Mortgage Loan Origination Activities (27%) Flashcards
Amortization:
Loan payments made periodically, usually on a monthly basis, that are equal and geared towards paying off the debt in full by the end of a fixed period. This includes the outstanding principal balance and interest.
Bridge Loan:
Short-term financing used by a person or company until a more permanent financing option can be put into place.
Contingency:
A clause or provision during the real estate purchasing process that requires that certain actions be performed before a contract becomes fully binding. For instance, the offer on a home can be contingent upon what is found during a home inspection.
Early Payment Default:
A mortgage loan that goes delinquent for over 90 days or becomes default within the first year. This is one of the largest indicators of potential mortgage fraud.
High-Priced Mortgage Loan:
Generally, a high-priced mortgage loan is one where the annual percentage rate is a certain percentage point higher than the benchmark rate, which is known as the average prime offer rate.
Junior Liens:
Also known as a second mortgage. This is a loan taken out by using your home as collateral while there is still another loan secured on the property. Home equity loans and HELOCs are examples of these second mortgages.
Subordinate Liens:
Subordinate liens incorporate all of the secondary loans on a home behind the primary one used to purchase a home. So, if a borrower sells their home, or defaults on payments, the primary loan, or mortgage, will be first in line to receive their owed money, followed by the subordinate liens.
Table Funding:
This is a lending method where a loan originator does not have access to funds necessary to make loans and then hold onto them until they can sell them on the secondary market. So, the originator will develop a relationship with a lender, who will provide the money for closing costs and then immediately take assignment of the loan.
Lender Credits:
Lender credits are used to offset your closing by allowing the lender to cover them, generally in exchange for a slightly higher interest rate.
Qualified Mortgage:
A defined class of mortgages that meet certain borrower and lender guidelines outlined in the Dodd-Frank regulation. There is an Ability-to-Pay standard, so lenders are obligated to assess and ensure, to the best of their ability, that a borrower will be able to meet the payment requirements of their loan.
Yield Spread Premium:
A form of compensation that a mortgage broker receives from the lender for selling a borrower an interest rate that is higher than the lender’s par rate in exchange for lower upfront costs.
