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S.A.F.E. Exam > Mortgage knowledge > Flashcards

Mortgage knowledge Flashcards

1
Q

Bi-weekly

A

26

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2
Q

Bi-monthly

A

24

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3
Q

LTV ratio

A

(Loan amount) / (Lesser of the property or purchase price)

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4
Q

CLTV ratio

A

(1st loan balance) + (2nd loan balance) + (All other liens) = (Total Encumberance)

(Total Encumberance) / (Lesser of the property or purchase price) = (CLTV)

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5
Q

Front-end ratio/housing ratio

A

(Housing expense) / (Income) = (Front-end ratio/housing ratio)

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6
Q

Back-end ratio/total debt ratio

A

(Total monthly debts / (Income) = (Back end ratio)

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7
Q

Interest per diem

A

(Interest rate) x (Loan balance) = (Annual interest)

Annual interest) / 365 = (Daily Interest Amount

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8
Q

Private Mortgage Insurance (PMI)

A

Conventional loans (LTV greater than 80%)

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9
Q

Mortgage Insurance Premium (MIP)

A

FHA loans

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10
Q

FHA loans

A

3.5% downpayment minimum

Insured by the government

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11
Q

Regulation Z

A

Truth-In-Lending Act (TILA)

An attractive interest rate or loan term that is not actually available

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12
Q

Regulation B

A

Equal Credit Opportunity Act (ECOA)

Prohibits lenders from discriminating, in any aspect of a credit transaction, based on any of the following factors:

Race
Color
Religion
National origin
Sex
Marital status
Age (unless borrower is too young to sign a contract, or lacks “legal capacity”)
Receipt of income from a public assistance program
Exercise of rights under the Consumer Credit Protection Act

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13
Q

Regulation X

A

Real Estate Settlement Procedures Act (RESPA)

  • Require effective advance disclosure of costs
  • Eliminate kickbacks and referral fees
  • Limit amounts held in escrow or reserve accounts
  • Reform record-keeping of local land title information
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14
Q

Regulation N

A

Mortgage Acts and Practices Rule (MAP Rule)

A federal rule governing the advertising of mortgage products

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15
Q

Revised Loan Estimate

A

Due within 3 business days of revision

Due within 4 days before consummation

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16
Q

Regulation C

A

Home Mortgage Disclosure Act (HMDA)

Requires certain lenders, based on asset size, location, and housing-related lending activity, to report data regarding its mortgage lending activity

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17
Q

Yield Spread Premiums

A

Otherwise known as borrow credits

It use to be used to be known for paying originators an additional fee for charging up the interest rate

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18
Q

RESPA Penalties/Section 8

A

Section 8 of RESPA prohibits referral fees and other forms of kickbacks/fee splitting. Penalties include fines of up to $10,000 and up to one year in prison.

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19
Q

Transactions reported under HMDA

A
  • Purchases
  • Refinances
  • Home improvement loans
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20
Q

The Loan Estimate must be provided…

A
  • No later than three business days after receiving a completed application
  • No later than seven business days prior to consummation
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21
Q

The Closing Disclosure must be provided…

A

At least three business days prior to consummation

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22
Q

The purpose of the Homeowners Protection Act is to…

A

Facilitate the cancellation of private mortgage insurance (PMI). Borrowers can request cancellation when their loan reaches 80% loan-to-value (20% equity), but the law requires automatic termination of PMI at 78% LTV (22% equity).

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23
Q

Advertising trigger terms for closed-end loans under TILA include…

A
  • Amount or percentage of any down payment
  • Number of payments or period of repayment
  • Amount of any payment
  • Amount of any finance charge
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24
Q

The TRID Rule does not apply to…

A
  • HELOCs
  • Reverse mortgages

-Mortgages secured by a mobile home or dwelling not attached to real property

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25
Q

Loans not covered by RESPA include…

A

Loans for:

-Business, commercial, or agricultural purposes

Temporary financing (bridge loans)

Vacant land

Loan conversions

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26
Q

The purpose of FCRA is…

A

The Fair Credit Reporting Act (FCRA) is aimed at ensuring the accuracy, fairness, and privacy of consumers’ personal information that is assembled and used by consumer reporting agencies.

