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a-SAFE Exam > SAFE exam > Flashcards

SAFE exam Flashcards

1
Q

4 C’s to Underwriting

A
  1. Capacity
  2. Collateral
  3. Cash
  4. Character

If every C is good, they approve/ clear
OKTC - Okay to close

Capacity: Borrowers ability to repay a loan
Collateral: is appraisal of subject property
Cash: Assets/ Capital
Character: credit history - how much you’ve paid in the past. -main thing they look at
-if 30 days late on any account past 24 months, could cause someone not to qualify

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2
Q

How much does a credit pull affect the score as long as you shop around within in 45 days?

A

1% of your score

and you can get it pulled by as many lenders as you like within in 45 days

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3
Q

FNMA,
FHLMC
Investers are all what market?

A

Secondary market

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4
Q

What are listed as Primary Market?

1st point of contact

A 
Banks (Depository)
Credit Union (Depository)
Credit Unions  (Depository)
Thrifts  (Depository)
Lenders (NON- Depository!)
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5
Q

MBS

A

Mortgage Backed Security

-bundle of mortgages securitized for secondary market

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6
Q

Securitization

A

Securing a bundle of loans to sell to Fanny Mae, Freddy Mac, and Investor Banks with documents in order

Fanny Mae, Freddy Mac, and Investor banks will sell mortgage securities to each other

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7
Q

Portfolio Lender never leaves the ?

A

company that’s taking care of it

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8
Q

Servicer

A

an individual or entity that services a loan by performing responsibilities such as sending statements to borrowers, accepting payments, issuing late payment notices, and managing escrow accounts.

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9
Q

Section 6

15/15/60 Rule

A

When your loan is paid off by original

  • They have 15 days to provide document to new lender
  • Servicer has 15 days to send a new welcome letter
  • If borrower accidentally makes a payment to original company, it cannot be considered late in that 60 days
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10
Q

RESPA means? and deals with?

A

Real Estate Settlement Procedures Act

to provide consumers with info. on costs of closing so they can shop for settlement services

Regulated by HUD and CFPD

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11
Q

4 main things of RESPA (SK-TE)

A

S- Servicing. Section 6 - 15/15/60 rule

K- Kickbacks- Section 8 -
No kickbacks or referral fees are allowed between third party and lender.

T- Title - section 9- cannot force borrower to use a certain title company

E- Escrow - Section 10 - a bank cannot keep $50 or over than what is needed in escrow account

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12
Q

Escrow is meant to?

A
  • Get rid of co-mingling of funds
  • is any account established or controlled by a servicer on behalf of a borrower to pay taxes, insurance premiums, or other charges related to a mortgage loan, including charges to which the borrower and servicer have voluntarily agreed.
  • lenders must maintain an escrow account if required
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13
Q

Documents required for escrow account

A
  1. Initial Escrow analysis / statement
    - Due at closing or 45 days after closing
  2. Annual Escrow Statement
    -Due at closing or within 30 days of closing
    (bank has max 30 days to send out)
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14
Q

1/6 Rule

A

Lenders cannot have more than needed in the escrow account.

Only a 2 month cushion is allowed by lender

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15
Q

RESPA only applies to what type of properties?

A

1-4 Unit residential properties
Condos/homes/apartments

A manufactured home MUST be permanently fixed to the ground and must be in a slab, not pillars

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16
Q

Balloon Loan Not covered by RESPA except if:

A

If the balloon loan has a automatic refinance provision built into it (meaning they will pay interest only then it will roll into a fixed interest rate loan)

and a
1. Construction Loan (blue prints must be drawn up and built in 24 months for RESPA to apply

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17
Q

Good Faith Estimate

A

Includes a rate lock fee- underwriting
This allows the customer to shop around for best rate

  • this estimate must be sent in 3 days
  • good for 10 days from date of application (sundays and federal holidays don’t count)
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18
Q

HUD 1

A

tells interest rate and closing costs

Due at closing or 1 day Before closing

  • We don’t work for the seller so they never get a copy
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19
Q

Section 8 Violation is:

A

$10,000 fine and 1 year in prison

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20
Q

TILA - Regulation Z

A

Truth in Lending Act
“Teela Zeela” 1968

  • Enacted under the Consumer Protection Act (CCPA) to protect consumers by disclosing the costs and term of credit
  • Creates uniform standards for stating cost or credit to encourage consumers to compare diff. options
  • Ensures that advertising is truthful and gives consumers the right to rescind certain loans
  • Federal Reserve Board issues regulations
    FTC handles the enforcement for mortgage professionals
  • *** Applies to ALL businesses that regularly offer or extend credit for personal, family, or household purposes
  • Does not apply to business, agricultural, or organization or credit in excess of $25K unless secured by real property

