Mortgage Loan Origination Activities (25%) Flashcards
The Principle of __________ states that a knowledgeable consumer will pay no more for a property than the cost of acquiring an equally desirable alternative property.
Substitution
Mortgages have __________ foreclosure and require court action to foreclose on a property.
judicial foreclosure
Discount points (buydowns) are paid upfront to the \_\_\_\_\_\_ for lowering the interest rate, and origination points are paid to the \_\_\_\_\_\_\_\_ as a fee for service.
Lender / loan originator
If a property is in a flood zone, the lender will require __________ for the life of the loan.
flood insurance
Assessing an individual’s risk (underwriting) may be done manually or by the __________.
automatic underwriting system (AUS)
Commission, Overtime, Bonus, Part-time, Interest and Dividend income must be averaged over __ years.
Averaged over 2 years
Trust Deeds are __________ and do not require a court action to foreclose on a property.
Non-judicial
The note (promissory note) is the legal evidence of the _____ and is not recorded.
debt
Hazard insurance does not cover damages due to perils of ________.
flood
HCLTV stands for __________.
Home equity line of credit (HELOC) Combined Loan-To-Value ratio
If unemployment is a part of an applicants natural annual work cycle, then it can be included in their qualifying income if it has shown for the past ___ years on the borrowers tax return.
2
Late fees are due after the ____ of the month.
15th
If a borrower uses unemployment as qualifying income then the the average unemployment income from the past __ years is used.
2 years
Applications can be taken which 4 ways?
Face-to-face, over the phone, through the mail or over the Internet
The _____________________ prevents a mortgage broker from choosing the appraiser for loans that are sold to Fannie Mae. The Dodd-Frank Act extended the law to include all mortgages.
Home Valuation Code of Conduct (HVCC)
The one promising to pay the money is called the ______.
maker
A mortgage is a _________ lien; special assessments and mechanic’s liens are ______________ liens.
voluntary lien / involuntary liens
Fannie Mae requires a maximum Housing Expense Ratio of __%.
28%
The three approaches to estimating property value are the:
- Sales Comparison Approach (residential and vacant land)
- Cost Approach (new construction and special-use properties)
- Income Capitalization Approach (income producing properties)
The two types of documents associated with a loan are the _______ and the __________.
mortgage / promissory note
Buy down points (temporary points) shown as FHA 2-1, allow a purchaser to reduce the interest rate on a mortgage by __% for the first year, __% for the next year, and __% every year thereafter.
2% / 1% / 0%
The appraiser must be paid a ______, and not a fee based on the appraisal value.
flat fee
The income approach is most useful for __________ and __________ property.
income-producing commercial / investment
The Housing Expense Ratio =
PITI ÷ Gross Monthly Income
In the Sales Comparison Approach, the appraiser researches a minimum of __ closed sales that are similar in characteristics to the subject property.
3 closed sales
A borrower’s payment history on previous mortgages or rent must be verified for ___ months.
12 months
The underwriter is responsible for evaluating both the risk of the ________ and the ________.
borrower / property
The lender always makes the final decision to _______ a loan. The lender issues the ____________.
Final decision to fund a loan / Clear-to-Close
Monthly interest rate is calculated by
loan amount x interest rate ÷ 12
Fixed discount points gives a borrower a ______ for the life of the loan.
lower interest rate
Loan consummation is the point and time that the Consumer becomes ______________ on a credit transaction. Often referred to as “doc signing” or “closing” on the exam.
contractually obligated
The Income Approach Appraisal analyzes _________ or ________ the property does or could generate. Sometimes called capitalization approach.
revenue / income
Origination fees are charged on _____ that close and cover ___________.
Loans that close / administrative costs to close/service loan
Prorated mortgage interest paid by the borrower at closing is calculated by:
(loan amount x interest rate)/365 days) x number of days left in month including closing day
Retirement and pension income must continue for __ years beyond the application date in order to be included as income.
