Module 3 Flashcards
Insurance that is required to protect the security of the collateral property from damage caused by fire and other risks.
Hazard Insurance (Homeowner’s Insurance)
Included in hazard insurance policies in order to protect the lender. The clause requires insurance claims to be made jointly payable to the lender and the homeowner so the lender can ensure its collateral is repaired or its debt is retired in the event of damage to the property.
Loss Payee Clause
Occurs when the entity that is servicing a mortgage loan obtains coverage for a home after the borrower’s failure to obtain and maintain insurance.
Force-Placed Insurance
Under these regulations, banks that are members of the Federal Reserve System may not extend mortgage credit that will be secured by a dwelling in a flood zone unless the loan is covered by flood insurance for its full term.
- National Flood Insurance Act of 1968
2. Flood Disaster Protection Act of 1973
Government agency that makes affordable Flood Insurance available to all homeowners
FEMA
Prefixes on zones that indicate a flood zone:
A & V
Defined as an area of land that would be inundated by a flood having a 1% chance of occurring in any given year. This is also referred to as the base or 100-year flood. All flood zones with an “A” or “V” prefix fall into this area.
Special Flood Hazard Area (SFHA)
Designation used for areas where there are possible but undetermined flood hazards. In these areas, no analysis of flood hazards has been conducted, but while mandatory flood insurance requirements do not apply, coverage is available.
Zone D
Zones that correspond to areas outside the 1% annual chance floodplain; areas of 1% annual chance sheet flow flooding where average depths are less than one foot; areas of 1% annual chance stream flooding where the contributing drainage area is less than one square mile; or areas protected from the 1% annual chance flood by levees. Insurance purchase is not required in these zones.
Zones B, C, & X
In these states, the closing instrument for a lending transaction is a mortgage
Lien Theory States
In these states, the closing instrument is a deed of trust.
Title Theory States
Fannie Mae guidelines on using a POA at closing:
POA must:
1. Is valid at the time that the loan documents are signed
- Is notarized
- References the address of the property involved in the transaction
The amount of interest calculated each payment period (like monthly) when the payment periods occur more frequently than the quoted rate.
Periodic Rate or Nominal Rate
Calculated by dividing the annual interest rate by the number of days in a year, then multiplying the result by the outstanding balance of the loan.
Per Diem Interest
Feature of an ARM that could result in negative amoritization
Payment Caps
