Mortgage Key Facts Flashcards
What is the penalty when a loan applicant makes a false statement on the 1003?
May face a 5 year jail term
3/1, 5/1, 7/1 and 10/1 ARMS; these are examples of what types of mortgage
These are adjustable rate mortgages, in which rate is fixed by may adjust annually. Also called hybrid AMRS.
What is the official name for the 1003 form?
URLA
What is a 1031 exchange?
a tax deferred exchange of “like” real estate, used to offset or avoid capital gain tax.
What is the form that the IRS uses to retrieve past tax returns, w-2s, and 1099 transcripts that are on file with the IRS?
4506c
What documents is a summary of recorded transactions, concerning a particular property?
Abstract of title
What is the clause/condition in a mortgage that gives the lender the right to require immediate repayment of the loan balance if regular mortgage payments are not made or for breach of other conditions of the mortgage?
Acceleration clause
interest earned by not yet paid is called what?
accrued interest
What is included in acquisition costs?
purchase price + closing costs - seller paids
What type of mortgage, is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index.
Adjustable Rate Mortgage (ARM)
An opinion of market value as of a specific date is known as what?
Appraisal
The date that the interest rate changes on an adjustable rate mortgage (ARM) is known as what?
adjustment date
The measure of the full cost of a loan, including interest and loan fees, expressed as a yearly percentage rate is known as what?
APR
If there is greater than 1% ownership interest of a party in both the business referring out the service and the business receiving the referral, what document is required?
Affiliated business arrangement (ABA)
loan payment, divided into equal periodic payments, calculated to pay off the debt at the ned of a fixed period, including accrued interest on the outstanding balance is known as what?
Amortization
What does the consumer reporting agency (or bureau) do?
An organization that handles the preparation of reports used by lenders to determine a potential borrower’s credit history
The agency gets data for these reports from a credit repository and other sources.
What is a contingency?
A condition that must be satisfied before a contract is legally binding before a sale can close.
real estate sales contracts often have a specific date or number of days, in which the contingencies must be removed.
What is a conventional loan?
a mortgage not insured by FHA or guaranteed by VA
When would a conversion clause/Option be used?
A provision in an ARM allowing the laon to be converted to a fixed-rate at some point during the term
Usually conversion is allowed at the end of the first adjustment period
Conversion feature may cost extra
Also referred to as a convertible ARM
What is conveyance?
The transfer of a deed or possible a lease or mortgage
Covenants, conditions, and restrictions (CC&Rs) are what type of documents?
A document defining the use, requirements and restrictions of a property.
What is a credit report?
A report documenting the credit history and current status of a borrower’s credit standing.
What is a CRV?
Certified reasonable value
a property appraisal performed by a VA-approved appraiser that established the limit on the principal of the VA loan.
When should an ARM disclosure be provided to a borrower?
Within 3 days of the application whenever an adjustment-rate mortgage transaction is contemplated (TILA)
Who receives the charm handbook?
The consumer who applies for an ARM loan. The consumer receives it within 3 days of application.
What is an assessment?
A local tax, levied against a property, for a specific purpose, such as a sewer or street light.
The transfer of a mortgage from one person to another is known as what?
Assignment
A document showing the financial situation - assets, liabilities, and net worth of a person at a specific point in time is known as what?
Balance sheet
What is a basis point?
A unit of measure: 1/100th of one percent
What is a bi-weekly payment mortgage?
a plan to reduce the debt every two weeks (instead of the standard monthly payment schedule).
What is a blanket mortgage?
a mortgage that covers more than one parcel of land
Bona fide is also known as what?
“in good faith” offer
who’s considered a borrower?
The borrower/mortgagor is the one who applies for and receives a loan in the form of a mortgage, with the intention of repaying the loan in full.
What are caps (payment)?
consumer safeguards, which limit the amount of change to the interest rate, for an adjustable rate mortgage.
Who receives a Certificate of Eligibility?
The document given to qualified veterans, which entitles them to a VA guaranteed loan for homes, business and mobile homes.
What is a certificate of occupancy?
A document, issued by local government agency, stating that a property meets the requirements of health and building codes.
What is a certificate of reasonable value?
an appraisal issued by the veterans administration showing the property’s current market value.
What is the chain of title?
The chronological order of conveyance of a property, from the original owner to the present owner.
What is clear title?
A marketable title, free of clouds and disputes
COFI/Cost of funds index is used to calculate what?
An index used to calculate the rate of an adjustable-rate mortgage
What is Combined Loan to Value?
The ratio of the total mortgage liens against the subject property, to the lesser of either the appraised value or the sales price.
Conforming loans are what type of loans?
a mortgage loan under the maximum amount of loans that FNMA and FHLMC are legally allowed to buy.
When are construction loans used?
A short-term interim loan to pay for the construction of buildings or homes.
What is the name of the agency who enforces law that protect consumers of financial products and services such as mortgages, credit cards, and deposit accounts?
Consumer financial protection bureau (CFPB)
What is a rate lock?
A commitment issued by a lender, to a borrower guaranteeing a specified interest rate and lender costs for a specified period of time.
