Morgtgate Loan Origination Flashcards

Question

A VOE is...

Answer 1

Verification of Employment. | It is one form of loan application documentation used for applicants who are not self-employed.

Answer 2

Must be consistently received for a period of two year in order to be used for income qualification. The employer must verify that the additional income is likely to continue.

Answer 3

Loan programs are diligently matched to the current financial circumstances of each customer. Some states have passed laws making loan suitability a regulated standard.

Answer 4

Considers the replacement value of the property. It is often used for new properties and analyzes what it would cost to build a substitute residence, plus the value of the land.

Answer 5

New disclosures (e.g. GFE, TIL Disclosure) must be issued. This is particularly true for changes such as fixed rate to adjustable rate, etc.

Answer 6

- Cash reserves - Gift funds - Stocks and bonds - IRA/401(k) Accounts - Other real estate - Cash surrender value of life insurance - Value of automobiles

Answer 7

Automated underwriting systems (AUSs). Fannie Mae's system is called Desktop Underwriter, and Freddie Mac's system is known as Loan Prospector. FHA and VA also have their own proprietary systems.

Answer 8

Only considers the housing debt. Debt ratios look at the percentage of debt to monthly income. The front or housing ratio only takes the mortgage payment (or rental payment) into consideration.

Answer 9

May be made up to 15%. Fannie Mae and Freddie Mac permit net adjustments of 15% and gross adjustments of 25% to comparables in the sales comparison approach to appraisal.

Answer 10

Determine the value of the property. The appraisal is also used to establish any deficiencies that effect the marketability of the property.

Answer 11

An important consideration for most loan programs. In the past, nontraditional programs did not always verify income. However, today, lenders take a close look at a borrower's ability to repay a loan.

Answer 12

Typically includes paystubs for the last 30 day period and W-2's for the last two-year period.

Answer 13

A mortgage. A homeowner voluntarily allow the lien to be placed on the property in order to secure a loan from the lender.

Answer 14

- promissory notes payable to financial institutions and other creditors/lenders - Credit accounts with outstanding balances - Unpaid income taxes and interest - Child support and alimony - Previous bankruptcies

Answer 15

By as much as 25%. This type of income typically includes Social Security, public assistance, and disability. Loan applicants must still provide comprehensive documentation for these types of income.

Answer 16

3.5%. This amount is based on the sales price or appraised value of the property and can be the borrowers own funds, gift funds or a grant.

Answer 17

75%. Investment properties generating rental income are just one type of special income that cannot be used at 100% for qualification purposes.

Answer 18

Obtain a transcript of a loan applicant's tax returns. Lenders use this to perform an independent verification of tax documentation. Form 8821 is also used to authorize release of other tax information.

Answer 19

( base rate ) x ( hours ) = ( weekly income ) ( weekly income ) x ( weeks worked ) = ( annual income) ( annual income) / 12 = ( monthly income )

Answer 20

Is called "Property information and Purpose of Loan." | It is used to designate information concerning the property address and how the loan proceeds will be used.

Answer 21

( bi-weekly salary ) x 26 = ( annual income ) | annual income ) / 12 = ( monthly income

Answer 22

Usually averaged over a two-year period. | Self employed income would come from the tax return; commissioned income may be taken from W-2s or tax returns.

Answer 23

10 yrs. | This is longer then standard credit account information which, which is purged after seven years.

Answer 24

When evaluating the capacity of the borrowers' ability to repay a loan. This is because these forms of income are often less stable then traditional salaried employees.

Answer 25

Is called "Borrower Information". It is used to capture the loan applicant's personal information such as name, social security number, address, age and marital status.

Answer 26

Is gathered and sold by consumer reporting agencies. The credit report ( or consumer report) is the method for obtaining credit information.

Answer 27

Using a statistically-validated system. This is required by consumer protection laws such as ECOA and FCRA.

Answer 28

Is generally reported for a period of seven years. There are some exceptions for information that may be reported for a longer period.

Answer 29

Is called "Employment Information" It is used to capture the loan applicant's current and two-year employment history.

Answer 30

May be used for income and qualification if they are court ordered. The loan applicant must be able to show a stable history of receiving payments.

Answer 31

Is called "Monthly Income and Combined Housing Expense Information." It is used for information needed to calculate the loan applicant's debt-to-income ratios.

Answer 32

Usually provide: - The company name - Date the account was opened - Date any information for the account was reported - Months reviewed/date of last activity - Credit limit ( "high credit") - Balance and past due amounts - timeliness of payments

Answer 33

Equifax Experian Transunion - Not all creditors report to all three agencies.

Answer 34

Payments for items such as rent and utilities. First-time homebuyers or consumers with little credit history may sometimes use nontraditional credit to establish creditworthiness.

Answer 35

Is called "Assets and Liabilities". It is used to capture assets (cash, bank accounts, 401ks, etc.) as well as various debts (credit cards, loans, alimony, child support, etc.)

Answer 36

28%. | The front end ratio ( or housing ratio) is the comparison of housing debt to the applicants monthly income.

Answer 37

Is called " Detail of Transaction." | Information in this section is used to determine how much money the borrower will need to bring the loan to closing.

Answer 38

31%. | The front end ration ( or housing ratio) is the comparison of housing debt to the applicant's monthly income.