Basic purpose is to provide in disclosure to provide true cost and terms of credit being abstained

  • APR
  • Finance charge
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21
Q 
Finance charge (used to calculate APR)
COUIM
A

C- Closing agent fee, Settlement fee

O- Origination fee (bank charge/fee), processing fee

U- Underwriting fee, loan commitment

I- Interest (total)

M- Mortgage broker fee , PMI, MIP

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22
Q

Final TIL (Truth in Lending) disclosure is due

A

3 days in person or 7 days if in the mail

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23
Q

Fixed rate loan and APR cannot be

A

1/8 of 1 point that you said on LE

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24
Q

If doing a refinance

A

Right to cancel or Rescission form (both are same thing)
(Only apply to owner occupied home)

If APR is higher than what it should be, customer has 3 years to cancel AND
Customer must get 2 copies of Final TIL or 3 years to cancel

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25
Q

CFPB monitors

A

monitors RESPA, TILA, ECOA

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26
Q

Bait and switch

A

saying one price and then selling it for another

Triggering terms must show APR with it

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27
Q

Fee packing (TILA cont…)

A

illegal extra charges

Docking fee is illegal

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28
Q

HOEPA / or High Cost loan

Limits in %?
and BAPS

A

Home Owners Equity Protection Act - Under TILA

Section 32- High Cost

to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees.

Exceeds APOR by:

  1. 5% on first
  2. 5% on subordinate
"BAPS"
no Balloon payment
ATR
no Prepayment penalty
Speak to HUD counselor

Prepayment penalties (not allowed for HOEPA loans under any circumstances)

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29
Q

HPML

A

High Priced Mortgage loans
Section 35

if APR exceeds APOR by

  1. 5% on first
  2. 5% on subordinate

“APE”
ATR
no Prepayment penalty
requires Escrow

“32 comes before 35 so cost comes before price”
Section 32 is High cost
Section 35 is High priced

APOR = Avg Prime Offered Rate - published by CFPB

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30
Q

Consumer Hand Book is required by:

A

TILA

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31
Q

TRID stands for?

and ALIENS?

A

TILA - RESPA Integrated Disclosure

-CFPB - Dodd Frank Act
LE and CD

Requires 6 pieces of information for an application to be received (ALIENS)

A- Address
L- Loan amount
I- Income - Gross monthly
E- Est. of property value
N- Name
S- SSN
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32
Q

TRID has 3 buckets (tolerances from LE to CD)

A
  1. No tolerance
  2. Zero Tolerance: COAT
    - once put on LE, nothing can change
  3. 10% tolerance- they can pick (we use this one)
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33
Q

COAT (from the 2nd bucket of TRID)

A

C- Credit Report
O- Origination (bank charges)
A- Appraisal Report
T- Transfer taxes

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34
Q

Tolerances explained

A

10% tolerance is when we have a list of companies we are associated with and they can pick off that list if they request the list of title companies

Zero tolerance is when the lender forces you to use a particular company

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35
Q

CD

A

Closing disclosure

7 days by mail or 3 days in person before closing

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36
Q

ECOA - Regulation B

A

Equal Credit Opportunity
Regulation B (“babies/black” - race and pregnant women
-1974

Illegal to discriminate against “MS. NORA SPARC”

M - Marital status (can ask if married or un married)
N O - National Origin (can ask if U.S citizen or green card holder)
R- Race 
A- Age
S- Sex
P- Public assistance
R- Religion
C- Color

Applies to all stages of loan process

Enforced by CFPB and Dept. of Justice

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37
Q

Who regulates ECOA

A

CFPB

Consumer financial protection bureau

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38
Q

ECOA has 4 documents

A
  1. Adverse Action Notice
  2. Notice of Action Taken (ex. moving forward with loan)
  3. Notice of incomplete application
  4. Right to receive a copy of your appraisal - Due within 3 days of application
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39
Q

Disparate Treatment

A

Intentional
When a lender uses one or bases to determine credit availability

when an employer discriminates against a specific individual or employee because of that persons race, color, national origin, sex, or religion

  • If reasonable business justification such as profitability factors- then no violation occurs
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40
Q

Disparate Impact

A

often Unintentional
when there is collateral effect on potential borrowers
- Usually involves failure of a lender to provide the same level of assistance to all applicants such as marginally qualified minority applicants

Disparate-Impact occurs when an employer discriminates against an entire protected class

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41
Q

Overt Discrimination

A

blatant statement of act that clearly evidences discrimination

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42
Q

Steering

A

deliberately guiding an applicant toward or away from certain loan products

using prohibited bases to refer applicants to subsidiary, affiliates, or lending channels