The Real Estate Settlement Procedures Act protects who? (RESPA)
A consumer protection law, which requires lenders to give borrowers advance notice of closing costs/settlement services.
Also known as Reg X
Memory tool: REXPA
What is real property?
Land and everything, which is permanently affixed to it.
Reclamation is the right of which person?
The right of the person, with title to a property, to recover it from the debtor in case of a bankruptcy.
Reconveyance transfers a property to whom?
The transfer of property back to the owner when a mortgage is fully repaid.
What is a recording?
The act of entering documents concerning title to a property into public records.
Refinance/refinancing a loan occurs when?
Obtaining a new mortgage loan on a property, already owned, often to replace existing loans on the property.
Regulation B (ECOA) is also known as what?
The equal credit opportunity act
makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, age, public assistance program.
Regulation V (FCRA) regulates what?
The fair credit reporting act
FCRA is a federal law that regulates the collection, dissemination, and use of consumer information including consumer credit information.
memory tool: V = Very Fair.
Regulation Z (TIL or TILA) was designed to promote what?
The truth in lending Act
Designed to promote the informed use of consumer credit, by requiring disclosures about it’s terms and cost to standardize the manner.
Memory Tool: TILA - TILA the GodZilla
Rescission gives the homeowner the right to do what?
The cancellation of a contract
What is a reverse Annuity Mortgage (RAM)?
A form mortgage, in which, the lender makes periodic payments to the borrower, using the borrower’s equity in the home as collateral for and repayment of the loan.
More commonly called a HECM (home equity conversion mortgage) or simply reverse mortgage.
What is a reverse mortgage (HECM)
Home equity conversion mortgage
reverse mortgage unlock the equity in the home
multiple payout options
for borrowers 62+
The Safe Act (2008) was designed for what?
Secure and Fair enforcement for mortgage licensing act. Designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan origintors.
Who issues a satisfaction of mortgage?
The document issued by the mortgagee when the mortgage is paid in full
also called a release of mortgage.
What is a second mortgage?
a mortgage made subsequent to another mortgage and subordinate to the first one.
Who’s part of the secondary mortgage market?
The market, into which, primary mortgage lenders sell the mortgages they make to obtain funds to originate more new loans.
This includes fannie, freddie, ginnie
What is a security?
The property that will be pledged as collateral for a loan
A seller carry back is what type of agreement?
An agreement in which the owner of a property provides financing often in combination with an assumable mortgage.
Who is a servicer?
An organization that collects principal and interest payments from borrowers and manages the borrower’s escrow accounts.
What is servicing?
All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.
What are settlement/settlement costs?
Expenses over and above the price of the property that are incurred by the buyers and sellers when transferring ownership of a property. also called closing costs.
Who creates Sweat Equity?
Equity created by a purchaser performing work on a property being purchased.
A tax lien is a claim against what?
A claim against a property for unpaid taxes.
What is a tax sale?
public sale of property, by a government authority, as result of nonpayment of taxes.
A title shows what?
A document, which gives evidence of an individual’s ownership of property
A total expense ratio (back end ratio/total debt ratio) includes what?
total obligations (PITI + all debt) divided by the gross monthly income - expressed as a percentage.
What is the law that requires that the annual percentage be disclosed to a home buyer, shortly after they apply for the loan?
TILA
Also known as reg Z
Evaluating a loan applicant package and making the decision, whether to make a loan to a potential home buyer, based on credit, employment, etc is a process known as?
Underwriting
What is a deed of trust?
Agreement to pledge property as security for a loan, used in many states in place of a mortgage.
in this agreement, the borrower transfers legal title to a trustee, who holds the property in a trust as security for the repayment of the debt.
What is deferred interest?
When a mortgage is written with a monthly payment that is les sthan required to satisfy the note rate the unpaid interest is deferred by adding it to the loan balance. also known as negative amortization.
The department of Veteran’s Affairs is what type of agency?
An independent agency of the federal government, which guarantees long term low-or-no down payment mortgages to eligible veterans.
What is a deposit/earnest money deposit?
Cash paid when a formal sales contract is signed.
the deposit is usually held by a third party until the sale is complete.
Depreciation happens when?
When the value of property declines.
What are discount points?
Prepaid interest assessed at closing by the lender. each point is equal to 1 percent of the loan amount.
What is the purpose of the Dodd-Frank Act.
To promote financial stability
to end “too big to fail”
to protect taxpayers by ending bailouts
to protect consumers from abusive practices.
Established by the CFPB
Who established the Dodd-Frank Act?
CFPB
A provision in a mortgage or deed or trust, which allows the lender to demand immediate payment of the balance the mortgage, if the mortgage holder sells the home is known as what?
A due on sale clause
What’s an encumbrance?
A legal right or interest in a property that affects title and lessens the property value.
encumbrance can take the form of claims, liens, unpaid taxes and so on.
Equal Credit Opportunity Act (ECOA) is also known as what?
A federal law, which requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sec, marital status, or receipt of income from public assistance programs.
Also known as Reg B
Reg B is also known as what?
Equal credit opportunity act
What is Equity?
The difference between the fair market value and current indebtedness also referred to as the value an owner has in real estate over and above the obligation against the property.