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27
Q

The purpose of FACTA…

A

The Fair and Accurate Credit Transactions Act (FACTA) was passed as an amendment to the FCRA. It includes provisions to address identity theft, facilitate consumers’ access to the information retained by CRAs, and improve the accuracy of consumer reports.

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28
Q

Page 2 of the Loan Estimate

A

Loan Costs table

Other Costs table

Calculating Cash to Close table

Adjustable Payment table

Adjustable Interest Rate table

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29
Q

What fees are never included in finance charges?

A

Title insurance and title examination fees, doc prep fees, notary fees, seller’s points, and appraisal/credit report fees

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30
Q

What fees are included in finance charges?

A

Finance charges include: interest, loan origination fees and points, mortgage broker fees, and credit life insurance fees (when insurance is required)

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31
Q

Seller concessions for conforming loans with an LTV of greater than 90% are…

A

Limited to 3%

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32
Q

A deed of trust is…

A

A document used in place of a mortgage to secure the payment of a promissory note

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33
Q

A nonconforming loan is…

A

Is one that exceeds Fannie Mae and Freddie Mac’s loan limits or underwriting standards.

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34
Q

A reconveyance clause…

A

Is the method used to transfer title for a property following full payment of a loan. Reconveyance is typically used with a deed of trust.

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35
Q

A funding fee is required on…

A

VA and USDA loans

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36
Q

A state licensed loan originator is…

A

An employee of a non-depository institution, loan originator

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37
Q

Conforming loan guidelines generally include DTI ratios of:

A

28% / 36%

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38
Q

FHA DTI is…

A

43%

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39
Q

VA DTI is…

A

41%

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40
Q

The URLA is also known as:

A

The application

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41
Q

For ARMS characterized by figures like “3/1,” “5/1,” “7/1,” or “10/1,” the first number represents _____, and the second number represents _____.

A

The locked term; the adjustment frequency

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42
Q

Safeguards Rule

A

Preserving the confidentiality of personal financial information

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43
Q

USDA loans are made for a term of…

A

30 years, offered in a fixed rate only. They do not require a down payment, but lenders must use debt ratios to ensure the borrower can repay the loan.

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44
Q

An 80-10-10 loan is an example of…

A

A piggy back loan

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45
Q

The 1003 is also known as…

A

The Uniform Residential Loan Application (URLA)

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46
Q

The 1004 is also known as the…

A

Uniform Residential Appraisal Report (URAR)

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47
Q

Regulation P

A

Gramm-Leach-Bliley Act (GLB Act)

Enacted to protect the privacy of consumer personal information. It applies to all financial institutions over which the Federal Trade Commission (FTC) has regulatory authority

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48
Q

The Dodd-Frank Act

A

Establishment of the Consumer Financial Protection Bureau (CFPB)

  • Authorization of the Qualified Mortgage Rule
  • Requiring an assessment of the borrower’s ability to repay a mortgage (i.e., establishment of the Ability to Repay Rule)
  • Restricts loan originator compensation (i.e., authorizing the Loan Originator Compensation Rule)
  • Requires new borrower disclosures to replace GFE and TILA disclosures (i.e., TILA-RESPA Integrated Disclosure Rule)
  • Limits loan terms such as prepayment penalties, negative amortization, balloons, etc.
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49
Q

Who issues and enforces regulations for TILA?

A

The CFPB

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50
Q

Who regulates RESPA?