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43
Q

HMDA - regulation C

A

Home Mortgage Disclosure Act

Section 10 of the 1003
“C’s for discrimination”

  • Race/ Sex/ Ethnicity
  • Federal Reserve Board issues regulations- enforcement is handled by indiv. federal agencies (FDIC, NCUA, etc)

You ask customer is they would like to answer, but they don’t need to.
If they don’t answer then you need to guess

Lenders report because banks must keep a HMDA in file registry of: sir name, loan #,
location (zip code, city and state),
type & purpose of loan, was it approved or denied,
race, sex, ethnicity, & income of applicant
identification of a loan that is subject to HOEPA

This info is used to see if there are any patterns of discrimination

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44
Q

CRA

A

Community Re- Investment Act
Regulation BB

Tells lenders if you have done business in a certain area

  • Redlining is there are certain zip codes that a bank won’t lend to
    Reverse redlining is targeting certain zip codes
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45
Q

GLB Act. Reg. P

OR (GLBA)

A

Gramm Leach Bliley Act
“SPF”

S- Safeguarding
Safeguard Rules- all paperwork with Personal Information must never be left out and you must shred it when done

P- Pretexting- (“pretending”) to be someone else to find out information

F- Financial Privacy - protection of NPI

Also known as the Financial Services Modernization Act of 1999

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46
Q

FCRA

A

Fair Credit Reporting Act
Reg V
(“very good or very bad credit”)

-*Creates obligations/restrictions for CRA’s (consumer reporting agencies). FTC enforces

Deals with credit
Regulates how credit info is collect, used, & shared
Enables borrowers right to dispute data on their credit reports

Big 3 are: Equifax, Transunion, Experian

Notice of adverse action taken

If dispute, 5 day window for company to mail customer letter they are fixing it then 30 days to fix the bad reporting

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47
Q

FACTA

A

Fair and Accurate Credit Transactions Act - 2003
This is an amendment to FCRA

  • Goal is to reduce risk of identity theft by regulating how personal info is handled
  • Credit reporting agencies must provide borrowers with 1 free credit report if requested

FTC Federal Trade Commission- Red Flag Rules is part of this and banks must establish an ID theft policy

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48
Q

Primary Market

A 
Where loans are orginated/ transactions
- Depository institutions (banks)
- Registered Originators
FDIC and NCUA - take deposits
(Federal deposit insurance co & National Credit Union Assoc.
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49
Q

From 2008 - Regulation G - all banks have to be _______ with the US government

A

registered

depository banks

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50
Q

Secondary Market:

A

Where the securities are traded by investors

Primary is where they are created

Behind the scenes/ who is backing- where the $$$ comes from
market where existing securities or other assets are bought and sold

Lenders make money on sale of loans- Service Release Premium (SRP)

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51
Q

Non depository are _____ & ______

A

Licensed and Registered

Regulation H = License
To tell states they must meet the minimum requirements for loan officers
(“home- need license in home state”)

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52
Q

Brokers are

A

the middle man

“licensed” originator

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53
Q

Title insurance is paid by

A

the owner but is for the lender

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54
Q

Regulation H - Minimum requirements

A

20 hours of pre-licensing
3- federal
3- ethics
2- non traditional mortgage products

Then every year 8 hours of cec
3 federal
2 ethics
2 non traditional mortgage

must pass the 125 question exam with 75%+

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55
Q

part of Reg. H - requirements are to include _____ _____, pay into state fund, or maintain a minimum net worth

A

Ensurity bond

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56
Q

Exceptions of Reg. H where you don’t need to be licensed

A
  • If you work for the government and negotiate mortgage contracts
  • if you’re an attorney and your fiduciary responsibility is to negotiate a mortgage
  • Asked by a close friend or family member
  • If the home is your primary residence
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57
Q

Fannie Mae - FNMA

A

1938 - FNMA.
Federal National Mortgage Association

  • Buys “conforming” loans (conforms to FNMA & FHLMC reqs for funding)
  • Government Sponsored Entity - GSE- 2008 placed in conservatorship
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58
Q

What is same for both Fanny and Freddie:

A

Provides a source of funds for the lenders- this is called Securitization

  1. They buy loans and pay service companies to service the loans
  2. Mortgage backed securities - bundle mtg loans & sell as bonds to Inv. (graded A, B, C)
  • Both GSE and placed in conservatorship
    (Government Sponsored Entity)
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59
Q

Freddie Mac - FHLMC

A

Federal Home Loan Mortgage Corporation

  • Created to complete FNMA (fanny) and similar to FNMA, but a little more flexible
  • Overseen by FHA- Federal Housing Finance Agency
  • Better LTV than Ginnie Mae
  • Won’t accept someone one foreclosure in past 7 years
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60
Q

