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MLO Licensing > Non Traditional Mortgage Products > Flashcards

Non Traditional Mortgage Products Flashcards

1
Q

How does the SAFE Act define a non-traditional mortgage?

A

Anything other than a 30 year fixed rate mortgage.

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2
Q

How does the SAFE Act define a traditional mortgage?

A

30 year fixed rate mortgage.

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3
Q

Conforming mortgages meet standards set by who?

A

Fannie Mae & Freddie Mac

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4
Q

Conforming mortgages may be sold in the ________?

A

Secondary market (where lenders sell existing loans to other lenders)

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5
Q

What are non-conforming mortgages?

A

They do not meet standards of Fannie Mae/Freddie Mac. Cannot be sold on the secondary market. Also called jumbo loans.

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6
Q

What is another name for non-conforming loans?

A

Jumbo loans.

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7
Q

What is an interest only promissory note also called?

A

Straight Note

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8
Q

What is a straight note/interest only note?

A

Calls for payments of interest-only during term of note.

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9
Q

What is a partially amortizing note also called?

A

Balloon payment/installment note with balloon

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10
Q

What is a partially amortizing note/balloon payment?

A

Calls for periodic payments of principal/interest during loan term with balloon payment at end of term to pay off balance due.

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11
Q

What is negative amortization?

A

Monthly payment is not sufficient to cover the accrued interest from previous month.

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12
Q

What is a fully amortizing installment note also called?

A

Self-Liquidating Loan

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13
Q

What is a fully amortizing note?

A

Calls for regular payment of principal/interest, calculated to pay off entire balance by end of loan term.

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14
Q

What are the 4 types of promissory notes?

A
  1. Straight Note/Interest Only Note
  2. Partially Amortizing/Balloon Payment
  3. Negative Amortization
  4. Fully Amortizing/Self-Liquidating Loan
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15
Q

What is the acceleration clause?

A

Gives lender right to declare entire loan balance due immediately because of borrower default or for violation of other contract provisions.

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16
Q

What is the alienation clause?

A

Gives lender certain stated rights when there is transfer of ownership in the property.

17
Q

What is the alienation clause also known as?

A

Due On Sale Clause

18
Q

What is the rate for an ARM made up of?

A

Index + Margin = Rate (Fully Indexed Rate)

19
Q

What is the Index (ARMs)?

A

The index is often referred to as the cost of money.

Index is the part that “adjust” (goes up and down)

20
Q

What is the Margin (ARMs)?

A

The Margin, which is sometimes referred to as a spread, remains fixed for the life of the loan.

21
Q

What are the 3 components of an ARM?

A
  1. Index
  2. Margin
  3. Rate
22
Q

What are buydown plans also known as?

A

Discount points

23
Q

What are buydown plans (discount points)?

A

Money paid up front to buy-down interest rate and/or lower monthly mortgage payments

24
Q

Who can pay for buydown plans?

A

Borrower, seller, builder, etc.

25
Q

What are the 2 types of buydown plans (discount points)?

A

Permanent buy downs reduce payments for life of loan.

Temporary buy downs reduce payments for a specific period of time.

26
Q

1 Point = __ % of the loan amount

A

1%

27
Q

How old must a borrower be in order to qualify for a Reverse Mortgage?

A

62 years old

28
Q

What does a reverse mortgage do?

A

Allows qualified borrowers (62 and older) to convert equity in home without selling or making payments

29
Q

What happens to the loan in a reverse mortgage?

A

Balance of loan rises as equity shrinks (rising debt, falling equity)

30
Q

What is FHA’s Reverse Mortgage?

A

HECM - Home Equity Conversion Mortgage

31
Q

What 4 reasons would a Reverse Mortgage end?

A

When last surviving borrower:

  1. Dies
  2. Sells the home
  3. Non-payment of taxes and insurance
  4. Ceases to live in home for 12 consecutive months
32
Q

What is a Hybrid ARM?

A

An ARM with an initial fixed rate period greater than one year (period). For example, 3/1, 5/1, 7/1, or 10/1 ARMs.

33
Q

How many payments would a borrower make with a bi-weekly mortgage plan?

A

26 annual payments (equals1 extra monthly payment each year)

34
Q

What does a blanket mortgage cover?

A

More than one parcel of land or lot. Usually used to finance subdivision developments.

35
Q

What is a bridge mortgage? (swing loan)

A

Occurs between the termination of one mortgage and the beginning of the next. When the next mortgage is taken out, the bridge mortgage is repaid.

36
Q

What is a Home Equity Loan?

A

Usually a one-time loan for a specific amount of money/specific purpose; a closed-end loan.

37
Q

What is a Home Equity Line of Credit (HELOC)?

A

Money that is available to the homeowner to be borrowed as needs arise; an open-end loan.

38
Q

What is a package mortgage?

A

A mortgage that includes personal property, like appliances, in the property sale and all are financed together in one contract.

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