A

The CFPB

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51
Q

Reverse Redlining

A

When predatory lenders targeted neighborhoods with elderly, immigrant, and minority populations to make risky loans that included oppressive lending terms

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52
Q

Redlining

A

When creditors refuse to make loans in certain neighborhoods due to the personal characteristics of the residents

53
Q

Initial Escrow Notice

A

Typically given at settlement, but the lender has 45 days from settlement to deliver it

54
Q

Annual Escrow Notice

A

Must be given within 30 days of the completion of the escrow account computation year

55
Q

The Good Faith Estimate and HUD-1 Settlement Statement

A

Still required for:

  • Reverse mortgages
  • Home equity lines of credit (HELOCs)
  • Mortgages secured by a mobile home or other dwelling that is not attached to land
56
Q

Good Faith Estimate

A

There is a 10% tolerance for differences between the total amount of actual and estimated charges permitted for:

  • Lender-required settlement services performed by a provider chosen by the lender
  • Lender-required services and title and insurance services if the loan applicant uses a provider recommended by the lender, and
  • Recording fees
57
Q

“Servicing”

A

Receipt of mortgage payments from a borrower, including payments for taxes and insurance that are deposited in an escrow account, and forwarding these payments to the owner of the loan and to third parties, such as providers of homeowners’ insurance

58
Q

Power of sale clause

A

If the mortgage does include a power of sale clause, no legal action is required. This process is known as non-judicial foreclosure.

59
Q

Prohibited Practices (ECOA)

A
  • Refuse to consider public assistance as income
  • Assume a woman of childbearing age will stop working to raise children
  • Refuse to consider income from a pension, annuity, or retirement benefit
  • Refuse to consider regular alimony or child support (although borrowers are not required to disclose alimony and child support unless it is used as qualifying income)
60
Q

Application

A

Six pieces of information:

  • The consumer’s name
  • Social Security Number, which is used to obtain a credit report
  • Income
  • The address of the property to secure the loan
  • An estimate of the value of the property securing the loan
  • The loan amount sought
61
Q

Finance Charges

A

For closed-end transactions, disclosure of the finance charge is regarded as accurate if:

  • The charge is not understated by more than $100, or
  • The amount stated is greater than the amount required to be disclosed
62
Q

Determining the APR..

A

The fees that are included in the calculation of the APR include many of the fees that are included in the calculation of the finance charge, such as:

  • Private mortgage insurance (PMI) or mortgage insurance premium (MIP)
  • Discount points and mortgage broker fees
  • Origination fees
  • Processing fees, and
  • Underwriting fees
63
Q

Excluded fees from APR..

A

When calculating the APR, the following fees are generally excluded, just as they are in the calculation of the finance charge:

  • Title fees
  • Escrow fees
  • Notary fees
  • Appraisal and credit report fees, and
  • Document preparation fees
64
Q

A(n) _____ is an individual who accepts a fee to falsely claim ownership to a property.

A

Straw seller

65
Q

A “straw buyer” is:

A

A buyer who accepts a fee for the use of his or her Social Security Number and other personal information on a mortgage application

66
Q

Which of the following would be on a promissory note?

A
  • Amount owed,
  • Rate of interest and whether the loan is fixed or adjustable,
  • Due dates for payment,
  • The loan terms.
67
Q

A deed of trust requires that borrowers obtaining owner-occupied loans occupy the property within how many days?

A

60 days

68
Q

Under TILA’s rules…

A

In regard to higher-priced mortgage loans, under TILA and Regulation Z, a creditor or servicer may cancel an escrow account only upon the earlier of termination of the underlying debt obligation or five years after the loan was consummated, at the request of the consumer.

69
Q

Even before the adoption of the Dodd-Frank Act and the Ability to Repay Rule, which of the following federal laws created specific requirements for the verification and documentation of a borrower’s repayment ability?