Ginnie Mae

A

Government National Mortgage Association
(*Bookkeeper)

  • Provides insurance to investors purchasing MBS in the secondary market
  • Independent private gvt agency
  • Deals with govt insurance/ insuring guaranteed loans
  • From VA/ FHA/ USDA/
    -Fannie and Freddie buy as well
    97% of all loans follow Fanny and Freddy
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61
Q

Private Investors

A

If a loan doesn’t meet govt guidelines, and has no govt backing in the event of default, that loan can still be written, but would be funded by a private bank or investor who will take the risk

***“Non-Confoming” or Jumbo loans/ Non Agency

62
Q

Encumbrance

A

a legal claim on a property

encumbrance is a third party’s right to, interest in, or legal liability on property that does not prohibit the property’s owner from transferring title.

A mortgage is a lien and Encumbrance

63
Q

Abstractor

A

His job is to research ownership for the past 3 years and check county records

A title report has a fee to make sure there are no encumbrances

64
Q

1008 Form is what type of report?

A

Transmitter Summary Report

  • “Index” that says tells you where pages are
  • Once stack is complete, underwriter gets it and only they can approve it
65
Q

Title/ Deed. Vs. Lien

A

Evidence of ownership. Formally recorded at the courthouse
Shows chain of ownership, and any liens on property

Lien is - debt secured against your house/ property (collateral)

66
Q

“Mechanics” Lien

A

Mechanics Lien:

placed by contractor for unpaid work. They can put a lien on house until work is completed & paid in full

67
Q

Hypothecation

A

You hold the title, bank has the loan

68
Q

Re-conveyance

A

Title goes to you when loan is paid in full

They “re-turn” it to you

A Defeasance clause - allows Reconveyance to happen

69
Q

Mortgage

A

Document that connects loan to home
Creates a “Security Instrument” in case of foreclosure
- Also called a “Deed of Trust”

-Once the mortgage is recorded, it becomes a new Lien

70
Q

Deed

A

Evidence of ownership

Typically refiled with every change of ownership

71
Q

Acquisition Costs =

A

purchase price + closing costs

72
Q

Down payment - 2 types

A
  1. Seasoned - how long they’ve had it
    Needed to have it at least 2 months
  2. Out of pocket - Can be gifted, granted

There is also “Earnest Money” - deposit towards downpayment, made in Good Faith

73
Q

Seller Concessions

A

Used to cover closing costs
***Can never be used to borrowers down payment

<10%, the seller can contribute up to 3%.

If down payment is 10% - 24.9%, the seller can contribute up to 6%

VA- 4%

If your down payment is more than 25%, the seller can contribute up to 9%

74
Q

Rate Term Refinance vs. Cash-out-Refinance

A

Rate Term Refinance:
Replacing old mtg(s) w/new one
New loan amt = Old mtg balance + Closing costs

Cash-out-Refinance:
Paying off old mtg(s) + possibly consumer debts or getting extra cash our from equity

75
Q

HERA “Housing and Economic Recovery Act”

A

= Federal Law

Fanny & Freddy were so bad they had a conservator put over them by the government
FHEA monitored them

76
Q

Balloon Loan

A

Periodic payments including final payment is larger than preceding payments
(180/360) Amortizes over 30 years, but balance is due at year 15.

77
Q

Construction Loan - also called

A

Interim loan

periodic disbursements as builders progress

78
Q

Bridge loan

A

Short term loan collateralized by borrowers current home and used to close a new home before the present home is sold (Aka- swing loan)

79
Q

“Buying down” the Rate

A

Investing money into the loan, taking a lower interest rate and lower payment (rate goes down, cost goes up)

80
Q

Discount point

A

Bought to lower the rate below Par
Charged 1% of the loan amount per point

Point = 1% of loan amount

81
Q

“YSP’s” Yield Spread premium-

now known as a “borrower credit”

Dodd- Frank Wall Street Reform and Consumer Protection (Dodd- Frank) Act

A

given as credit toward towards closing costs by the lender for taking a rate above Par

a yield spread premium (YSP) is a fee collected by a broker or lender which the borrower uses as a credit toward closing costs in exchange for paying a higher interest rate -(above Par)

Benefit must go to the borrower

YSP must be fully disclosed as a dollar amount/ Recent QM/ ATR Rule

Prohibits UDAAP - Unfair Deceptive or Abuse Acts & Practices

82
Q

APR

A

a uniform measurement of the cost of a loan, including interest and financed costs of closing, expressed as a yearly % rate

APR reflects interest rate, but also 
the points, 
broker fees, 
certain closing costs. 
For that reason, the APR is usually higher than the interest rate.
83
Q