3 years
The borrower is called the ______.
Trustor
FHA requires a maximum Housing Expense Ratio of ____.
31%
Public Assistance Income can be considered any of the following:
Child support, alimony, social security income, retirement income, pension, etc.
__________ is the most probable price a property will bring in a fair and open market.
Market value
The _______ is the beneficiary who retains note and deed of trust.
Lender
An appraisal is valid for __ months. It must be re-certified if the appraisal will be __ months or ___ days old or more at closing.
6 months / 4 months (120 days)
Combined Loan-to-Value Ratio (CLTV) =
1st Mortgage + 2nd Mortgage ÷ the sales price or appraised value (whichever is lower).
Employment income must be verifiable for the past __ tax years. Any source of income which is not verifiable is _______ to the lender.
2 / Not acceptable
Annual interest rate is calculated
loan amount x interest rate
Yield spread premium (or lender credits) is a tool MLOs can use to reduce a borrowers ____________.
settlement costs
The Cost Approach Appraisal calculates the __________, _________ and ____________.
cost of land, site improvement, and construction of structure
Daily interest rate is calculated
loan amount x interest rate ÷ 365
Each discount point and loan origination point costs __% of the loan amount.
1% of the loan amount
Loan-to-Value Ratio (LTV) =
The loan amount ÷ appraisal value or purchase price, whichever is less
Public Assistance income is “grossed up” by _________ during underwriting because it’s non-taxable.
1.25 (increased by 25%)
The VA ___________ the housing expense ratio
Does not consider
AUS stands for _____________.
Automatic Underwriting Systems
The one that will receive the money promised is called the ______.
payee
The Fannie Mae appraisal form is called the _____________________.
Uniform Residential Appraisal Report (URAR) – form 1004
To determine the highest and best use of a property, the use must be _________, ________ and __________.
legally permissible, physically possible and financially feasible
When a married applicant qualifies for a mortgage based on his or her own financial capacity (without any assets or income of his or her spouse being taken into consideration), the spouse _______ need to sign the note.
does not
A borrower may charge ____ for an appraisal and up to __% of the loan amount to his/her credit card to pay for lock-in fees.
$500 / 1%
Points are used to lower_______ and each point will ______________ .
interest rates / lower the rate by 0.25%
The Total Debt to Income Ratio =
PITI + other monthly debt ÷ Gross Monthly Income
As it relates to rental income – the underwriter will only consider ___% of rental income collected.
75% - The other 25% is considered vacancy factor.
Property appraisers must be licensed and adhere to the ________________.
Uniform Standards of
Professional Appraisal Practice (USPAP)
The cost approach is most useful for _________ or _____________ producing property.
unusual or non-income producing property.
Receipt of alimony or child support payments must continue for ___ years beyond the application date in order to be included as income.
3 years
The ______ and _____ of ________ establish the lien position of the mortgage.
date and time of recording
The Uniform Residential Loan Application (URLA) is also called the _____.
1003 or Form 1003
Mortgage Fraud is investigated by the ____.
FBI
Mortgage fraud is punishable by up to ___ years in prison and/or a fine of up to $__________.
30 years/$1,000,000
The core of a loan originator’s job is to obtain a complete and accurate ____ supported by ___________ from the borrower.
1003/documentation
The ___________ evaluates the documentation, borrower information, and various risk factors to make a decision.
Underwriter
The ____________ orders the appraisal.
Loan Processor
The ____________ will verify the information collected by the loan originator, such a s check stubs W-2 forms, copies of bank statements and other documents.
Loan Processor
A _________________, also known as the ____ is the standard appraisal form used to appraise single-family homes.
Uniform Residential Appraisal Report / 1004
An appraisal is valid for ___ months but must be rectified if it will be __ months old or more at closing.
12 months / 4 months
After the borrower makes the down payment lenders would like to see at least enough to cover __ months’ mortgage payments of principal, interest, taxes and insurance
2 months
