NMLS Knowledge Week Before Test Flashcards
Credit Reports Include…
Information available in public records and data reported by creditors
Credit Scoring was designed by…
The Fair Isaac Company
How is Annual MIP determined?
Based on Loan Amount, Loan Term, and Loan To Value
The 1004 is also known as the…
Uniform Residential Appraisal Report
A VOE is a…
Verification of Employment (Documentation used for loan applications who are not self-employed)
Loan Suitability means…
Loan programs are diligently matched to the current financial circumstances of each customer.
INCOME DOCUMENTATION FOR SALARIED LOAN APPLICANTS…
Typically includes paystubs for the last 30-day period and W-2s for the last two-year period.
FHA downpayment is based on
the sales price or appraised value of the property and can be the borrower’s own funds, gift funds, or a
grant.
BANKRUPTCIES STAY ON CREDIT REPORT FOR…
10 Years
Information on consumer credit:
is gathered and sold by consumer reporting agencies.
CREDIT SCORES ARE DEVELOPED…
Using a statistically-validated system. This is
required by consumer protection laws such as
ECOA and FCRA.
TO EVALUATE INCOME CONSISTENCY, UNDERWRITERS REVIEW…
W-2s and 1040s.
TO ENSURE THAT A PROPERTY
MEETS LENDER GUIDELINES, THE UNDERWRITER WILL REVIEW…
The appraisal report
The preliminary title report
Any inspections requested by the borrower or
required by the lender
WHEN UNDERWRITERS REVIEW
DEROGATORY CREDIT
INFORMATION…
They are looking for an explanation of the
derogatory credit.
LENDERS RELY ON PROPERTY
APPRAISALS TO…
Ensure that the value of the property is
adequate to serve as security – or collateral –
for the loan.
Protects the lender from title defects or
undisclosed liens that should have been
cleared up prior to closing.
Lenders Title Policy
Provides protection for the borrower for potential title
liabilities.
HOMEOWNER’S TITLE
INSURANCE
Land and anything that is permanently
affixed to it.
Real Property
Monetary claims that provide a
creditor with the right to foreclose.
Liens
The desired form of holding ownership to
property, because it has the fewest
restrictions.
High Cost Home Loan, First-time borrowers accepting a negative amortization loan, Any borrower seeking a reverse mortgage loan from the FHA, any borrowers
choosing an ARM instead of a fixed-rate loan
IN TITLE THEORY STATES…
The borrower gives legal title to the lender,
but retains equitable title. The lender “owns”
the property via a deed of trust.
IN LIEN THEORY STATES…
The borrower retains legal and equitable title
to the property.
DRY SETTLEMENT OCCURS
WHEN…
Parties meet to execute documents, but funds
are not disbursed.
WET SETTLEMENT OCCURS
WHEN…
Parties meet to execute documents and funds
are subsequently disbursed.
LOAN APPLICANTS THAT MAKE A
FALSE STATEMENT ON THE 1003…
May face a five-year jail term
