mortgage finance

Question 1

what is adjustable rate mortgage (ARM)?

Answer 1

contains an escalation clause allows the interest to adjust over the loan term

Question 2

what is buy down mortgage?

Answer 2

allows the borrower to buy down the interest rate, thus reducing the monthly payment for a number of years

Question 3

what is budget mortgage?

Answer 3

includes principle, interest taxes, and insurance (PITI). the taxes and insurance portion of each monthly payment are put into an escrow account and pains when those payments are due.

Question 4

what is graduated payment mortgage (GRM)?

Answer 4

is also known as the flexible payment plan. the borrower make lower monthly payment for the first few years and larger ofrht remainder of the loan. if the lwer monthly payments do not confer all the interest charges, the add the unpaid interest to the principle balance the create negative amortization because the balance increases instead of decreasing. the borrower who has negotiated a growing equity mortgage (or GEM) realizes that there will be periodic increase in the monthly payment. however, the increase is applied directly to the principle, thus reducing the term of the loan.

Question 5

what is package mortgage?

Answer 5

are usually used in the sale of new home in subdivision or in condominium sales. this type of loan cover both real and personal property

Question 6

what is open end mortgage?

Answer 6

allows the mortgage to borrow additional funds, up to a max dollar amount, all of which are secured by the same original mortgage.

Question 7

what is shared appreciation mortgage (SAM)?

Answer 7

the lender agrees to orientate the loan at borrow market interest rates in rerun for guaranteed share of the appreciation to eh borrower will realize when the property is sold. this typically is used in financing of commercial project.

Question 8

what is prepayment clause?

Answer 8

an open mortgage usually allows a borrower to off the loan at any over the life of the of the loan at any time over ht life of the loan without penally. this allowed by prepayment privilege clause in the mortgage. when a borrower repays the loan ahead of the mortgage an other charge a prepayment penalty is a percent rage of ht e remaining balance.

Question 9

what is lock in clause?

Answer 9

in the note typically means that upon loan application the lender has agreed to to the lock the rate for the specified time period, or it could mean that the loan cannot be prepared unless all interest paid.

Question 10

what is hypothecation?

Answer 10

mean to pledge property to the lender as collateral without giving up possession of it.

Question 11

what is due on sale clause?

Answer 11

in mortgage allows the lender to collect full payment from mortgage when the property is sold. the clause prevents owner from selling the property to a buyer on a loan assumption subject to the mortgage or land lender.

Question 12

what does RESPA mean?

Answer 12

real state settlement procedures act

Question 13

what is real estate settlement procedures act (RESPA)

Answer 13

it requires that lender disclose to the buyer and seller all settlement cost on the federal reales mortgage loans, and and first second lien for the purchase refinancing of one to four family dwellings

Question 14

what is lender disclose at the time of the loan application at closing of the loan under RESPA?

Answer 14

1. the booklet settlement cost
2. within three business days of application the lender must provide borrower with a good faith estimate
3. uniform settlement statement (HUD-1)

Question 15

what is booklet settlement cost for RESPA?

Answer 15

the booklet settlement and you must be given to prospective borrower within three business days format he time that person receives or prepares a loan application

Question 16

what is good faith estimate (GFE)?

Answer 16

the lender must proved the borrower with a good faith estimate (GFE) of the settlement cost the borrower will likely incur. the new GFE discloses the charges that cannot change, the that can increase up to 10 percent at settlement and those that change at settlement

Question 17

what is uniform settlement statement (HUD-1)?

Answer 17

this must be used to itemized all charges related to the transaction. borrowers have right to review the HUD-1 to the extent to which the are available, within 24 hours of the closing

Question 18

what are lender not able to take?

Answer 18

they are prohibited from receiving any kickbacks or other referral fees from the service.

Question 19

Can lender charge for HUD-1 at closing?

Answer 19

NO

Question 20

what is RESPA limitations for lenders?

Answer 20

this limits the amount of money a lender may require the borrower to hold in escrow amount for payment of taxes insurance and etc. and require the lender to provide initial and annual escrow account statement to the borrower.

Question 21

what is regulation z (the truth lending act)?

Answer 21

requires that lenders disclose the true cost of credit expressed as an APR or annual percentage rate.

Question 22

what is regulation z cover?

Answer 22

all one four family real estate financing for residential borrowers who are natural persons, but loan that are used for business, commercial or agricultural purposes; personal property credit transaction involving more than $25,000 and loans to the owner of dwelling containing more than four housing units.

Question 23

what does regulation z defines?

Answer 23

defines a creditor as an entity that extends consumer credit more than 25 times, a years or more than 5 times a years if the transaction involves a dwelling as security. the credit must be subject to a finance charge or payable in more than four installments by written agreement.

Question 24

what was the lending act passed with what?

Answer 24

as part of the consumer credit protection act.

Question 25

why was the lending act as part of the consumer credit protection act pass?

Answer 25

when negotiating a home improvement loan, refinancing a home loan, a home equity loan and an FHA reverse mortgage, there is three business day right rescission marketed by regulations full disclosure is required by the lender if any of the lender if any of the following trigger items appears in a ad

Question 26

what are trigger items for truth in lending act?

Answer 26

1. amount of monthly payment
2. number of payments
3. amount of down payment
4. finance charges
5. term of the loan

Question 27

what is full service discount brokers?

Answer 27

with this business policy, the broker firm may offer full service at reduced commission or rebates and inducement to buyers and sellers

Question 28

what is fee for service broker?

Answer 28

under this business model flat fee or limited service broker allow buyers and seller to select from menu of real restate services.

Question 29

what is mortgage fraud?

Answer 29

means the lender was provided with false or misleading information on a loan application, or with falsified document in the loan process.

Question 30

what is equity skimming for mortgage fraud?

Answer 30

a investor negotiates with a straw buyer to purchase the property and then the straw buyer gives the investor a quitclaim deed to the property. the investor rents the property but does not mate any mortgage payment.

Question 31

what is house selling for mortgage fraud?

Answer 31

a con artist selects a house and assumes the identity of the owner by finding personal information on the internet and public records. once they have fake identification, they sell the property and pocket the profits, even while the true owner is living in the house

Question 32

what is property flipping for mortgage fraud?

Answer 32

the basis for property flipping is an inflated appraised. in the type of mortgage fraud, a property is purchase then quickly resold at much higher value. the home was purchased for $15,000, but within the mouth was sold to someone for $83,000 value. many times the borrower’s loan is supported by falsified document, such forged paycheck stubs, fake tax return.

Question 33

what is equal credit opportunity act (ECOA)?

Answer 33

prohibits discrimination on race, color, religion, national origin, sex, martial status. age or source of income in granting of credit. this act requires that credit application be considered only on the basis of income, net worth, job stability and credit rating. if applicant lenders have 30 days to inform the applicant of the reason why credit was denied.

Question 34

what is community reinvestment act?

Answer 34

was redlining and disinvestment in central city areas

Question 35

what is redlining?

Answer 35

is the lender’s refusal to negotiate loans in certain geographic areas, even to qualified borrowers.