “impound” or “reserve” account
examples of the origination services
inputting application into the computer, verifying credit, employment and income, selecting a loan product and interest rate, locking interest rate, sending out required disclosure forms, requesting an appraisal, underwriting and funding the loan
federal mortgage loans
mortgage loans that provide full )FHA, USDA) or partial (VA) government reimbursement to approved lenders in the case of borrower default
FHA mortgage
a mortgage that is insured by the FHA> The FHA approved lender is insured against suffering any loss on the loan
FHA
Federal housing administration, an agency within the US department of housing and urban development (HUD)
Finance charge
the amount of interest and loan charges a borrower would pay over the entire life of the mortgage loan. Loan charges include origination charges, discount points, mortgage insurance, and lender fees.
Fraud alert
a statement in the file of a consumer that notifies all prospective users of a consumer report relating to the consumer that the consumer may be a victim of fraud, including identity theft.
fully indesxxed rate
the interest rate calculated using the index value and margin at the time of an adjustable rate mortgage consummation
high cost loads
mortgage loans in which the APR exceeds the Average Prime Offer Rate by 6.5 percent for a first-lien mortgage or 8.5 points for a substitute lien loan; total lender and broker fees exceed 5 percent of loan amount, and the loan has a prepayment penalty in effect for more than 3 years or the prepay penalty exceeds 2 percent of the amount prepaid. origination of a high cost loan triggers HOEPA disclosures.
high interest rates
interest rates that exceed a specified threshold required HOEPA disclosures.
high proced mortgage
a high priced mortgage loan is one with an APR 1.5 percent higher than the average prime offer rate for a first lien mortgage or 3.5 percent higher for a subordinate mortgage.
interest
a fee charged for eh use of money
intermediation
withdrawal of funds out of real estate, stocks and bonds and into savings accounts.
junior liens
a loan that is subordinate to the primary load (first lien mortgage loan) such as a second or third mortgage
legal title granted via a mortgage
full and legal ownership of real property with the borrowers receiving the deed at closing. Lenders in states with legal title must file a foreclosure lawsuit in order to foreclose. In states with equitable title, property owners don’t receive full legal title until the loan Is paid off and they receive a deed of reconveyance. Foreclosers in equitable title states can occur outside the court system
lender credits
The lender may offer to give the borrowers a credit to help with closing costs. Typically, the lender will either increase the loan amount to cover these costs, or charge a higher interest rate in exchange for the credit.
legerage
use of borrowed funds to increase yield
loan consumption
this occurs when the closing documents are signed and the loan is funded
loan payment collection
mortgage payments are due the first of the month and late after the 15th. Payments are frequently sent to loan services who manage borrowers accounts.
loan to value ration
the relationship between the loan amount and the value of the property (the lower of appraised value or sales price) expressed as a percentage of the property value
mortgage broker
a person(other than an employee of a lender) that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan, including a person that closes the loan in its own name in a table funder transaction
mortgage investor
individual or company that purchases mortgages after the closing
mortgage lender
the lender providing fudners for mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.
Net Worth
assets minus liabilities
non-conforming loan
a loan that does not conform to federal national mortgage association (FNMA) or federal home loan mortgage corporation (FHLMC) guidelines
non traditional mortgages
residential mortgage loan products that allow borrowers to defer repayment of principal and sometimes interest. They include such products as “interest only” mortgages where a borrower pays no loan principal for the first few years of the loan and “payment option” adjustable rate mortgages (ARMs) where a borrower has flexible payment options with the potential for negative amortization.
Note Endorsed with recourse
Mortgage note that does not limit recovery solely from a property
Payment Shock
the surprise borrowers receive when an adjustable rate mortgages interest rate increases more than expected
premium pricing
a credit from a lender for the interest rate chosen. premium pricing may be used to pay a borrowers actual closing costs and / or prepaid items
prepaids
prepaid expenses at closing may include property taxes, homeowners insurance, and mortgage interest that will accrue before the first mortgage payment is due
primary mortgage market
the entities involved in originating a mortgage loan including mortgage brokers and lenders are operating in the primary mortgage market
Qualified Mortgage
category of loans that have certain, more stable features that help make it more likely that a borrower will be able to afford a mortgage loan. Interest only loans, negative amortizing loans, balloon loans and term longer than 30 years arent allowed.
rate lock agreement
an agreement in wich an interest rate is “locked in” or guaranteed for a specified period of time prior to closing.
referral
a referral includes any oral or written action directed to a person in order to influence the selection of a settlement provider paid for by that consumer.
residential mortgage loan
a mortgage on the consumers principal dwelling to finance the acquisition or initial construction of that dwelling
residual income qualification test
the amount of money left each month after all major expenses are paid. The VA publishes a chart of desired minimum amounts, and lenders are encouraged to weight this factor more heavily than debt to income rations. residual income is also one factor considered in a qualified mortgage.
secondary market
the market in which mortgage loan and mortgage-backed securities are bought and sold.
servicing transfers
servicing of a loan can be sold, assigned or transferred to another entity. This process requires a borrower disclosure containing the contact information of the new servicer
settlement
the process of completing a loan transaction at which time the mortgage documents are signed and then recorded, funds are disbursed, and the property is transferred to the buyer(if applicable) . Also called closing or escrow in different jurisdictions.
Steering
a loan originator may not direct a consumer to a particular mortgage product that increases the loan originators compensation unless that transaction is in the consumers interest
subordinate loans
Any mortgage with a lower priority than the first mortgage. This includes a second mortgage at the time of purchase or an equity lone of credit
subordination
the act of lowering the priority of mortgage lien
subprime
a subprime mortgage is generally a loan that is meant to be offered to prospective borrowers with impaired credit records. a higher interest rate is intended to compensate the lender for accepting the great risk in leading to such borrowers.
table funding
an option that allows mortgage brokers or title companies approved for wholesale traditional lending to originate, process and close loans in their own name. at settlement time, the loan is transferred to the lender who advances funds for the loan.
thried part providers
settlement providers other than the lender including title company., hazard insurance company, credit report providers, appraisers, surveyors and pest inspectors
Tolerances
the degree to which stated closing costs can vary between the loan estimate and the closing disclosure. There are three categories of closing costs. some closing costs the lender can increase by any amount, some the lender can increase by up to 10 percent, and some the lender cant increase at all.
Types of mortgages a lender cannot be formed to reupuse
a non recourse loan
underwriting
the process used to determine loan approval. it includes evaluating the property and the borrowers credit and ablilty to pay the mortgage
yield spread premiums
compensation paid by the lender to a mortgage broker when the selected interest rate is above par ( the average rate)
