Module 1 Flashcards
The standard form that applicants must complete when applying for a mortgage.
The Uniform Residential Loan Application Form (URLA) or Form 1003
Can originators make revisions to the URLA?
Yes
What guidance is provided on revisions to the URLA?
Freddie and Fannie “Rendering Options”
What cannot be changed on the URLA?
- Wording
- Field names
- Descriptions of requested information
- Section order
What qualifies a misrepresentation as “material”?
If it is intended to influence the recipient of the application to grant credit for the applicant
Maximum penalty for misrepresentations on a loan application?
5-year jail time
How many years of employment history is required on the URLA?
2 years
Where must an applicant list any bridge loan proceeds they receive?
Assets (not income)
For a two- to four-unit principal residence, if the LTV is greater than 80%, the borrower must make a contribution of at least X% in order to use employer assistance.
5%
The value of unimproved land that a potential borrower owns might be acceptable to use for qualification purposes. If the applicant owns the land outright already (i.e., it is not affected by any outstanding liens), they will potentially be able to use the value of that land as collateral to obtain a construction loan and build a home
Lot Equity
Might be offered by an employer to incentivize an employee or group of employees to relocate
Relocation Funds
Occurs when consumers are living in rent-to-own properties – i.e., they began by renting a property, and they now wish to purchase it for good. The agreement may provide that a portion of their rent payments is set aside and applied to the property purchase price
Rent Credit
The non-monetary contributions a person has made toward a venture or investment. In mortgage terms, it usually refers to a person having completed maintenance, repairs, and/or renovations on a property they are now looking to buy. The value of the work completed replaces a monetary investment, in whole or in part – for example, if a property requires $5,000 in repairs, but the consumer is able to do the majority of that repair themselves and supply materials, their work could replace the $5,000 cash needed.
Sweat Credit
Refers to a borrower exchanging property they already own to finance, wholly or partially, a new property.
Trade Credit
Manufactured homes that are treated as real property from the beginning of the application process
Modular homes - mobile home are not treated as real property until they are connected to the land in the form of water / electricity
What relationships must between borrower / seller must be indicated on the URLA?
- Family
- Business Affiliates
If a gift is being used, what may the lender require from the borrower?
A letter detailing the nature of the gift, indicating that repayment is not required
These laws provide that each spouse has an equal interest in a home, even though both may not have their names on the title or an obligation to repay the mortgage debt. In states where these laws apply, lenders must pull credit of the spouse not listed as a borrower on the application
Community Property laws
How is the credit report for a non-borrower spouse used by the lender?
Only used to understand there are additional obligations that may impact Debt-to-Income calculations; not used to qualify the borrower for the loan
The homebuyer takes possession of the real estate and makes monthly payments to the seller, who holds the title to the property until the borrower has completed payment of the purchase price.
Contract for Deed
Benefits to borrowers of Contract for Deed:
- Quicker (no underwriting)
- Creates homeownership opportunities that would not otherwise qualify for a mortgage
- No closing costs
Benefits to sellers of Contract for Deed:
- Can demand immediate repayment when late
- Defaults do not require foreclosure proceedings
Can a Seller in a Contract for Deed transaction continue to use the home as collateral on future debt?
Yes
With these products, eligible consumers can borrow more than a home is currently worth if the improvements will increase its appraised value. These products are ideal for consumers who want to take on renovations as soon as a home purchase is complete.
Fannie Mae’s Homestyle Renovation Loan or the FHA’s 203(k) Renovation Loan
A borrower who applies for a cash out refinance must have purchased the home securing the loan at least ___ months prior to the new loan’s disbursement date
6 months
These government insured refinance transactions do not require an updated appraisal or underwriting, but the lender must determine that the borrower will experience a “net tangible benefit.”
VA interest rate reduction refinance loans (IRRRLs) and FHA streamline refinances
What body regulates the notion of “net tangible benefit” in a refinance transaction?
State Governments
The repeated refinancing of mortgage debt without any benefits to borrowers
Loan Churning
When financing energy improvements to a home through PACE, borrowers will pay the cost in the form of:
Higher property taxes
Ownership that is full, unconditional ownership of property, including the right to sell i t, leave it to heirs, or make changes. Most property in the U.S. is held this way.
Fee Simple
Ownership in which tenants purchase the home but not the land it is built on.
Leasehold
What properties may have a leasehold ownership structure?
Condos, Townhomes, and commercial property
The most common manner in which partners and married couples hold the title to their homes. If one homeowner dies, the dwelling passes directly to the surviving partner or spouse.
Joint Tenancy with Rights of Survivorship
When homeowners hold the title to a home as tenants in common, they share ownership interests, but there is no right of survivorship. Homeowners must use estate planning to decide how to pass their interest in residential real estate to their beneficiaries.
Tenancy in Common
Each spouse has an equal, undivided interest in the property. This acts to protect each spouse, as something that they co-own cannot be taken from one due to debts incurred solely by the other. This preserves the living spouse’s right to inherit joint property when their partner dies, and it ensures that creditors can only attach and execute on property for joint debts.
Tenancy by the Entirety
The consumer owns the property only through the duration of their life – this may also be called a “tenant for life,” or “life tenant.” The property will pass to its intended beneficiary upon death without needing to be incorporated into an estate
Life Estate
Allows the passing of assets to beneficiaries without the involvement of a probate court
Trust
Trust whereby the homeowner/trustor (a.k.a., grantor or settlor) places their property into this form of trust and surrenders management of their assets to a third-party trustee. Once it is formed and finalized, it is extremely difficult to make changes to or terminate
Irrevocable Trust
Trust whereby the homeowner/trustor also functions as the trustee and has authority to manage the assets of the trust. The owner of a home that is included in this type of trust does not need the permission of the trust’s beneficiaries to change or terminate it.
Revocable Trust
In which trust structure does it become difficult to refinance or sell the home?
Irrevocable Trusts
APR must be re-disclosed an a regular transaction X business days prior to closing, if the APR varies by at least x%
3 Business Days; 1/8%
How do you arrive at annual income of someone who is paid bi-weekly?
Bi-weekly Income * 26