Adjustable rate

A

interest rate is adjusted periodically based on pre determined margin, index, and adjustment interval

5/1 ARM- fixed for 5, adjusts annually after

84
Q

Indexes of the ARM

A

the index determines how the ARM will adjust

a. Indices- LIBOR - London Interbank Offered Rate
Fast moving adjustments
b. COFI- Eleventh District Cost of Fund index
Slow moving
c. 10 yr T-Note

*Treasury bill- Tied to U.S stock market

85
Q

FHA

Non- Conventional govt loan

A

Federal Housing Administration

31/43

FHA insures loans - they don’t “give” loans

3.5% down payment
(500 credit score - need 10% down)

MIP Required!!!
If LTV = 78% MIP goes away at 11 yr mark
If loan is 15 years or less - only MIP for 11 years

UFMIP- 1.75% of loan amount

no prepayment penalties, and fee limits on closing costs (origination fees) cannot exceed 1% of loan amount

(know the 203 (b) and 203 (k) )

86
Q

Reverse mortgage- HECM

Conforming/ Conventional

A

Home Equity Conversion Mortgage- Insured by the FHA

  • A form of mortgage in which the lender makes scheduled periodic payments to the borr. using the borrowers equity in the home as. security for the loan.

Borr. pays T&I (taxes & insurance)
- Must be 62

87
Q

USDA

Non- Conventional govt loan

A

U.S Dept of Agriculture - Low income & Rural housing

29/41

100% financing

RHS Direct

2.75% guarantee fee can be financed

-“Lender Guaranteed Loan”
- Always 30 Year fixed Rate
Section 502 loans are made for the purpose of assisting low income borrowers purchases homes in rural areas (the approved areas on map are updated regularly)

88
Q

Which section of USDA loan has purpose of assisting low income borrowers purchases homes in rural areas

A

Section 502
and has 2 types:

RHS Direct Loans, which are funded directly by the U.S. Government, and

RHS Guaranteed Loans, which are funded by private lenders, but are guaranteed by the RHS in the event that the borrower’s loan goes into foreclosure

both offer 100% financing.

89
Q

USDA has a monthly guarantee fee of ______ of annual balance

A

0.35% of annual balance

PITNIA payment = 0.35% x balance / 12

90
Q

Seller Concession can go up to how much on a USDA loan?

A

6%

91
Q

VA loan

Non- Conventional govt loan

A

Veterans Administration
VA guarantees home loans
41

COE required (certificate of eligibility)

Funding fee charged one time (can be financed) and also waived for disabled vets

100% financing
No down payment
No MPI or MIP
Low rates

Form DD-214 - This says when they were enlisted and where

  • Must have served in a war or served a full 4 years
    (or 6 years for Reserves)
92
Q

Seller Concession can go up to how much on a VA loan?

A

4%

93
Q

What are the Funding Fees associated with the VA loan?

A

Upfront Fund Fee is waived if disability

1st time use: 2.15% of loan amount

Repeated use: 3.34% of loan amount

94
Q

Define Novation (of VA loan)

A

when one eligible veteran assumes another eligible veterans loan

Assumption is when a civilian takes over the loan and that veteran will not be allowed to get another loan until that one has been paid off

95
Q

203 (b) of FHA and 251 program of FHA

A

203 (b) This is FHA’s primary program
It is a fixed rate program used to purchase and refinance 1-4 unity dwellings

251 program of FHA: is the adjustable rate program- it is based on 203 (b).
The different type of ARM’s include: one-, three-, five-, seven-, and ten-, year versions

96
Q

203 (k) of FHA is used for what?

A

is used to purchase a home that needs rehabbing or needs repairs

“k= knock down walls”

97
Q

Types of Insurance:

A

Hazard:
HOI/ sometimes pymnt held in escrow
- Dwelling coverage - costs of rebuilding home, internal contents

Flood insurance:
Necessary in in FEMA flood zone
Zone A= inland
Zone V= coastal (“V - virginia”)

Title insurance:
One time closing cost, paid by borrower that covers any errors in title search
(2 types - lender policy and owners policy)

Mortgage Insurance (MI)

98
Q

What are the two types of Title insurance?

