Mortgages and Residential Lending

Question 1

Adjustable Rate Mortgage

Answer 1

A mortgage in which the borrower and lender share risks of a fluctuating interest rate economy

Question 2

Capacity

Answer 2

The ability to pay a debt or loan being contemplated

Question 3

Character

Answer 3

The desire or willingness to pay a debt or loan being contemplated

Question 4

Collateral

Answer 4

The security pledged for the payment of a loan

Question 5

Conforming Loan

Answer 5

A conventional loan that follows Fannie Mae and Freddie Mac residential loan uniform documentation and qualification parameters

Question 6

Conventional Loan

Answer 6

A loan that is made that is not federally insured or guaranteed

Question 7

Credit

Answer 7

The reputation of a person or firm for the paying of bills when due

Question 8

Gap Loan

Answer 8

Also referred to as a Bridge loan or swing loan. This type of loan is used as a short-term loan until long term financing can be obtained

Question 9

Government-Backed Loan

Answer 9

Residential mortgage loan that is insured or guaranteed by federal agencies

Question 10

Graduated Payment Mortgage

Answer 10

Begins with low payments but increases at regular intervals for set number of years and then levels out for the balance of the term

Question 11

Negative Amoritization

Answer 11

Occurs when the monthly loan payment is not enough to pay the interest due

Question 12

Nonconforming Loan

Answer 12

Also known as a jumbo or high balance loan, can also be sold to the secondary mortgage market, although the purchaser will most likely be a nongovernment entity

Question 13

Participation Loan

Answer 13

A loan where the lender participates in the profits generated by a commercial property used to secure the debt

Question 14

Qualified Mortgage

Answer 14

A new class of mortgage defined by Consumer Financial Protection Bureau rules that are designed to be safer and easier for consumers

Question 15

Release

Answer 15

When the lender removes the lien on a property

Question 16

Reverse Annuity Mortgage

Answer 16

The lender makes monthly payments to a homeowners who repays in a lump sum upon the homeowner’s death or sale of the home

Question 17

Shared Appreciation Mortgage

Answer 17

Lender participates in the appreciation of the property value and in turn accepts a note with a lower rate of interest

Question 18

Subprime Loan

Answer 18

A loan where the applicant does not qualify for prime loans but can qualify for a higher interested rate above the prime rate

Question 19

Take out Loan

Answer 19

This term is used when changing from a short term loan to a long term loan

Question 20

Wraparound Mortgage

Answer 20

Purchasing money transaction subjects to, but still including, encumbrances to which it is subordinate