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Mortgage Licensing > Mortgage Terminology > Flashcards

Mortgage Terminology Flashcards

1
Q

Form 1003 “ten-o-three”

A

Standard loan application form

Designed by Fannie Mae and Freddie Mac used to obtain financial and personal info from borrowers.

Also known as Uniform Residential Loan Application (URLA) and Freddie Mac Form 65

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2
Q

1031 Exchange

A

A tax deferred exchange of “like” real estate, employed to offset or avoid capital gains tax.

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3
Q

4506-T

A

IRS doc used to retrieve past tax returns, W-2, and 1099 transcripts.

Signed document that gives permission for a third pert to retrieve the tax payers data.

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4
Q

Abstract of title

A

A summary of recorded transactions, concerning a particular property.

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5
Q

Acceleration Clause

A

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.

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6
Q

Accrued Interest

A

Interest earned but not yet paid.

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7
Q

Acquisition Costs

A

Purchase price + closing cost - seller credits = Acquisition Costs

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8
Q

Adjustable Rate Mortgage (ARM)

A

Mortgage where the interest rate is adjusted periodically based on a pre-selected index.

Also known as renegotiable rate mortgage, variable rate mortgage or Canadian rollover mortgage.

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9
Q

Adjusted Basis

A

Cost of a property plus the value of any capital expenditures for improvement minus any depreciation taken.

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10
Q

Adjustment Date

A

The date that the interest rate changes on an ARM.

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11
Q

Adjustment Interval

A

On an ARM the time between changes in the interest rate and/or monthly payment typically 1, 3, or 5 years depending on the index.

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12
Q

Adjustment Period

A

The period lapsing between adjustment dates for an ARM.

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13
Q

Affiliated Business Arrangement (ABA)

A

An arrangement to share or refer business between two different companies involved in providing services in the closing of a real estate transaction.

If there is greater than 1% ownership of a business involved in the transaction, it must be disclosed to the borrower.

Regulated by RESPA.

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14
Q

Agreement of Sale

A

Also known as “sales contract”

A doc in which a purchaser agrees to buy property and the seller agrees to sell, under certain conditions.

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15
Q

Alternative Documentation

A

A method of documenting a loan file which relies on info the borrower is likely to be able to provide, instead of waiting on verifications sent to third parties for confirmation of statements made in the application.

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16
Q

Amortization

A

Loan payment, divided into equal periodic payments, calculated to pay off debt at the end of a fixed period, including accrued interest on the outstanding balance.

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17
Q

Amortization Term

A

Length of time required to pay of the mortgage expressed in months.

Ex: 30 year fixed rate mortgage has a 360 month amortization term.

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18
Q

Annual Percentage Rate (APR)

A

Measurement of FULL cost of the loan. Includes interest and loan fees as a yearly percentage.

It provides consumers with a good basis for comparing the cost of different loans.

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19
Q

Application

A

Often referred to as a 1003, an initial statement of personal and financial info required to approve your loan.

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20
Q

Application Fee

A

A few charged by a lender to cover initial cost of processing a loan application. Includes charges for the appraisal and credit report.

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21
Q

Appraisal

A

Estimate of the value of property.

Based on appraiser’s knowledge, experience, analysis of the property and comparable sales (comps) in the area.

A fee is typically charged.

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22
Q

ARM Disclosure

A

A specific disclosure that must be prepared and presented to the consumer within 3 days of application whenever an ARM transaction is contemplated.

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23
Q

Consumer Handbook to Adjustable Rate Mortgages (CHARM)

A

Must be presented to the consumer within 3 days of applying for an ARM loan.

Memory tool: Where do you wear a CHARM? On your ARM.

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24
Q

Assessment

A

A local tax, levied against a property, for a specific purpose, such as: sewers or street lights.

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25
Q

Assignment

A

The transfer of a mortgage from one person to another.

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26
Q

Assumability

A

An Assumability mortgage can be transferred from the seller to the new buyer.