A

Home Ownership and Equity Protection Act (HOEPA)

70
Q

A purpose of the Home Mortgage Disclosure Act (HMDA) is to:

A

Identify possible discriminatory lending patterns

71
Q

A defeasance clause…

A

Provides for release of the lien when the borrower pays off the debt and is generally included in a mortgage or deed of trust

72
Q

Material disclosures include…

A

The APR, the finance charge, the amount financed, the total number of payments, and the payment schedule

73
Q

Record Retention

A 
Loan Estimates - 3 years
Ability to Repay - 3 years
Loan Originator Compensation - 3 years
Closing Disclosure - 5 years
Escrow Closing Notice - 2 years
74
Q

HOEPA (Home Ownership and Equity Protection Act)

A

Discourage abuses in the subprime market

75
Q

TRID Rule (TILA-RESPA Integrated Disclosure Rule)

A
  • Zero-tolerance limit for the costs of services provided by the creditor or its affiliate
  • 10% tolerance limit for services provided by non-affiliates
  • Refunds the excess paid within 60 days of consummation
76
Q

HPA (Homeowners Protection Act)

A

Allows borrowers to request that lenders cancel PMI when their loan balance reaches 80% LTV

Does not apply to:

Government-insured FHA or VA loans
Loans protected by PMI paid for by the lender

77
Q

How many total hours of ethics are required, at minimum, for continuing education?

A

Two hours

78
Q

ECOA applies to the extension of credit for:

A

Residential, business, commercial, and agricultural loans

79
Q

Intentionally targeting borrowers in poor or underserved areas with expensive high-cost loans is considered illegal under:

A

HOEPA

80
Q

As a result of the Housing and Economic Recovery Act of 2008, Congress created the _____ for oversight of the GSEs.

A

FHFA (Federal Housing Finance Agency)

81
Q

Oversight and enforcement of FCRA is left to what government agency?

A

The CFPB, but shares some authority with the FTC

82
Q

Per diem interest is used by a lender in order to:

A

Collect interest that accrues between the closing date and the end of the month

83
Q

HOEPA is federal legislation enacted by Congress through amendments to:

A

TILA (Truth-In-Lending Act)

84
Q

Which of the following documents conveys title to real property?

A

Deed

85
Q

Safe harbor qualified mortgages offer a “safe harbor” from:

A

Liability for ATR Rule violations

86
Q

The Nationwide Multistate Licensing System and Registry was developed and is maintained by:

A

The CSBS and AARMR

87
Q

The provisions of the GLB Act specifically require compliance with the:

A

The Safeguards Rule

88
Q

An upfront mortgage insurance premium is required for _____ loans, and borrowers can pay this amount directly or finance the cost.

A

FHA

89
Q

Annual PMI is determined by multiplying:

A

The loan amount and the mortgage insurance rate

90
Q

Which legislation sets the disclosure requirements for the Affiliated Business Arrangement Disclosure?

A

RESPA

91
Q

Which of the following documents connects the promissory note to the collateral?

A

Mortgage

92
Q

Under the GLB Act, a customer relationship is established:

A

Upon application

93
Q

A loss payee clause protects whom?

A

The lender in the event the property is damaged by fire or other risks

94
Q

Regulation V

A

FCRA

95
Q

Disposal Rule:

A
  • Burning, pulverizing, or shredding papers containing consumer information
  • Destroying or erasing electronically-stored information
96
Q

The Red Flags Rule:

A

is a measure included in FACTA to address identity theft

-FTC enforces

97
Q

Sales comparison approach:

A

is most commonly used and involves the comparison of three similar, recently-sold properties

98
Q

Which of the following terms is allowed in a high-cost mortgage?

A

A variable interest rate

99
Q

The act of guiding homebuyers in a particular direction based on demographics is prohibited by:

A

The Fair Housing Act (FHA) and ECOA

they both prohibit steering

100
Q

A property inspection waiver:

A

may be allowed if the lender is comfortable with existing data on a property used as collateral for a rate/term refinance.

