Section 13 Flashcards
1
Q
Loan not guaranteed or insured by the government
A
conventional mortgage
2
Q
loan backed by the government, such as Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) loans
A
Non-conventional mortgage
3
Q
covers any of the 20 percent not put down by the borrower in case of default on a conventional mortgage.
A
Private mortgage insurance or PMI
4
Q
Loans are made in the
A
primary mortgage market
5
Q
Loans are sold in the
A
secondary market
6
Q
the maximum percentage of debt to income that is allowed as a standard of measurement to qualify for a loan
A
Total Obligation Ratio (TOR)
7
Q
To qualify for a conforming conventional mortgage, a borrower cannot exceed maximum total monthly obligation ratio of .
A
36%
8
Q
TOR =
A
Total Monthly Obligations (including PITI + PMI)
÷
Monthly Gross Income
9
Q
negotiable between the buyer and the lender
A
Interest rates
10
Q
the central banking authority of the government.
A
The Federal Reserve System (the Fed)
11
Q
established to provide a safer and more stable monetary system and to influence the availability and cost of money and credit
A
The Federal Reserve System (the Fed)
12
Q
The Fed conducts monetary policy through:
A
Open-market operations
Discount rate
Reserve requirements.
13
Q
features a Due-on-sale clause
A
Conventional mortgage
14
Q
do not include a due-on-sale clause and are therefore assumable
A
VA and FHA loans
15
Q
have a combined principal and interest payment that remains the same
A
Amortized mortgages
16
Q
As more and more payments are made, the balance of the mortgage is
A
killed
17
Q
consistently charges the same interest rate
A
fixed rate mortgage
18
Q
Mortgages may be offered with an adjustable rate known as an
A
ARM
19
Q
Index + Margin =
A
Full Indexed Rate
20
Q
Many ARMs start with a low rate known as a
A
teaser rate
21
Q
A partially amortized mortgage has a payment schedule that will leave a large balance to be paid at the end of the loan period called a
A
balloon payment
22
Q
loans against equity and may be taken as one amount.
A
Home equity loans
23
Q
line of credit using home equity as collatoral
A
Home equity line of credit (HELOC)
24
Q
insures the mortgages protecting the lender from losses should the homeowner default
A
FHA
25
A down payment of at least ___ of the purchase price is required to secure an FHA loan
3.5%
26
dictate the maximum purchase price a home may be to qualify under an FHA mortgage
FHA loan limits
27
The cost of the FHA loan which acts as insurance to lenders is passed on to the borrower as:
Upfront Mortgage Insurance Premium (UFMIP)
| Mortgage Insurance Premium (MIP)
28
FHA borrowers must meet TOR of up to ___
43%
29
FHA borrowers must meet a Housing Expense Ratio (HER) of ___
31%
30
HER =
Monthly housing expenses (PITI and MIP)
÷
monthly gross income
31
Sellers are allowed to pay up to ___ of the sales price towards the buyer’s closing costs for FHA loans
6%
32
the standard FHA loan used for the purchase of single-family homes
Section 203(b)
33
provides a component for rehabilitation and repair of single family properties
Section 203(k) FHA program
34
FHA loans may be made for condominium purchases if the condominium is included on the
FHA Approved Condominium Projects list
35
FHA loans may be either a fixed rate or
FHA ARM
36
FHA loans may be either an FHA ARM or
fixed rate
37
offer a partial guarantee to lenders
Veteran’s Administration (VA) loan
38
Designed to provide home ownership for Service members, Veterans, and eligible surviving spouses.
VA program
39
must be as Owner-Occupied
VA purchases
40
To qualify for a VA loan, the borrower must meet TOR requirements of up to ___
41%
41
VA does not set a limit for the purchase price; however, the value of the home must be verified through a
Certificate of Reasonable Value
42
VA has established loan guarantee limits. This provision limits the purchase price that can be bought without a
down payment
43
The amount that the VA will guarantee is referred to as
Entitlement
44
The test for the amount of eligible Entitlement is based on ___ of the home’s value.
25%
45
charged to a VA borrower as a percentage of the loan amount and can be financed into the loan or paid at closing
funding fee
46
VA Lenders may charge discount points. Loan origination fee of up to ___ of the loan may also be
charged.
1%
47
Should a seller agree to contribute to a VA Program buyer’s closing costs, the amount of contribution is limited to ___
4%
48
Included in VA loans, which allows the loan to be paid off early
Prepayment Clause
49
Not included in VA loans, so VA loans may be assumed
due-on-sale clause
50
Mortgage lenders are in business to
loan money
51
conduct loan origination activities by acting as an intermediary brokering mortgage loans between borrowers and lenders
Mortgage brokers
52
created minimum standards for licensing and registering mortgage loan originators
The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) of 2008
53
The SAFE ACT requires all MLO’s to register with the
Nationwide Mortgage Licensing System (NMLS)
54
State Bond loans provide eligible borrowers a below market interest rate to purchase a home as a first-time home buyer and are issued by the state
Housing Finance Agency (HFA)
55
are personal property of the lender and bought and sold as chattel
Mortgages
56
Loans are pooled together and traded as
mortgage-backed securities
57
A non-conforming loan fails to conform to
government sponsored enterprises (GSE) guidelines
58
hold loans in the bank’s portfolio of assets
Portfolio lenders
59
a privately-owned corporation, sponsored and under conservatorship of the federal government.