A

Lenders Policy:
Required by banks/ lenders

Owners Policy:
Can be recommended, (esp if purchasing a new home)

99
Q

HPA- Homeowners Protection Act

A

Applies to conforming/ conventional loans when PMI is involved

PMI must go away at 22% equity/ 78% LTV

For PMI to be taken off, customer Must have a good pay history (no more than 30 day late payment in past 12 months)

HPA protects customers and the PMI applies to conventional

TILA = HPA

100
Q

Value of Property = _____ + ________

A

LTV + Equity = value of property (estimated or appraised value)

101
Q

PI/ PITI

A

Principle, Interest, Taxes, & Insurance payment

Borrower pays T&I on their own

Taxes and Insurance are part of the mortgage payment, bank pays it out of an escrow account

102
Q

PITIMI

A

Principle, Interest, Taxes, Insurance and Mortgage Insurance payment

MIP or PMI/ One payment to bank that covers everything

103
Q

PITI & PITIMI are only items that can ____ ?

A

escrow

104
Q

The PITI or PITIMI is calculated as _____ ____ while calculating DTI for approval limits.

A

Housing Costs
*This is the Front end number

This number is is called the “housing debt”

 Ex. 
P & I = 820 (Banks money)
T= 120 (Tax escrow)
I= 70 (homeowners insurance into escrow account)
MI= 85 (Mortgage insurance)

HOA and condo association must be calculated into this front end

Housing Costs/ Gross monthly income = front end #

105
Q

“Back end” Ratio

A

= DTI

All recurring monthly debts/ gross monthly income

Items excluded are: utilities, medical debts, installment debt w/ <10 payments (except lease)

106
Q

Limits for FHA, Conv, USDA, VA

A

Conv/conforming: 28/36
USDA: 29/41
FHA: 31/43
VA: 41

VA underwriting does not look at the housing (front-end) debt ratio

107
Q

LTV

A

Loan to Value Ratio =

Balance of 1st loan / est or appraised value

*Always the first loan!

108
Q

CLTV

A

Combined Loan to Value =

Balance of 1st mortg + balance of 2nd mortg / value of home

TQ:
John has a 1st mort of $40K and 2nd mortg of $45K and home value is $100K, what is his CLTV?
40,000 + 45,000 = 85,000/100,000 = 85%

109
Q

TLTV

A

Total loan to value

balance of 1st mortg + high limit (total value of HELOC) / value of home

TQ:
1st mortg has a balance of $35k. HELOC has a balance of $17K, but has a max line of credit of $50K. Assuming his home value is $100K, what it the TLTV?
35,000 + 50,000 = 85,000 / 100,000 = 85% TLTV

110
Q

HLTV

A

High Loan to Value

Mortgage(s) equal more than the value of the home

1st mortg/ value of home OR 1st mortg + 2nd mortg/value of home

TQ:
Jake has a 1st mortg of $75K and 2nd mortg of $60K. assuming his home is worth $100K, what is his HLTV?
75K + 60K = 135K/ 100K = 135%

111
Q

Max cash out against equity for FHA, Conv, and VA?

A

FHA and Conv : 80%

VA: 100%

112
Q

SAFE Act

A

Secure and Fair Enforcement for Mortgage Licensing ACT of 2008

  • Part of HERA (Housing Economic Recovery Act)
  • caused creation of NMLS

Requires 20 hours of education and pre-licensing exam
Requires credit analysis and background checks

-***Enforced by CFPB

113
Q

Loans NOT covered by RESPA

A
  • 25 + acres
  • business, commercial, or agricultural
  • temp financing (bridge loans)
  • loans secured by vacant land
  • loan assumptions that do not require lender approval and loan conversions where no new note is required
114
Q

RESPA disclosures

A
  • Good Faith Estimate (GFE)
  • Settlement Cost Booklet (Information booklet)
  • Mortgage Servicing Disclosure Statement
  • Affiliated Business Arrangement Disclosure
  • HUD-1 Settlement Statement
  • Initial Escrow Statement
  • Annual Escrow Statement
  • Servicing Transfer Statement
115
Q

Lending practices PROHIBITED by RESPA

A
  • Giving or accepting fee/ kickback/ in exchange for referral of settlement business (Section 8) Fine is $10K + 1 yr in prison!
  • Seller may not require homebuyer to use a particular title company
  • Lender/broker may not charge a fee for prep of Truth in Lending docs (TIL), HUD-1, and escrow statements
  • Prohibits referrals to affiliates w/out providing a business arrangement disclosure
  • Lender may not charge fees other than credit report fee until the loan applicant receives the GFE
  • HUD-1 may not list charges in excess
  • Markups are prohibited
  • Servicers may Not require a borrower to maintain more than 1/6 the amount of annual taxes/ insurance (worth 2 months) in an escrow account
116
Q

RESPA broken down into R-E-S-P-A

A

R: Referrals are prohibited

E: Escrow - Can hold 2 month cushion on T&I (anything above $50 must be refunded

S: Servicing: Mtg Discl (3days) - Tells borrower we will transfer servicing of loan. Servicing transfer statement - 15 days prior to transfer