Requires a credit review of the new borrower and lenders may charge a fee for the assumption.

If a mortgage contains a Due on Sale Clause, it may not be assumed by a new buyer.

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27
Q

Assumption

A

The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller.

Assuming a loan, can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and (new) probably higher market rate interest charges will apply.

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28
Q

Assumption Fee

A

The fee paid to a lender (usually by the purchaser of the property) when an assumption takes place.

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29
Q

Balance Sheet

A

A document showing the financial situation: assets, liabilities, and net worth of a person at a specific point in time.

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30
Q

Balloon Mortgage

A

A loan which is amortized for a longer period than the term of the loan.

Refers to a 30 year amortization and a five or seven year term.

At the end of the term of the loan, the remaining outstanding principle on the loan is due.

This final payment is known as a balloon payment.

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31
Q

Basis Point

A

A unit of measure: 1/100th of one percent.

Ex: the difference between a 9.0% loan and a 9.5% loan is 50 basis points.

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32
Q

Bankruptcy

A

Proclamation by a court of an individual’s or organization’s state of insolvency, or inability, to pay debts.

Petition may be brought by an individual or his creditors, with a goal of orderly and equitable settlement of obligations.

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33
Q

Bi- weekly Payment Mortgage

A

A plan to reduce the debt every 2 weeks instead of the standard monthly payment.

The 26(or possibly 27) bi weekly payments are equal to one half of the monthly payment required, if the loan were a standard 30 year fixed rate mortgage.

The result for the borrower is a substantial savings in interest.

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34
Q

Blanket Mortgage

A

Mortgage covering at least 2 pieces of real estate as security for the same mortgage.

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35
Q

Bona Fide

A

In good faith.

A “bona fide” offer is an offer made in good faith.

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36
Q

Borrower (Mortgagor)

A

One who applies for and receives a loan, in the form of a mortgage, with the intention of repaying the loan in full.

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37
Q

Bridge Loan

A

A second trust, which is collateralized by the borrowers present home, allowing the proceeds to be used to close on a new house, before the present home is sold.

Also known as a swing loan.

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38
Q

Broker

A

An individual in the business of assisting in arranging funding or negotiating contracts for a client, but who does not loan the money himself.

Usually charges a fee or receives commission.

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39
Q

Buy Down

A

When the lender and/or the home builder subsidized the mortgage, by lowering the interest rate, during the first few years of the loan.

Payments will increase when the subsidy expires.

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40
Q

Buyer’s Broker / Agent

A

Person hired to locate a property for purchase and to represent the buyer in negotiations.

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41
Q

Buyer’s Market

A

Market conditions that favor buyers.

With more sellers than buyers in the market, buyers have leverage to negotiate lower prices.

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42
Q

Call Option

A

A provision in the mortgage which gives the mortgagee the right to call the mortgage due and payable, at the end of a specified period, for whatever reason.

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43
Q

Cash Flow

A

The amount of cash derived over a certain period of time from an income producing property.

The cash flow should be large enough to pay the expenses of the income producing property: mortgage (PITI), maintenance, utilities, etc.

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44
Q

Caps (Interest)

A

Consumer safeguards, which limit the amount of change to the interest rate, for an adjustable rate mortgage.

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45
Q

Caps (Payment)

A

Consumer safeguards, which limit the amount of change to the monthly payments, for and adjustable rate mortgage.

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46
Q

Cash-Out (Refinance)

A

A refinance for more money than the balance of the original mortgage, with the extra money taken out of the equity of the property.

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47
Q

Certificate of Eligibility

A

Document given to qualifies veterans, which entitles them to the VA loan.

May be obtained by sending form DADA (Separation Paper) to the local VA office with VA form 1880 (Request for Certificate of Eligibility).

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48
Q

Certificate of Occupancy

A

Document issued by local government agency stating that a property meets the requirements of health and building codes.

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49
Q

Certificate of Reasonable Value (CRV)

A

Appraisal issued by the Verterans Administration showing the property’s current market value.