101
Q

The term “grossing up” means a borrower’s non-taxed income is allowed to be increased by as much as:

A

25%

102
Q

The initial rate cap:

A

is a limit on the amount by which the interest rate can increase or decrease at the first adjustment date for an ARM

103
Q

Which federal law was the first to expressly prohibit equity-based lending?

A

HOEPA

104
Q

RESPA servicing rules require loan servicers:

A

Delinquency requires live contact within 36 days, and written contact within 45 days that describes loss mitigation options.

105
Q

What legislation regulates the proper management of escrow accounts?

A

RESPA (Regulation X) regulates the management of escrow accounts

106
Q

The lending document that contains the contractual terms for repaying a home loan is the:

A

Promissory note

107
Q

Two federal laws that relate to the confidentiality of personal financial information are:

A

Safeguards Rule and FTC disposal rule

108
Q

A home equity conversion mortgage (HECM) is a type of _____ that is made pursuant to guidelines established by the _____

A

Reverse mortgage/FHA

109
Q

How to calculate the periodic rate on a mortgage loan?

A

Annual rate / number of payments in a year = periodic rate

110
Q

What is the purpose of the Fair Credit Reporting Act?

A

To ensure accuracy, fairness, and the privacy of consumers’ personal information assembled and used by consumer reporting agencies

111
Q

Which of the following types of loans is not a conventional mortgage?

A

FHA loans, USDA loans, and VA loans

112
Q

Which document actually contains the borrower’s promise to repay the loan?

A

The note, or promissory note, is the borrower’s promise to repay the loan.

113
Q

Sharing a borrower’s personal financial information for purposes other than what it was provided for is a violation of what act?

A

GLB (The Gramm-Leach-Bliley Act) governs the use of non-public personal information and how it can be shared amongst affiliated third parties.

114
Q

Regulations in Section 32 of TILA deal strictly with:

A

Consumer protections triggered by high-cost loans covered under HOEPA

115
Q

The cost approach:

A

is generally used on new home construction (among other reasons). This approach arrives at a value by estimating the value of the land, as if vacant, and adding the cost to build the house

116
Q

The chain of title shows:

A

History of ownership of a property

117
Q

When does rescission not exist?

A

Rescission does not exist for a purchase of a principal residence with a conventional loan

118
Q

What is considered in the calculation of a borrower’s back-end ratio?

A

The back-end ratio is the total amount of monthly payments made on long-term debt carried by the consumer, such as car loans, student loans, and other debt in addition to housing expenses.

119
Q

The factors involved in determining the movement on an ARM loan include:

A

Frequency of change, caps, index, rate

120
Q

When funds are placed in a separate escrow account to offset the monthly payments required by the terms of a loan, and those funds are used to reduce the payment rate for a period of time, this is known as:

A

Temporary buy-down

121
Q

FACTA requires an initial Fraud Alert to be kept in a consumer’s file for what period of time?

A

One year

An Extended Fraud Alert, meaning there is an actual identity theft report submitted, is required for seven years

122
Q

Homeownership counseling is required in transactions for all of the following, except:

A

Higher-priced mortgage loan

123
Q

Which of the following loan types considers residual income in qualification?

A

VA loans

124
Q

A revised Loan Estimate is required when:

A

The loan applicant locks his or her interest rate

125
Q

“E-Sign Act” is short for:

A

The Electronic Signatures in Global and National Commerce Act

126
Q

High cost home loan is if the APR exceeds the APOR for a comparable transaction by more than:

A
  • 6.5% points for a first lien

- 8.5% points for a subordinate lien

127
Q

HPML that has an APR that exceeds the APOR by:

A
  • 1.5% points, first lien
  • 2.5% points, jumbo loan
  • 3.5% points, subordinate lien
128
Q

Must obtain two appraisals on HPML if:

A
  • Seller acquired property 90 or fewer days and price is 10% higher than sellers acquisition
  • Seller acquired property 91-180 days and price is 20% higher

S.A.F.E. Exam (5 decks)

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