Answer 39

Is called "Declarations." This section contains questions about judgments defaults, citizenship, and occupancy status. Answers to these questions can affect underwriting and result in additional conditions or adverse action.

Answer 40

Is called "Acknowledgement and Agreement". It allows applicants to confirm that they understand the purpose of the loan application and that it is a binding agreement.

Answer 41

Dividing the amount of the mortgage by the appraised value or purchase price of the home, whichever is less. Loan-to-value determines the loan program an applicant may qualify for.

Answer 42

Contractually hold the interest rate and points for a loan. They are usually made in writing and the lender is bound to honor the rate at closing.

Answer 43

Is called "Information for Government Reporting Purposes." It requests voluntary demographics information on the applicant. The applicant may decline to answer, in which case the loan originator must make a best guess based on visual observation.

Answer 44

A borrower's attitude toward credit obligation and a prediction of his/her future actions. Creditors/lenders assume that if an individual has met his/her obligations in the past he/she will continue to do so in the future.

Answer 45

W-2s and 1040s Substantial income increases and decreases must be addressed.

Answer 46

The underwriter will review: - the appraisal report - the preliminary title report - any inspections requested by the borrower or required by the lender.

Answer 47

In case the borrower defaults and the lender is required to foreclose.

Answer 48

They are looking for an explanation of the derogatory credit. Without an explanation or documentation that makes sense the derogatory information can be used as the basis for loan denial.

Answer 49

- Inspection that required repairs have been made - Termite - Well & Septic - Roof

Answer 50

Ensure that the value of property is adequate to serve as security- or collateral- for the loan. For this reason, a licensed appraiser must conduct the appraisal.

Answer 51

For investment properties. | It would generally not be used for a single-family home being used as a borrower's primary residence.

Answer 52

Provides protection for the borrower for potential title liabilities. These include mechanics liens, unreleased mortgages, and other third party rights. Obtaining this type of policy is voluntary on the part of the homeowner.

Answer 53

Protects the lender from title defects or undisclosed liens that should have been cleared up prior to closing. Lenders typically make this type of policy mandatory - the borrower is required to cover the cost of obtaining it.

Answer 54

Land and anything that is permanently affixed to it. | Personal property includes items that can be moved.

Answer 55

Monetary claims that provide a creditor with the right to foreclose. A mortgage is an example of a lien.

Answer 56

- Tax liens - Mechanics liens - Judgment's - Attachments

Answer 57

The chronological order in which liens are filed against a property. The order establishes the priority of the liens in the event the property is foreclosed. Lenders want first priority for the mortgage on a property.

Answer 58

Provide security to the lender in the event of default. | PMI also allows the borrower to make a smaller down payment.

Answer 59

All FHA loans.

Answer 60

The desired form of holding ownership to property, because it has the fewest restrictions. Almost all residential mortgage loan transactions involve an estate held in fee simple.

Answer 61

The owner is entitled to the entire property and had "unconditional power of disposition" during his/her lifetime, and the property will descend to his/her heirs upon death.

Answer 62

- Any borrower accepting a high-cost home loan - First-time borrowers accepting a negative amortization loan - Any borrower seeking a reverse mortgage loan from the FHA - Counseling is encouraged for any borrowers choosing an ARM instead of a fixed-rate loan.

Answer 63

- Loan Estimate form (will replace Early TIL, GFE) | - Closing Disclosure ( will replace Final TIL, HUD-1 )

Answer 64

Reasonably-reliable third-party documents, such as tax returns, W-2 forms, payroll statements, bank statements, etc..

Answer 65

- Open-end credit plans - Timeshare plans - Reverse mortgages loans - Temporary/ bridge loans with terms of 12 months or less - Construction phase of 12 months or less in a construction-to-permanent loan. - Designated extensions of credit from certain entities/agencies.

Answer 66

- Current/reasonably - expected income/assets ( not including equity) - Current employment status - Monthly mortgage payments - Monthly payments on any simultaneous loans secured by the property - Monthly payments for property/ taxes/ insurance, other property-related obligations. - Debts/ alimony/ child support - Monthly DTI or residual income - Credit history

Answer 67

The borrower gives legal title to the lender, but retains equitable title. The lender "own" the property via a deed of trust. The lender has a right to possession of the property in the event of default. Legal title is returned to the borrower upon repayment and satisfaction of the debt.

Answer 68

The borrower retains legal and equitable title to the property. The mortgage is a lien against the property. In the event of default, the lender must institute a foreclosure proceeding to obtain legal title.

Answer 69

A process in which a broker originates and closes a loan in his/ her own name, then transfers the loan to a lender at closing. The lender provides funds for disbursement.

Answer 70

Parties meet to execute documents, but funds are not disbursed. Funds are not disbursed and property is not conveyed until certain conditions are met.

Answer 71

Parties meet to execute documents and funds are subsequently disbursed. Lenders involved in purchase transactions are required ensure that the closing agent has adequate funds to close.

Answer 72

May face a 5 year jail term.

Answer 73

- Deposit or "earnest money" held in escrow - Cash - Checking / Savings accounts, with account numbers - Stocks and bonds - Cash value and face amount of life insurance policies.

Answer 74

- Real estate - Retirement accounts - Net worth of businesses - Automobiles

Answer 75

At least 3 business days before closing, any time the APR varies by more than one eighth of 1% (0.125%)

Answer 76

No later than 3 business days after receiving an application for credit secured by a first lien on a dwelling.