Mortgage Loan Origination Activites

Question 1

There was no video, only a quiz of 25 qs so this will be the qs and answers….

Answer 1

next card (This is based off the pdf pages on this section)

Question 2

What is the housing ratio for a borrower who makes $24,000 a year with a payment amount of $560?

Answer 2

28%

-To find the front end DTI(debt to income) you take the amount the borrower will be paying and divide it by their gross monthly income.

Which is:

amount paying
________________________ =Debt To Income Ratio
gross monthly income

$24,000 / 12 (months) = $2,000 a month

$560 / $2,000 = 28%

Question 3

What fee is not included in the Loan Estimate?

Answer 3

Real Estate Broke Fee

Question 4

Which of the following is true concerning Service Release Premium (SRP)?

Answer 4

The interest rate is a factor of the SRP

-The amount of SRP is generally based on the market value of the mortgage note, influenced by several key variables, such as interest rate, loan type, margin (for ARM loans). Also considered are factors such as the loans LTV, the borrowers credit score, the presence of private mortgage insurance (PMI), pre-payment risk of the borrower and the other factors.

Question 5

The lender discloses the prepayment penalty on which of the following docs?

Answer 5

Loan estimate

-Page 1 of the LE(Loan Estimate) has whether the loan includes a prepayment penalty or not.

Question 6

What are 2 of the most important docs that the borrower signs at settlement?

Answer 6

The promissory note and the deed of trust or mortgage

-A note or promissory note is a written, legally binding promise to repay a debt. The note creates the debt, and the mortgage secures the payment. When the property is foreclosed on, the lender is foreclosing on the note. The mortgage or deed of trust is the security instrument that the borrower gives to the lender that protects the lender’s interest in the property. When the borrower signs the mortgage or deed of trust, they are giving the lender the right to take the property by foreclosure if they fail to pay their mortgage properly.

Question 7

At closing, the borrower should receive a notice of the right to rescind. If two copies are not provided to the borrower at closing, the right to rescind extends from 3 days to:

Answer 7

3 years

-If the required rescission notice is not provided to the borrower, or if there are errors on the disclosures, the borrower’s right to rescind expires three (3) years after the closing, transfer of the interest in the property, or sale of the property, whichever occurs first

Question 8

The borrower is putting 10% down on a $180,000 sales price. She is paying 2.5 discount points and a 1% origination fee. What is the total of the origination fee and discount points she is paying?

Answer 8

$5,670

-First, determine the loan amount. 10% of $180,000 is $18,000. $180,000 - $18,000 =$162,000. The origination fee is 1% of $162,000 which is $1,620. The discount points are 2.5% of the loan amount which is $4,050. $4,050 + $1,620 = $5,670.

Question 9

If a borrower is going to be denied financing based on an incomplete application, which of the following can be done?

Answer 9

Send a written notice of incompleteness within 30 days of the last action taken or of the incompleteness

-ECOA gives a lender the ability for a lender to send a notice to the borrower if their application is incomplete and give the borrower time to respond. This has to happen within 30 days of the last action taken on the transaction or the incompleteness.

Question 10

Under what circumstances would it be possible to consider capital gains as income for a Fannie Mae or Freddie Mac loan?

Answer 10

If the borrowers can verify a minimum of 2 years income on their tax returns and still own the asset

-Most income can be used as long as it can be verified for 2 years and there can be reasonable belief that the income will continue, in this case, the borrower would still need to own the assets for the underwriter to believe that the income will continue.

Question 11

When you order an Insurance binder on a borrower’s loan file, the one-page sheet that summarizes all the insurance information is known as the:

Answer 11

Declaration page

-Borrowers often need home insurance binders to provide proof of insurance coverage when purchasing a house with a mortgage. The insurance binder specifies all the protections for which the borrower is covered while they wait for a new policy, as well as any coverage limits, deductibles, fees, terms and conditions, this is all included on the declaration page. The declaration page is the front page (or pages) of the policy that specifics all the pertinent details of the policy.

Question 12

Which of the following sources of income would NOT be allowed on a conforming conventional loan?

Answer 12

Child support received for 16 year old child

-In order to use child support received as income for a loan, the child support must continue for at least 3 years. Most child support agreements expire when the child is 18 years old, which in this situation would only be 2 years in the future, so it cannot be used as it cannot be confirmed it will continue.

Question 13

A borrower has an Interest Only mortgage loan and wishes to make the minimum monthly payments required. If the homeowner decides to payoff the loan at the end of the loan term, what will the homeowner be required to pay?

Answer 13

The original loan amount

-If the borrower continually makes the minimum monthly payment which on an interest-only loan is the interest accrued monthly at the end of the loan, the original loan amount will remain.