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50
Q

Certificate of Title

A

Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.

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51
Q

Certificate of Veteran Status

A

The document given to veterans or reservist who have served 90 days of continuous active duty. It may be obtained by sending DD 214 to the local VA office with firm 26-8261a (Request for Certificate of Veteran Status).

This doc enables veterans to obtain lower down payments on certain FHA loans.

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52
Q

Chain of Title

A

The chronological order of conveyance of a property, from the original owner to the present owner.

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53
Q

Clear Title

A

A marketable title, free of clouds and disputes.

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54
Q

Civil Right Act (1866)

A

Enacted April 9, 1866. It was the first US Federal law to define US Citizenship and affirmed that all citizens were equally protected by the law.

It was mainly intended to protect civil rights of African-Americans in the wake of the Civil War.

This legislation was enacted by Congress in 1865 but vetoed by President Andrew Johnson.

It passed again in 1866 and was again vetoed by President Johnson. However a two-thirds majority vote in each house overcame the veto and the bill became law.

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55
Q

Change Frequency

A

The frequency (in months) of payment and/or interest rate changes in an adjustable rate mortgage.

Ex:

  1. 6 month ARM changes every 6 months.
  2. A 2/1/6 ARM changes once per year.
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56
Q

Closing / Settlement

A

The meeting (in wet funding states) between the buyer, seller and lender or their agents, where the property and funds legally change hands, also called settlement.

Closing cost usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other cost assessed at settlement.

The cost of closing usually are about 3% to 6% of the mortgage amount.

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57
Q

Closing Cost

A

Expenses over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property.

These include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc.

Will vary according to the area county and the lenders used.

Also known as Settlement Costs

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58
Q

Closing Statement

A

A financial disclosure statement, which lists the funds received and expected at the closing.

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59
Q

Cloud on Title

A

An outstanding claim or encumbrance that, if valid, would affect or impair the owners title.

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60
Q

COFI / Cost of Funds Index

A

An index used to calculate the rate of an adjustable-rate mortgage.

The rate adjusts based on a cost-of-funds index often the 11th District Cost of Funds.

Index+Margin = Rate

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61
Q

Combined Loan-to-Value (CLTV)

A

The ratio of the total mortgage liens against the subject property, to the lesser of either the appraised value or the sales price.

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62
Q

Commitment

A

A formal offer by a lender to make a loan under certain terms or conditions to a borrower.

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63
Q

Community Reinvestment Act (1977)

A

Also known as Title VIII of the Housing and Community Development Act of 1977, is a United States Federal Law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low and moderate-income neighborhoods.

Congress passed the Act to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.

Banks must extend loans in communities, in which they accept deposits.

64
Q

Condominium

A

A form of property ownership, in which the homeowner holds title to an individual dwelling unit and an interest in common areas and facilities of a multi-unit project.

65
Q

Conforming Loan

A

A mortgage loan under the maximum amount of loans that FNMA (Fanny Mae) and FHLMC (Freddie Mac) are legally allowed to buy.

Maximum loan amount varies by county.

66
Q

Construction Loan

A

A short-term interim loan to pay for the construction of buildings or homes.

These are usually designed to provide periodic disbursements to the builder as he or she progresses.

67
Q

Consumer Financial Protection Bureau (CFPB)

A

A federal agency, which enforces laws that protect consumers of financial products and services such as mortgages, credit cards and deposit accounts.

68
Q

Consumer Reporting Agency (or Bureau)

A

An organization that handles the preparation of reports used by lenders to determine a potential borrowers credit history.

The agency gets data for these reports from a credit repository and other sources.

The Big 3: Experian, Equifax, and Trans Union.

69
Q

Contingency

A

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.

70
Q

Contract Sale or Deed

A

A contract between purchaser and a seller of real estate, to convey title, after certain conditions have been met.

It is a form of installment sale.

71
Q

Conventional Loan

A

A mortgage not insured by FHA or guaranteed by VA.

