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MLO Test 2020 > Processing And Underwriting > Flashcards

Processing And Underwriting Flashcards

1
Q

How long must the income or job be before it can be counted as an asset?

A

2 years

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2
Q

How must the borrower prove their income?

A

Tax returns and/or W-2

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3
Q

Some types of income with expiration require years of continues proof. How many years?

A

3 years. Example is child support as income

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4
Q

What can you do if a type of non taxable income is used as income? The underwriter can ….

A

Do a gross up by adding 25% to that non taxable income

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5
Q

How much rental income can be counted?

A

Only 75%

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6
Q

What percent ownership in a business makes the owner self employed?

A

25% or greater ownership makes him self employed

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7
Q

Name a few things that are not considered liabilities.

A

Utilities, cell phone payments, insurance payments, tax payments, union dues, voluntary deduction on paystub

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8
Q

What are the 3 credit score bureaus?

A

Experience, Equifax and Transunion

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9
Q

What is the bankruptcy rules for conventional loans?

A

Ch. 13
-Discharged within the past 2 years, dismissed within the last 4 years, or filed but neither dismissed or discharged within the last 4 years
Non chapter 13 bankruptcies, cannot have filed, discharged or dismissed within the last 4 years.

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10
Q

For conventional loans what are the rules involving foreclosure?

A

No foreclosures in past 7 years. 4 years for a short sale.

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11
Q

What created the ATR rule?

A

Dodd-Frank Wall Street reform a to of 2010, TILA section went into effect in 2014.

8 considerations for ATR

  1. Current or reasonable expected income or assets
  2. Current employment
  3. Monthly mortgage payment of this loan
  4. Monthly payment on an simultaneous loan secured by same property
  5. Property taxes and insurance
  6. Debts, alimony and child support
  7. Monthly DTI
  8. Credit history
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12
Q

What are the 4 types of QMs

A
  1. General QM
  2. Temporary QM
  3. Small Creditor
  4. Balloon-Payment QM
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13
Q

High Cost loans requires homeownership counseling requirements, how many days must that be sent?

A

3 bus days after app

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14
Q

What section are higher-priced loans in TILA

A

Section 35

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15
Q

What are the two types of LTVs?

A

CLTV or Combined Loan to Value
TLTV or Total Loan to Value

CLTV = 1st mortgage + 2nd mortgage divided by the current value of property

TLTV=Maximum loan amount + HELOC max divided by the value

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16
Q

What are the 3 types of appraisals?

A

Sales comparison approach - (most common) comparing property to other similar properties in the area.

Cost Approach - derived from land + construction cost - depreciation.

Income Approach - (Investment Property) Using the potential income of property to determine the value.

17
Q

What does Title mean?

A

The collective term for all a borrower’s legal rights to own, use and dispose of land.

18
Q

What is an easement?

A

Legal right to use another’s land for a specific limited purpose. Ie. Widening a sidewalk

19
Q

What is a restrictive covenant?

A

Is a clause in a deed or a lease to real property that limits what the owner of the land or lease can do with th property.

20
Q

What is encroachment?

A

Where property owner violates the property rights of his neighbor by building something on the neighbors land or by allowing something to hand over on the neighbors property.

21
Q

What is title insurance?

A

Protects against the possibility of future loss should the borrowers’ legal rights to their property be challenged.

22
Q

What is a Deed?

A

The deed is a document that is used by the owner of a real property to transfer all or part of his interest in the property to another. (Evidence of title)

23
Q

Co-Ownership is also known as concurrent ownership. What is concurrent ownership?

A

The ownership of a property by two or more persons who share title to real property.

24
Q

What are the three types of ownership?

A
  • Tenancy in common
  • Right to survivorship
  • Joint Tenancy
25
Q

What is Tenancy in common?

A

Form of co-ownership with two or more persons having an undivided interest in the entire line, but no right to survivorship

26
Q

What is right to survivorship?

A

Means that the property passes automatically to other co-owners when one co-owner dies.

27
Q

What is joint tenancy?

A

Exists when each co-owner has equal undivided interest in the land with the right of survivorship.

28
Q

What is Tenancy by the Entirety?

A

Is a form of co-ownership that involves only owners who are husband and with each having an equal and undivided share of the property. (Husband to spouse)

29
Q

What is a lien?

A

Financial interest in property. As well as a financial encumbrance.

30
Q

What is a foreclosure?

A

Property is sold and the lien holder collects the amount of the debt from the proceeds of the sale.

31
Q

Give an example of a voluntary lien?

A

Mortgage, because it is at the consent of the owner.

32
Q

What is a note or promissory note

A

Written, legally binding promise to repay a debt. The note creates the debt and the mortgage secures the payment.

33
Q

What is the lien priority in the event of foreclosure?

A

Normally the one attached to the land first. Important exception is property tax leans that, superior to other types.

34
Q

What does the flood hazard determination form show?

A

Whether or not the property is in a flood zone

35
Q

Name a few different types of liens

A

Mechanics Lien - Someone who performed work on real property and was not paid
Tax lien - secure the payment of taxes
Judgement liens - Law suit payment through court action
Attachment liens - liens intended to prevent the transfer of property pending the outcome of litigation

36
Q

When do you need flood insurance?

A

If property has a 1 percent chance of flooding in any year. Or 100 year flood. Zone A

MLO Test 2020 (7 decks)

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