Question 14

If an MLO has a borrower who has had a foreclosure in the past and is looking to obtain a conventional mortgage, how long does that foreclosure have to be seasoned on the credit report before the borrower can qualify?

Answer 14

7 years

-For conventional financing, a foreclosure must be seasoned for 7 years before the borrower can be eligible for the financing.

Question 15

What is the HCLTV (HTLTV) assuming a $200,000 value, a $100,000 first mortgage loan, and a $50,000 Home Equity Line of Credit second mortgage with a drawn amount of $30,000?

Answer 15

75%

-$100,000 plus $50,000 = $150,000. $150,000 divided by $200,000 = 75%. In this situation you only care about the total amount of the HELOC

Question 16

If the borrower’s monthly gross income was $6,000 and the monthly housing expense was: first mortgage payment, $900; monthly property tax $110; monthly hazard insurance $28; and monthly mortgage insurance $60, what is the housing ratio or front-end ratio?

Answer 16

18.30%

-First step is adding up the monthly housing expense, $900 plus $110 plus $28 plus $60 = $1,098. Second step is determining the housing ratio by dividing the monthly housing expense by the gross monthly income, $1,098 divided by $6,000 =18.30%

Question 17

Private Mortgage Insurance is required on conforming 1st mortgage loans when the Loan-To-Value is:

Answer 17

Above 80%

-Private Mortgage Insurance (PMI) is required on all 1st lien mortgage loans where the LTV is over 80%.

Question 18

How is rental income calculated when the borrower owns rental properties other than the subject property?

Answer 18

75% of the income less the PITI. If the net is positive, include as income; If the net is negative, include as a monthly debt

-Generally rental income is calculated, 75 percent of the rental income, 25 percent vacancy factor, or an average of the Schedule E (this is a schedule of the borrower’s tax return) income with depreciation added back. You would have to subtract any payments being made for a loan on the property. The borrower must list all properties that they own and if there are any liens against those properties.

Question 19

The lender is requiring repairs on the home to be completed. Those repairs can be done after the loan closes by including them in a(n):

Answer 19

Escrow holdback

-An escrow holdback is simply money set aside that assures the seller will finish agreed upon work at a later time. It is kind of like an insurance policy.

Question 20

Calculate the borrower’s maximum housing payment if the qualifying ratios are 28/36, the husband’s income is $48,000 per year, and the wife makes $2,500 per month?

Answer 20

$1,820

-The first step is determining the husband’s monthly income, $48,000 divided by 12 equals $4,000. $4,000 plus $2,500 is $6,500 a month. 28% of $6,500 is $1,820.

Question 21

A borrower purchases a home for $120,500 and is putting 10% down. If he has already paid $2,500 in earnest money, what is the rest of the down payment at closing?

Answer 21

$9,550

-First find out what the entire down payment is, 10% of $120,500 is $12,050. Subtract the earnest money from the total down payment, $12,050 - $2,500 = $9,550.

Question 22

On an FHA annually adjusting ARM, assume that the starting rate was 5%; the margin is 2.5%; the index in 6 months is 3%; the index in 12 months is 3.5%; the index in 18 months is 3.25%. What is the borrower’s interest rate in 18 months?

Answer 22

6%

-The margin plus the index as 12 months is 6%. There is additional superfluous information in this question. The loan adjusts annually so you only need the index at 12 months.

Question 23

If there are two borrowers on the loan but the two borrowers are unmarried, they would be considered what:

Answer 23

Co-mortgagors

-Only borrowers who are married can be included on the same 1003 and be considered co-borrowers. If there are two unmarried borrowers, they must fill out two separate 1003s. These two borrowers are called co-mortgagors

Question 24

What is the note rate for a $150,000 loan with a 2/1 buy down when the borrowers start with a payment rate of 4% for 12 months; then 5% for another 12 months; then 6% for the rest of the payment term?

Answer 24

6%

-The note rate is the interest rate after the buydown which in this situation is 6%.

Question 25

Your customer owns several rental properties, one-third of which have a Negative Net Lease. Therefore, you can conclude that:

Answer 25

The rents are equal to or less than the mortgage amount due each month

-If your borrower has negative net lease it means the amount they get from the income they receive is equal to or less than the amount they have to pay on the mortgage for the investment property on a monthly basis.

Question 26

For an interest only loan of $180,000 with a 5% interest rate, how much is the dollar amount of interest for 7 months?

Answer 26

$5,250

-First find out the interest for the year, $180,000 x .05% = $9000. Divide $9,000 by 12 to get the monthly interest, that is $750. Multiple $750 by 7 months to get $5,250 in interest over 7 months.