P: Purchases- Settlement Cost Booklet (RESPA requires borrower to hold docs for 5 years)

A: AfBA- Affiliated Business Arrangement- given at time of referral (seller can’t force buyer to use their title co)

117
Q

Penalties for violation of RESPA

A

Section 6 violation: (servicing) Up to $10K in individual action + up to $500K in class action suits

Section 8 violation : Up to $10K + 1 year prison

Section 10: $55 for each violation up to $100K within a 12 month period for escrow violations

118
Q

ECOA

4 Disclosures and due dates

A

Notice of Right to Rec’v Appraisal Report - Due with 3
business days of application

Notice of Adverse Action - Due w/in 30 days of appl

Notice of Action Taken - Due w/in 30 days of appl

Notice of Incomplete Appl - Due w/in 30 days of appl

119
Q

Penalties for violation of ECOA

A
  • Civil penalties of $5K per day
  • Up to $25K if pattern of discrimination exists
  • Punitive damages up to $10K for individual actions
  • For class actions, punitive damages up to the lesser of $500K or 1% of creditors net worth
120
Q

Redlining and Steering are against which Act?

A

ECOA - Regulation B

121
Q

TILA drives a Z “car”

A

“CAR”

C- Cost of credit (expressed as APR% and finance is expressed as dollar amount)

A- Advertising - trigger terms require additional info

R- Recission
3 days to void contract
(must give 2 copies or right to cancel to EVERYONE with ownership interest or 3 years to cancel)

Consumer Handbook on Adjustable Rate Mortgages (CHARM) must give 3 days from application

(HOEPA and HPML- high priced mortgages right in the car with TILA)

Disclosures for Open-End Credit

122
Q

USA Patriot Act

A

Passed after 9/11, part of Bank Secrecy Act

Banks must report suspected terrorism and or money laundering

OFAC - Office of Foreign Assets & Control

123
Q

Telemarketing Sales/ Do not Call Provisions

A

Set times: 8am - 9pm / Can’t hide business #

Company list is updated every 31 days
National list is updated every 3 months

Once # is on DNC list- it is there forever

If someone makes an inquiry, can call for 3 months.
If they do business, can call for 18 months

124
Q

What is the fine if you violate the DNC provision?

A

$43,792 per call

Regulated by FTC

125
Q

Bank Secrecy Act of 1970 (Anti- Money Laundering Law)

A

Required banks to aid in detection & prevention of money laundering

Must file reports if daily aggregate exceeds $10,000

  1. CTR - Currency Transaction Report
  2. SAR - Suspicious Activity Report - report cash transactions where Bank Safety Requirements are avoided

***Enforced by FinCEN - Financial Crimes Enforcement Network

126
Q

Home Valuation Code of Conduct (HVCC)

A

Lenders can’t influence appraised values/ Appraisers can’t over - inflate values

Banks order appraisals through middleman

Borrowers must get a copy of their appraisal

127
Q

Penalties for violations of TILA

A

Individual Civil Actions: Recovery of actual damages, statutory damages equal twice the amount of the finance charge or damages of not less than $400 or more than $4,000 for closed-end transactions secured by real property

Class actions: total recovery limited to the lesser of $500,000 or 1% of the creditors net worth. Willful and knowing violations are subject to criminal penalty of $5,000 and or 1 yr imprisonment

128
Q

FTC (Federal Trade Commission) handles _________ for mortgage professionals

A

enforcement

129
Q

What Are Qualified Mortgages?

A

A qualified mortgage is a

  • closed-end loan
  • will not result in negative amortization

The loan’s term does not exceed 30 years

The points and fees for the loan do not exceed 3% of the total loan amount,

The borrower’s debt-to-income ratio does not exceed 43%

130
Q

Qualified mortgages may be

A

fixed-rate mortgages or adjustable-rate mortgages, and, in limited circumstances, they may include balloon mortgages.

  • it is typically prime borrowers who qualify for qualified mortgages)
131
Q

Specifically, a loan is a general QM if its APR exceeds the APOR for a comparable transaction by no more than:

A
  1. 25%, - equal to $114,847
  2. 5%, greater than or equal to $68,908 but less than $114,847
  3. 5%, less than $68,908
132
Q

Conforming loans

conventional - non govt loan

A

Eligible for sale to Fannie and Freddie

620 credit score

2 years of income

DTI:
28/36

PMI is required at less than 20% down

Loan limit:
One-Family Properties:
$647,200 in most locations, but as high as $970,800 in high-cost areas (differs by county)

133
Q

Nonconforming loans

conventional - non govt loan

A

Private investors buy these
Not eligible to be sold to Fannie Mae and Freddie Mac.