Fannie Mae
60
buys and sells conventional, FHA, and VA mortgages in the secondary market.
Fannie Mae
61
functions by issuing mortgage-back securities to investors
Fannie Mae
62
the largest single private mortgage purchaser
Fannie Mae
63
a GSE that guarantees loan payments in the secondary mortgage market
Ginnie Mae
64
a government wholly owned corporation under HUD
Ginnie Mae
65
acts as a payment passthrough entity for FHA and VA mortgages with “full faith and credit guarantee” for investors that all payments including interest are made in full and on time
Ginnie Mae
66
came under conservatorship of the Federal
| Government in 2008
Freddie Mac
67
a publicly traded GSE that purchases conventional loans in the secondary mortgage market
Freddie Mac
68
pools mortgages and sells them as a mortgage-backed security to investors.
Freddie Mac
69
Designed to expand the secondary market by purchasing conventional loans made by savings associations
Freddie Mac
70
Acting as a direct mortgage lender, they have the authority to underwrite their own loans funded by their investors.
correspondent lenders
71
specialized mortgage brokers offering loans funded by private money investors.
Hard money lenders
72
a common type of mortgage fraud
straw borrower
73
involves having someone act as the borrower when the real purpose of the loan is for someone else’s use
straw borrower
74
prone to fraudulent applications and therefore are now illegal
No document loans
75
include inflated appraisal reports and significant sales price adjustments not supported by market data.
Mortgage fraud red flags
76
prohibits discrimination in loan underwriting based on sex, marital status, race, religion, age, or national origin, income from alimony, child support, public assistance, or part-time employment.
ECOA
77
provides the procedural framework for fair lending regulation
ECOA
78
makes it unlawful to inquire about an applicant’s children or plans for children
ECOA
79
Title I of the Consumer Credit Protection Act promotes the informed use of consumer credit by requiring disclosures about its terms and costs
Truth in Lending Act (TILA)
80
pairs with the Federal Reserve Regulation Z for actual implementation of the act’s provisions
Truth in Lending Act (TILA)
81
TILA requires disclosure of loan terms in 4 formats:
Finance charge
Total amount financed
Total amount of payments
Annual percentage rate (APR) – Within ⅛ of 1%.
82
Advertisement for mortgages containing trigger terms requires the ad to also include:
The amount or percentage of the down payment
The terms of repayment
the APR.
83
Triggering terms are:
The amount of the down payment, expressed either as a percentage or as a dollar amount
The amount of any payment expressed either as a percentage or as a dollar amount
the period of repayment (the total time required to repay)
84
The 3-day right of rescission does not apply to home mortgages except as
refinances
| home equity loans
85
created to control increasing loan costs for consumers caused by companies engaging in undisclosed kickbacks
Real Estate Settlement Procedures Act (RESPA)
86
Responsible for administering and enforcing RESPA.
The Consumer Financial Bureau (CFPB)
87
consolidated consumer protection agencies under CFPB to simplify oversight and compliance
TILA-RESPA Integrated Disclosure Rule (TRID)
88
RESPA requires the borrower be provided a booklet of information regarding closing costs by the financial institution or mortgage broker at the time of a written application or no later than __ business days after application is received
3
89
RESPA requires that no later than the ____ business day after the submission of a loan application, the borrower is provided with a Loan Estimate
third
90
must be provided to the borrower within 3 business days BEFORE the loan closing.
Closing Disclosure form
91
RESPA requires that no later than the third business day after the submission of a loan application, the borrower is provided with a
Loan Estimate
92
allows for the interest charged to fluctuate depending upon the terms outlined in the loan
adjustable rate mortgage (ARM)
93
The loan balance that is unpaid at the end of the loan has to be made in one large payment
balloon payment
94
payments are based on a regular amortization schedule, but divided in half and set up to pay every 2 weeks instead of once a month
biweekly mortgage
95
using this strategy, the
| mortgage is paid off in 22.6 years instead of 30
biweekly mortgage
96
Loans that follow the standards expected in order to be sold in the secondary market are said to be
conforming loan
97
occurs when depositors take their money out of financial institutions because they can earn more money in other investments
disintermediation
98
when you borrow money using the equity in your home as collateral
home equity loan
99
the normal flow of money into financial institutions from the public in the form of deposits
intermediation
100
Amortizing a loan over a specified period so that equal payments can be made each payment period
level payment plan
101
Limits the amount that the rate increases in total over the life of the loan.
lifetime cap
102
The amount the lender adds to the index in order to make the loan profitable
margin
103
charged to borrowers at closing as a closing fee. Goes into a fund in case the borrower defaults.
UFMIP
104
occurs when someone deliberately falsifies information to obtain mortgage financing that would not have been granted otherwise
mortgage fraud
105
a loan that doesn’t conform to guidelines established by government i.e. Fannie Mae or Freddie Mac
non conforming loan
106
a mortgage agreement that provides home financing including real property, property improvements and movable equipment.
package mortgage
107
set a limit of how much the payment can actually be increased in between terms.
payment cap
108
limits the amount of increase that a loan may increase to during one adjustment period (usually a year).
periodic cap
109
called seller financing or owner financing, is a home-financing technique in which the buyer borrows from the seller instead of, or in addition to, a bank
purchase money mortgage
110
a mortgage for homeowners 62 and older who have a significant amount of equity built up in their house
reverse annuity mortgage
111
UFMIP stands for
Up-front mortgage insurance premium