72
Q

Conversion Clause / Option

A

A provision in an ARM allowing the loan 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.

The conversion feature may cost extra.

Also referred to as a Convertible ARM.

73
Q

Conveyance

A

The transfer of a deed.

Or possibly a lease or mortgage.

74
Q

Covenants, Conditions, and Restrictions (CC&Rs)

A

A doc defining the use, requirements and restrictions of a property.

75
Q

Credit Risk Score

A

A statistical summary of the information contained in a consumers credit report.

The most well known type is the Fair Isaac or FICO score.

The form of credit scoring is a mathematical summary calculation, which assigns numerical values to various pieces of information in the credit report.

The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan.

76
Q

CRV

A

Certificate of Reasonable Value

A property appraisal performed by a VA-approved appraiser that establishes the limit on the principle of the VA loan.

77
Q

Debt-to-income Ratio

A

The ratio expressed as a percentage, which results when a borrowers monthly payment obligation on long term debts, is divided by his or her gross monthly income.

78
Q

Deed

A

A legal doc that transfers a property from one owner to another.

The deed contains a description of property, and is signed, witnesses and delivered to the buyer at closing.

79
Q

Deed of Trust

A

Agreement to pledge property as security for a loan, used in many states in place of a mortgage.

In this arrangement, the borrower transfers legal title to a trustee, who holds the property in trust as security for the repayment of the debt.

The deed of trust becomes void if the debt is repaid, but if the borrower defaults on the loan, the trustee may sell the property to pay the debt.

80
Q

Deferred Interest

A

When a mortgage is written with a monthly payment that is less than required to satisfy the note rate the unpaid interest is deferred by adding it to the loan balance.

Negative Amortization

81
Q

Department of Veteran Affairs

A

An independent agency of the federal government which guarantees long term low or no down payment mortgages to eligible veterans.

82
Q

Discount point

A

Prepaid interest assessed at closing by the lender. Each point is equal to 1% of the loan amount.

Ex: 2 points on a $100,000 mortgage would be $2,000.

83
Q

Dodd-Frank Act

A

Passed July 2010

Purpose:

  1. To promote financial stability
  2. To end “to big to fail”
  3. To protect taxpayers by ending bailouts
  4. To protect consumers from abusive practices.

Established the Credit Financial Protection Bureau (CFPB)

Title X (Consumer Financial Protection Act)

  1. Created the CFPB
  2. Assumed rule making and enforcement of prior regulations pertaining to the mortgage industry.

Title XIV (Mortgage Reform and Anti-predatory Lending Act)

  1. Concerned with regulations such as RESPA, TILA, and others.
  2. Addresses concerns of borrowers and guidelines of mortgage industry to ensure this.
84
Q

Down Payment

A

Money paid to make up the difference between the purchase price and the mortgage loan amount.

85
Q

Due on sale Clause

A

A provision in a mortgage or deed of trust which allows the lender to demand immediate payment of the balance of the mortgage, if the mortgage holder sells the home.

86
Q

Earnest money (deposit)

A

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Deposit made by a buyer, in evidence of good faith, when the purchase agreement is signed.

87
Q

Effective Interest Rate

A

The cost of a mortgage expressed as a yearly rate, usually higher than the interest rate on the mortgage, since this figure includes up-front costs.

It is used to compare the annual interest between loans with different compounding terms (daily, monthly, annually, or other)

The effective interest rate differs from the annual percentage rate (APR):

  1. The effective interest rate generally does not incorporate one-time charges such as front end fees.
  2. The effective interest rate is not defined by legal or regulatory authorities.
88
Q

Encumbrance

A

A legal right or interest in a property that affects title and lessens the property value.

Can take form of claims, liens, unpaid taxes and so on.

Will usually have to be taken care of before a buyer may purchase a property.

89
Q

Entitlement

A

The VA home loan benefit

Also known as eligibility.

