New MLO Flashcards
Maximum debt to income ratio on a qualified mortgage
43%
Maximum points and fees on a qualified mortgage
3% or three points
Maximum loan term on a qualified mortgage
30 years
Interest only loans and negative amortization loans are not allowed on what type of mortgage
Qualified mortgage
Creditors must consider eight types of information when establishing a borrowers ability to re-pay a mortgage loan. What are the eight types?
- Current income or assets
- Employment status
- Borrowers credit history
- Monthly payment for the mortgage
- Borrowers monthly payments on other simultaneous mortgage loans
- Monthly payments for other mortgage related expenses
- Other debts of the borrower
- Monthly debt payments compared to the borrowers monthly income. FYI cannot excess 43%
The index plus the margin equals what
Fully indexed rate
This is often referred to as the cost of money.
Index
This is sometimes referred to as a spread, remains fixed for the life of the loan.
Margin
The interest rate on in arm at closing is called what?
Introductory rate
Two other names for introductory rate.
Start rate, initial rate.
On ARM, when the introductory rate is lower than the fully indexed rate at the time of closing, it is known as what?
Teaser rate
This is the length of time between interest rate changes with ARMs.
Rate adjustment period.
The lowest interest rate to which an ARM may adjust is called what?
Floor
This gives the borrower the right to convert from an adjustable rate loan to a fixed rate loan.
Conversion option
A limitation on the amount that an interest rate can increase or decrease at the adjustment date or over the life of the loan.
Rate Cap
What are the two types of rate caps on most ARM loans?
The periodic cap and the life cap
On an adjustable rate mortgage, the first number indicates the maximum amount the interest rate can increase, or potentially decrease, from one adjustment to the next. What is the first number called?
Periodic Cap
On an adjustable rate mortgage, the second number indicates the maximum amount the interest rate can increased during the life of the loan. What is this number called?
The life Cap
Company, individual, or entity that originates, processes, under rights, closes/funds, and services mortgage loans.
Mortgage banker
Company or individual who, for a fee, places loans with lenders, but does not service such loans.
Mortgage broker
A location that offers a variety of financial services.
Commercial banks
Also known as thrifts
Savings and loans associations
Cooperative financial institutions owned and controlled by their members.
Credit unions
They specialize in making high-risk loans it higher interest rates.
Finance companies
State chartered banks that are owned by depositors (thrifts)
Mutual savings banks
Five of the secondary market players include:
Fannie Mae, Freddie Mac, Ginnie May, the Federal home loan Banking system, private investors.
The largest investor in residential mortgages on the secondary market
Federal national mortgage Association or Fannie Mae
It purchases FHA, VA and conventional loans from commercial banks.
Federal national mortgage Association
Second major government sponsored entity on the secondary mortgage market.
Federal home loan mortgage Corporation
Chartered by the federal government to buy mortgages originated by savings and loans
Federal home loan mortgage Corporation
A major player on the secondary mortgage market that is not a government sponsored entity.
Government national mortgage Association or GNMA or Ginnie mae
Wholy own government corporation within HUD.
Government national mortgage Association
A player on the secondary mortgage market that does not buy or sell loans, it issues guarantees on government backed loans.
Government national mortgage Association
Major player on the secondary mortgage market is now a part of hHUD
Government national mortgage Association
4 of the penalties for unethical behavior?
Loss of license, lawsuit, disciplinary action, criminal charges.
An intent to deceive.
Actual fraud
The result of carelessness or negligence.
Unintentional constructive fraud
Any misrepresentation or concealment used in an attempt to obtain a mortgage loan.
Mortgage fraud
What are the two categories of mortgage fraud?
Fraud for property, fraud for profit
When borrowers misrepresent information on the loan applications to qualify, including but not limited to misrepresenting income and expenses, lying about the property being owner occupied versus tenant occupied, and the lying about the source or amount of the down payment.
Fraud for property
A sophisticated version of mortgage Fraud because it involves real estate agents, appraisers, lenders, and closing agents or attorneys.
Fraud for profit
Nonexistent loans and new collateral loans.
Air loan
Forged sellers signature on the deed – property is fraudulently transferred and deed recorded.
Deed scam
Primary mortgage holders sells loan to fraudulent company for servicing.
Double sold loan
Buyer gives a seller a second mortgage without informing the lender, or makes the lender aware but never intends to file the lien to make any payments to the seller, with the seller agreement.
And recorded or silent second
Make loans and/or ‘’rescues” knowing the borrower will not be able to pay.
Equity skimming
Refinance with fee-rich loan that has no net tangible benefits to borrower.
Loan flipping
A person who makes a purchase on behalf of another person. They are used when the real buyer cannot complete the transaction for some reason.
Straw buyer
Appraise at inflated price without justification. FHA requires three months ownership before resale. Appraisers are required to investigate the transfer history of a property for the past three years.
Illegal flipping
ECOA disclosure’s must be retained for how long?
25 months
Civil action may be filed for ECOA violations for up to how long?
24 months
Penalties for noncompliance of ECOA is how much for each individual action?
$10,000
If an application is denied based on the appraisers report, the consumer has the right to request the appraisal report used within how many days of credit decision?
90 days
If an application is denied based on the appraisal report and the consumer has requested the appraisal report, how long does the lender have to provide the report to the consumer?
30 days
If an application was approved, the borrower should receive the appraisal no later then how many days prior to the close of the first lien loan?
Three business days
The fair housing act has seven protected classes, what are they?
Sex, race, religion, color, national origin, disability and familial status
The fair housing act has how many protected classes?
Seven
What are the two protected classes that are only protected by the fair housing act?