Jumbo loan

Subprime

SISA -Stated income stated assets
NINA

134
Q

Can you avoid PMI? How?

A

If a borrower does not have cash for a significant down payment, the purchase of private mortgage insurance (PMI) may enable him/her to succeed in securing a conventional/conforming loan.

To avoid having to pay PMI, a borrower will need to make a down payment of 20% or more.

135
Q

Non-conventional mortgages are mortgages guaranteed or insured

A

government agencies such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) and the Rural Housing Service (RHS) of the U.S. Department of Agriculture.

136
Q

The Federal Housing Administration - FHA- does not make, buy, or sell loans; it

A

insures loans

137
Q

Home equity conversion mortgage: HECM

Conventional - Non govt loan

A

a home equity conversion mortgage (HECM) is the FHA’s version of a reverse mortgage.

62 or older

HUD approved counseling required

Must have equity

No principle and interest as long as borrow lives in home

Non-taxable income and must pay taxes on the home annually UPMIP

and who have a low mortgage balance or no mortgage on their homes.

138
Q

Margins (ARMS)

A

margin represents the lender’s operating costs and profit margin. Margins vary from lender to lender and range from 2.5% to 3%

After the initial fixed period of an ARM expires, the calculation of an increase is made by adding the index to the margin.

139
Q

The Truth-in-Lending Act (TILA) includes a number of special requirements for ARMs that are intended to reduce the risks associated with these products. These include the following disclosure requirements:

A

CHARM Booklet

Loan program disclosures

Rate change disclosures

140
Q

The APR thresholds for first-lien and subordinate-lien high-cost mortgages are:

A
  1. 5% for First Lien

8. 5% for second lien

141
Q

The only transactions that are exempt from HOEPA are:

A

Reverse mortgage loans
Bridge loans
Loans originated by a housing finance agency and for which the agency is the creditor
Loans originated by the USDA

142
Q

HOEPA allows for the waiver of the three-business-day waiting period if the funds to be obtained from a loan are needed to meet a “___ ___ personal emergency.”

A

bona fide

in order to get the the 3 business day waiting period waived:
the borrower must

  1. Give the lender a dated and written statement that describes the emergency (the use of printed forms is not allowed)
  2. Obtain signatures from all parties who are entitled to the waiting period (the recipients of the disclosures)
143
Q

Special HOEPA Disclosure and must be in:

A

“conspicuous type size.”

144
Q

HOEPA prohibits the use of these terms in high-cost mortgages because these lending terms are often found in predatory home loans

A

Balloon payments (unless the loan is a bridge loan related to construction of a home that will be the borrower’s principal dwelling)

Negative amortization

Advanced payments

Increased interest rate after default

Improperly calculated rebates

Prepayment penalties (not allowed for HOEPA loans under any circumstances)

Acceleration of debt

145
Q

piggyback loan

A

In some cases, second mortgages will close in conjunction with a first mortgage from the same lender. This is known as a “piggyback loan.”

One example of this type of arrangement is an 80-10-10 loan.

In an 80-10-10 transaction, the borrower has funds to make a down payment of 10%. The borrower obtains a first mortgage at 80% LTV, with a simultaneous second mortgage at 10% LTV.

146
Q

Closing costs

“Opt- eat”

A

Closing costs normally include an

origination fee, 
property taxes, 
title insurance 
escrow costs, 
appraisal fees, 
Taxes

Closing costs will vary according to the area of the country and the lenders used.

147
Q

Uniform Residential Loan Application (URLA)

A

also known as Form 1003, is the standard form that applicants must complete when applying for a mortgage

flexible document- allowed to make changes

-Min. 8pt font

148
Q

What would be considered to be a high-cost home loan if the average prime offer rate is 3%?

A

a loan is a high-cost home loan if the annual percentage rate exceeds the average prime offer rate by more than 6.5 percentage points for a first lien loan; or 8.5 percentage points for a subordinate lien loan

[10% (APR) − 3% (APOR) = 7%; 7% exceeds the 6.5% threshold].

149
Q

Cost approach

A

the cost that would be necessary to rebuild the property. This approach is often used on new construction

150
Q

Income approach

A

typically used on rental and investment properties.

It bases value on the net income that the owner will receive and the rate of return (capitalization rate)

151
Q

Market approach / “sales comparison approach”

A

compares the subject property with sales data for comparable properties in the same area to establish value

  • is the preferred and most common appraisal method for valuing single-family residential properties
152
Q

The promissory note contains: (NIPLL)

A 
N- borrower’s Name
I- Interest rate
P- Provision requiring notices in writing
L- Loan amount
L- Loan terms

A promissory note does not contain a legal description of the property.

a-SAFE Exam (1 decks)

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