90
Q

Equal Credit Opportunity Act (ECOA)

A

Reg B

A federal law, which requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

91
Q

Equity

A

The difference between the fair market value and current indebtness also referred to as the owners interest.

The value an owner has in real estate over and above the obligation against property.

92
Q

Escrow

A

An account held by the lender into which the home buyer pays money for tax or insurance payments. Iiruur

93
Q

Escrow disbursements

A

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance and other property expenses, as they become due.

94
Q

Escrow Waiver

A

Waiver of the requirement to fund an escrow account with lender and instead pay insurance and taxes separately.

May require a fee or higher interest rate.

95
Q

FACT ACT (2003)

A

Fair and Accurate Credit Transaction Act.

An amendment to the Fair Credit Reporting Act.

The act allows consumers to request and obtain a free credit report once every 12 months from each of the 3 nationwide consumer credit reporting companies.

Also contains provisions to help reduce identity theft.

Requires a secure disposal of consumer info.

96
Q

Fair Housing Act

A

Reg V

Prohibits discrimination in real estate transactions because of race, color, religion, sex, handicap, familial status, or national origin.

Applies to mortgage lending as well as other aspects of real estate transactions, including sales and rentals, real estate brokerage, and appraisals.

97
Q

Fannie Mae (FNMA)

A

Federal National Mortgage Association

A government sponsored entity that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by the VA.

A secondary mortgage institution that buys FHA, VA, and conventional mortgages from primary lenders.

98
Q

Farmers Home Administration (FmHA)

A

Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

99
Q

Freddie Mac (FHLMC)

A

Federal Home Loan Mortgage Corporation

Government sponsored entity that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Provides a secondary market for savings and loans by purchasing their conventional loans.

100
Q

Federal Housing Adminiatration (FHA)

A

A division of the department of Housing and Urban Development.

Its main activity is the insuring of residential mortgage loans made by private lenders.

FHA also sets standards for underwriting mortgages.

101
Q

Federal Reaerve

A

The central bank of the US and major regulatory agency for many commercial banks.

102
Q

Fee Simple

A

Absolute ownership of real property.

103
Q

FHA Loan

A

A loan insured by the Federal Housing Administration

While there are limits to the size of FHA loans they are generous enough to handle moderately priced homes almost anywhere in the country.

104
Q

FHA Mortgage Insurance

A

Requires a fee (up to 2.25% of the loan amount) paid at closing in insure the loan with FHA.

In addition, FHA mortgage insurance requires an annual fee of up to 0.5% of the current loan amount, paid in monthly installments.

The lower the down payment, the more years in the fee must be paid.

105
Q

Firm Commitment

A

A promise by FHA to insure a mortgage loan for a specified property and borrower.

A promise from a lender to make a mortgage loan.

106
Q

First mortgage

A

The Primary Lien against a property.

107
Q

Fixed installment

A

The monthly payment due on a mortgage loan including payment for both principle and interest.

108
Q

Floor

A

A pre-determined amount that establishes the min interest rate over the life of an adjustable rate mortgage loan.

109
Q

Forbearance

A

Grace period given when a lender postpones foreclosure, to give the borrower time to catch up on overdue payments.

110
Q

Good Faith Estimate

A

This doc sets out the cost associated with a mortgage including the interest rate, lender fees, title charges, pre-paid interest and insurance.

The Gov requires the lender to nice a borrower a GFE within 3 business days of receiving the loan application.

Lender fees and interest rate (if you have locked rates) may not increase and certain other costs may not increase by more than 10%

111
Q

Graduated Payment Mortgage

A

A type of flexible mortgage where the payments increase for a specified period of time and then level off.

112
Q

Gramm Leach Blily act

A

Established in 1999

Requires financial institutions which offer consumers financial products or services to explain their information sharing practices to their customers and to safeguard sensitive data.

113
Q

Growing Equity Mortgage (GEM)

A

A fixed rate mortgage that provides scheduled payment increases over an established period of time.

The increased amount is applied toward the remaining balance of the mortgage.