The Fact Act (2003) was an amendment to what earlier law?
Amended the FCRA - Fair credit reporting act (Reg V)
The act allows consumers to request and obtain a free credit report one every 12 months from each of the three nationwide consumer credit reporting companies.
Who is Fannie Mae?
The nickname commonly used for the federal national mortgage association.
What is the federal home loan mortgage corporation (FHLMC)
Also called: Freddie Mac
A government sponsored entity that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.
The Federal Housing Administration (FHA) is a division of what larger entity?
A division of the department of Housing and urban development.
The federal National Mortgage Association is also known as what?
Also known as Fannie Mae
A government sponsored entity that purchases and sells conventional residential mortgages as well as those insured by FHA or guarantee by the VA.
What is the federal reserve?
The central bank of the united states and major regulatory agency for many commercial banks
commonly referred to as “The Fed”
Fee simple is what type of ownership?
Absolute ownership of real property
FHLMC provides what?
The federal home loan mortgage corporation provides a secondary market for savings and loans by purchasing their conventional
Also known as “Freddie Mac”
What is a first mortgage?
The primary lien against a property
A fixed rate mortgage has what type of interest rate?
An interest rate is fixed for the term of the loan.
Flood insurance is what type of insurance?
A form of hazard insurance required by lenders to cover properties in flood zones.
What is FNMA?
The Federal National Mortgage Association is a secondary mortgage institution.
FNMA buys VA, FHA, and conventional mortgages from primary lenders.
Also known as Fannie Mae
What is forbearance?
Grace period given when a lender postpones foreclosure to give the borrower time to catch up on overdue payments.
Foreclosure is known as what?
A legal process, by which, the lender or the seller forces a sale of a mortgaged property, because the borrower has not met the terms of the mortgage.
Also known as repossession of property.
Freddie Mac is a nickname for who?
The nickname most commonly used for the federal home loan mortgage corporation.
A fully amortized ARM is what type of rate.
An adjustable rate mortgage with a monthly payment that is sufficient to amortize the remaining balance at the interest accrual rate over the amortization period.
Ginnie Mae (GNMA) is also known as what?
The nickname most commonly used for the government national mortgage association.
Government National Mortgage Association (GNMA) is also known as what?
Also known as “Ginnie Mae”
Provides sources of funds for residential mortgages insured or guaranteed by FHA or VA.
A type of flexible payment mortgage, where the payments increased for a specified period of time and then level off is known as?
A graduated payment mortgage (GPM)
Usury is interest charged when?
Interest charged in excess of the legal rate established by law.
What is a variable rate mortgage (VRM)?
another name for an adjustable rate mortgage.
a document signed by the borrower’s financial institution verifying the status and balance of his/her financial accounts is known as what?
A verification of Deposit.
A document signed by the borrower’s employer, verifying his/her positions, salary, overtime, bonuses, and the likelihood of continued employment is known as what?
Verification of employment.
A document, signed by the borrowers servicer, verifying the status of the mortgage is called what?
A verification of mortgage
A document, signed by the borrower’s landlord, verifying their rental/lease payment history is called what?
A verification of rent
A margin is added to what to determine the fully-indexed rate?
The amount a lender adds to the index on an adjustable rate mortgage to establish the fully-indexed rate.
the margin is the lender’s profit
index + margin = adjusted interest rate.
What is a marketable title?
A title which is free and clear of liens, clouds or other defects, which would prevent the sale of the property.
A mechanic’s lien is used when?
A mechanic’s lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property.
the lien exists for both real property and personal property.
it is considered a cloud on title.
MIP (mortgage insurance premium) is purchased by whom?
Insurance from FHA to the lender against incurred losses if the borrower were to default.
insurance purchased by borrower to insure against default on FHA loans.
MIP protects the lender.
A monthly housing expense includes what?
principal, interest, taxes, insurance and mortgage insurance
it also includes HOA dues.
What is a mortgage?
A legal document, which pledges a property to the lender as security for payment of a debt.
The mortgage disclosure improvement act (MDIA) 2008 amended what?
An amendment to Reg Z
requires disclosures (LE) to be sent to the borrower within 3 business days after receiving borrowers application.
the loan may not close until after the 7th business day after disclosures have been delivered or mailed to the borrower.
Who is a mortgagee?
The lender in a mortgage loan transaction
What is private mortgage insurance?
Money paid to insure the mortgage when the down payment is less than 20 percent.
Who is a mortgagor?
The borrower or homeowner
What is negative amortization?
When your monthly payments are not large enough to pay all the interest due on the loan.
the unpaid interest is added to the unpaid balance of the loan.
if the borrower does not increase payments, the home buyer will end up owing more than the original amount of the loan.
A non-conforming loan cannot be sold to who?
A conventional loan that cannot be sold to fannie and freddie.
Often, these loans are larger than the conforming loan amount.
A notice of default (NOD) is given to whom?
Written notice to a borrower, that a default has occurred and that legal action may be taken.
What is the office of comptroller currency?
The federal financial regulatory body, which oversees the nation’s federally chartered banks and savings institutions.