Disability and familial status
Trying to induce owners to sell their homes by suggesting that the ethnic or racial composition of the neighborhood is changing, with the implication that property values will decline.
Blockbusting
Channeling Perspective real estate buyers or tenants to particular neighborhoods based on their race, religion, or ethnic background.
Steering
Refusal to make loans on property located in particular neighborhood for discriminatory reasons.
Redlining
How many protected classes does ECOA have?
Eight
What are the eight protected classes under ECOA?
Sex, race, religion, color, national origin, age, marital status, receipt of public assistance.
What are the three protected classes only under ECOA?
Age, marital status, and receipt of public assistance.
The fair credit reporting act states the credit reporting agencies may not report negative credit information more than how old?
Seven years
The fair credit reporting act states that credit reporting agencies may not reports bankruptcies more than how old?
10 years
This Administration is a government organization Within the department of housing and urban development.
Federal housing administration
This administration does not lend money, it ensures the funds for the mortgage to ensure that approved lenders are reimbursed for the losses suffered if there is a foreclosure or short sale.
Federal housing administration
Rule that requires financial institutions to design and maintain safeguards to protect the consumer data.
Safeguards rule
Protects consumers from individuals and companies in obtaining their personal financial information under false, fictitious, or fraudulent pretense is.
Pre-texting provisions
Governs collection of non-public personal information and how it is shared. Consumers have the right to opt in/opt out.
Financial privacy rule
Someone who obtains a specific product or service for personal use
Consumer
Someone that has an ongoing significant relationship with the business
Customer
A step done by an MLO, does not require disclosure and helps in the Pre-determining what a potential borrower may be able to borrow.
Prequalification
Determining if potential borrower can be financed and for what amount.
Preapproval
Rendering a credit decision that may be binding, that is only done by a lender, and triggers mandated disclosures and less specific property not identified.
Preapproval
Who interviews the applicant, pulls the credit report, calculates the debt to income ratio, and gathers all the documentation together?
MLO
Who verifies the information collected by the loan originator, copies paperwork, send out verification forms to the appropriate parties, orders the credit reports if it’s not done by then, and orders the appraisal?
Loan processor
Who evaluates the documentation, borrower information, and various risk factors to make a decision?
Underwriter
What is Fannie Mae’s automated underwriting system?
Desktop underwriter
What is Freddie Mac’s automated underwriting system?
Loan prospector
A loan originators errors or misconduct may result in negative financial consequences for a consumer, therefore there must be safeguards in place to help facilitate payment of the compensation. Protection options include:
- Minimum net worth
- Surety bonding
- Recovery fund
These two entities work with HUD to create the NMLS system
Conference of state bank supervisors (CSBS) and American Association of residential mortgage regulators (AARMR)
An individual who takes a residential mortgage loan application.
Mortgage loan originator
An individual who offers or negotiate terms of a residential mortgage loan for compensation or gain.
Mortgage loan originator
Loans with excessively high fees, misrepresented loans and frequent refinancing that does not benefit the borrower are examples of what?
Predatory lending
An alluring but insincere offered to sell a product or service is called what?
Bait and switch
A purpose to switch consumers from buying advertise products to something else is called what?
Switch after sale
What is the maximum penalty for mortgage fraud?
Not more than $1 million or imprisoned not more than 30 years or both
The following are examples of what?
Origination of a federally related mortgage loan, mortgage broker services and title services. Services related to the origination, processing, or federal mortgage loan funding.
Settlement services
Who is responsible for delivering the loan estimate to the borrower?
Creditor
Another term for interest rate
Note rate
Another term for note rate
Interest rate
These are paid up front to lower the rate.
Discount points
Another term for discount points
Buydowns
A buydown may be paid by one of three interested parties, what are they.
The borrower, seller, or interested third-party.
This is paid to the loan originator as a fee for their service.
Origination points
Both of these appear on the loan estimate as borrower charge.
Discount points and origination points
One origination point equals how much of the loan amount?
1%
The total amount needed to purchase property, including down payment, loan amount, and any allowable buyer paid closing costs.
Acquisition cost
Reduction of the balance of the loan by paying back some principal owed on a regular basis. Payments applied to principal and interest. What is this called
Amortization
This occurs when a portion of each payment is applied to the principal, thereby reducing the outstanding balance.
Positive Amortization
Monthly payment is not sufficient to cover the accrued interest from previous month. What is this called?
Negative amortization
Total payments over the life of the loan pay off entire balance of principal and interest due at the end of the term. What is this called?
Fully amortizing loan
You proceeding to extinguish all rights, title and interest of the owner of a property in order to sell the property and satisfy any liens against it.
Foreclosure
This type of foreclosure requires court action.
Judicial foreclosure
This type of foreclosure does not require a court action.
Non-judicial foreclosure
States that have redemption periods that expire prior to or at time of judicial sale have what?
Equitable right of redemption
States that allow the redemption period to exist even after the judicial sale has occurred. What is this called?
Statutory rate of redemption
Debtors still lose property, but by conveying it voluntarily before final court action, they avoid foreclosure on credit record. Lenders are not obligated to except. What is this called
Deed in Lou of foreclosure
When a seller extend credit to the buyer to finance the purchase of the property.
Seller financing
Real estate installment agreement where buyer makes payments to seller in exchange for right to occupy/use property.
Land contract
Property lease for specific term with option to buy at a predetermined price during the lease term.
Lease/option
Value in one property being traded for value in another property
Equity exchanges
If an advertisement contains any one of the triggering terms about the loan, that advertisement also must include the three following required disclosures.
Amount or percentage of down payment, terms of repayment, annual percentage rate.
In regards to triggering terms, if an ad contains only this, no additional disclosures are required.
Annual percentage rate