114
Q

Home Equity Loan

A

A loan secured by equity in a property.

Usually used for home improvements, major purchases or expenses, and debt consolidation.

Interest paid is usually tax deductible.

Types of Home Equity Loans are HELOCs and Reverse Mortgages (HECMs)

115
Q

Home Ownership and Equity Protection Act (HOEPA)

A

Est in 1994

Addresses certain deceptive and unfair practices In home equity lending.

Amends TILA and establishes requirements for certain loans with high rates and/or high fees.

Also known as Section 32 Mortgages.

116
Q

Housing and Urban Development (HUD)

A

A US Government agency established to implement federal housing and community development programs.

Oversees the FHA.

117
Q

HUD-1 Statement

A

A doc that provides an itemized listing of the funds that are payable at closing.

Items on the statement include real estate commissions, loan fees, points and initial escrow amounts.

Each item on the statement is represented by a separate number within a standardized numbering system.

The totals at the bottom of the HUD-1 statement define the sellers net proceeds and the buyers net payment at closing.

118
Q

Index

A

A published interest rate, against which, lenders measure the difference between the current interest rate on an ARM and that earned by other investments, which is then used to adjust the interest rate on an ARM either up or down.

Index + Margin = Rate

119
Q

Interest Rate Buy Down Plan

A

An arrangement that allows the property seller to deposit money to an account.

That money is then releases each month to reduce the mortgagors monthly payments during the early years of a mortgage.

Sometimes referred to as Pre-paid Interest.

120
Q

Interim Financing

A

A construction loan made during the completion of a building or project.

A permanent loan usually replaces this loan after completion.

121
Q

Jumbo Loans

A

A loan which is larger than the limits set by Freddie Mac and Fannie Mae.

Because Jumbo loans cannot be funded by these two agencies they usually carry a higher interest rate.

122
Q

Lease-Purchase Mortgage Loan

A

Allows low and moderate income home buyers to lease a home with an option to buy.

Each months rent consists of principle, interest, taxes, insurance plus an extra amount that accumulates in a savings account for a down payment.

123
Q

London Interbank Offered Rate (LIBOR)

A

The interest rate charges among banks for short term Eurodollar loans, and common index for ARMs.

124
Q

Margin

A

The amount a lender adds to the index on an ARM to establish the adjusted interest rate.

The margin is the lenders profit.

Index + Margin = Adjusted Interest Rate

125
Q

Mechanics lien

A

A security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property.

It exists for both real property and personal property.

It is considered a cloud on title.

126
Q

Mortgage Insurance Premium (MIP)

A

Insurance from FHA, to the lender, against incurring a loss, if the borrowers were to default.

Insurance purchased by borrower to insure against default on a FHA loan.

MIP protects the lender.

127
Q

Mortgage Disclosure Improvement Act (MDIA)

A

Amendment to Reg Z in 2008

Requires disclosures GFE & TIL 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.

128
Q

Non Assumption Clause

A

A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

129
Q

Non-Confirming Loan

A

A conventional loan that cannot be sold to Fannie and Freddie.

Often these loans are larger than the confirming loan amount.

130
Q

Office of Comptroller Currency

A

The Federal Financial regulatory body, which oversees the Nations federally chartered banks and savings institutions.

131
Q

Office of Thrift Supervision (OTS)

A

The regulatory and supervisory agency for federally chartered savings institutions.

Formerly known as Federal Home Loan Bank Board.

132
Q

PITI

A
  1. Principle
  2. Interest
  3. Taxes
  4. Insurance

The 4 components of a monthly mortgage payments. Does not have to be escrowed.

Also called monthly housing expenses.

133
Q

Points (Loan Discount Points)

A

Prepaid interest assessed at closing by the lender.

Each point is equal to 1% of the loan amount.

Ex: 2 points on $100,000 would cost $2,000.

134
Q

Primary Mortgage Market

A

Lenders such as savings and loan associations, commercial banks and mortgage companies, who make mortgage loans directly to borrowers.

135
Q

Prime Rate

A

Lowest commercial interest rate, charged by a bank on short term loans to its most credit worthy customers.

136
Q

Qualifying Rate

A

The qualifying rate may be a pre-determined percentage of interest, expressed as the “highest possible rate of interest at the beginning of the 2nd year” based on the start rate (i.e. Start rate + 2%)

Expressed as the Fully Indexed Accrual Rate (FIAR) or another amount.

137
Q

Qualifying Ratios

A

Calculations used to determine if a borrower can qualify for a mortgage.

  1. A housing expense as a % of income ratio
  2. Total debt obligations as a % of income ratio
138
Q

Real Estate Settlement Procedures Act (RESPA)

A

A consumer protection law, which requires lenders to give borrowers advance notice of closing costs.

Reg X

139
Q

Reclamation

A

The right of the person, with title to a property, to recover it from the debtor in case of bankruptcy.

140
Q

Reconveyance

A

The transfer of property back to the owner when a mortgage is fully repaid.

141
Q

Regulation B

A

The Equal Credit Opportunity Act (ECOA)

Enacted in 1974, makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction based on:
Race
Color
Religion
National Origin
Sex
Marital Status
Age
The fact that all or part of the applicants income derives from public assistance programs.
Or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

142
Q

Regulation C

A

The Home Mortgage Disclosure Act (HMDA) of 1975.

HMDA is a US Federal law that requires certain financial institutions to provide mortgage data to the public.

143
Q

Regulation V

A

The Fair Credit Reporting Act (FCRA)

It is a US Federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit info.

144
Q

Regulation X

A

The Real Estate Settlement Procedures Act (RESPA)

A Federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement.

145
Q

Regulation Z

A

The Truth in Lending Act (TILA) of 1968.

A US Federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

146
Q

Rescission

A

The cancellation of a contract.

With respect to mortgage refinancing the law that gives the homeowner 3 business days to cancel a contract, in some cases once it is signed, if the transaction uses equity in the home as security.

Three day right of rescission.

147
Q

Reverse Annuity Mortgage (RAM)

A

A form of mortgage, in which, the lender makes periodic payments to the borrower, using the borrowers equity in the home as collateral for and repayment of the loan.

More commonly called a HECM (Home Equity Conversion Mortgage) or simply a Reverse Mortgage.

For borrowers 62+

Typically the borrower must have about 50% equity.

148
Q

SAFE Act

A

Secure and Fair Enforcement for Mortgage License Act of 2008.

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 originators.

Also for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a Nationwide Mortgage Licensing System and registry (NMLS) for the residential mortgage industry.

149
Q

Secondary Mortgage Market

A

The market, into which, primary mortgage lenders sell the mortgages they make to obtain funds to originate more new loans.

This includes investors such as Fannie Mae, Ginne Mae, and Freddie Mac.

150
Q

Usury

A

Interest charges in excess of the legal rate established by law.

151
Q

VA Mortgage Funding Fee

A

A premium of up to 1.875% depending on the size of the down payment paid on a fixed rate loan.

On a $75,000 fixed rate mortgage with no down payment this amount would be $1,406 either paid at closing or added to the amount financed.

152
Q

Verification of Deposit (VOD)

A

A doc signed by the borrowers financial institution verifying the status and balance of his/her financial accounts.

153
Q

Verification of Employment(VOE)

A

A doc signed by the borrowers employer verifying his/her position, salary, overtime, bonuses and the likelihood of continued employment.

154
Q

Verification of Mortgage (VOM)

A

A doc signed by the borrowers serviced verifying the status of the mortgage.

155
Q

Verification of Rent (VOR)

A

A doc signed by the borrowers landlord verifying their rental/lease payment history.

156
Q

Warehouse Fee

A

When the prime rate of interest is higher on short term loans than on mortgage loans the mortgage firm has an economic loss, which is offset by charging a warehouse fee.

Mortgage Licensing (2 decks)

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