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NDUSA > Section II: MLO Part G- Pricing and Loan Products > Flashcards

Section II: MLO Part G- Pricing and Loan Products Flashcards

1
Q

Par

A
  • Base rate

- the standard rate offered by the lender for a specific lending product

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2
Q

discount point/permanent buy down

A
  • “charge to the borrower” or a “Buy down”
  • paid to the lender in exchange for a “lower than par” interest rate
  • 1 discount point = 1% of the loan amount
  • buy down the note rate
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3
Q

Yield Spread Premium (YSP)

A
  • paid to a mortgage broker by a lender

- the credit provides for a reduction in fees in exchange for a higher interest rate

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4
Q

Rate Lock

A

an interest rate is set (or locked) and cannot change unless the rate lock period expires

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5
Q

Rate Lock Agreement

A

form signed by the borrower that authorizes the MLO to lock n the interest rate for a specified time with the creditor

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6
Q

Rate Lock period

A

the length of time the locked interest rate will be available without returning to the current market rate
-most locks are for 30 or 60 days

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7
Q

Rate lock expiration

A

a date in which the locked rate is available through without returning to the current market rate

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8
Q

QM rule

A

limiting risky loan features and requiring creditors to adopt minimum responsible underwriting standards to ensure that lenders determine a consumer’s “ability to repay” the mortgage loan

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9
Q

categories of qualified mortgages

A
  • general definition category of QMs
  • Temporary definition category of QMs (GSE-eligible)
  • Seasoned definition category of QMs
  • Small creditor category of QMs
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10
Q

General definition category of QMs

A

Any loan that meets the product feature requirements with a debt-to-income ratio of 43% or less is a QM

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11
Q

Temporary definition category of QMs (“GSE-eligible”)

A

any loan that meets the product feature requirements and is eligible for purchase, guarantee, or insurance by GSE, FHA, VA, or USDA regardless of the debt-to-income ratio

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12
Q

Second definition category of QMs

A

any loan that is a first-lien, fixed rate loan that meets the product feature requirements and that meets certain performance requirements over a seasoning period of at least 36 months

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13
Q

Small creditor category of QMs

A

if you have less than $2B in assets and originate 2,000 or fewer first mortgages per year, loans you make and hold in portfolio are QMs as long as you have considered and verified a borrower’s debt-to-income ratio

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14
Q

QMs 3 types of features

A
  • uses of basic underwriting standards to verify ability to repay
  • limits on points and fees
  • restrictions on loan features
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15
Q

uses of basic underwriting standards to verify ability to repay

A

documentation and verification of income

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16
Q

limits on points and fees

A

these fee limits range from 8% to 3% depending on the size of the loan

17
Q

restrictions on loan features

A

a QM loan prohibits risky features such as interest only payments, negative amortization or allowing balloon features

18
Q

ability to repay

A

make a reasonable, good-faith determination or when you consummate a covered mortgage loan that the consumer has a reasonable ability to repay the loan

19
Q

8 factors when considering if an applicant can repay

A
  • current/reasonably expected income
  • current employment status
  • expected monthly payments are based on fully indexed rate
  • ability to pay the expected monthly payment on any simultaneous loan the creditor knows of or has reason to know
  • expected monthly payment for their total mortgage related obligations
  • total current debt obligations (PITIA)
  • current and expected monthly DTIC ratio or residual income
  • credit history
20
Q

Points and fees

A

maximum threshold on a QM loan is generally 3 percent of the loan balance

21
Q

fees that are excluded

A
  • bona fide third party fees unless paid to an affiliate
  • up to two bona fide discount points
  • FHA UFMIP, MIP, PMI, and VA funding fees (under certain conditions
22
Q

Standard 1: Safe Harbor

A

provided when a creditor presumes to comply with ability to repay rules, the loan is not a higher-priced mortgage, and meets the following attributes

  • limited risky features (no negative amortization, balloons, or interest only). Loans with these risky features are considered “non-standard” loans
  • the loan term does not exceed 30 years
  • the points and fees do not exceed threshold
23
Q

Standard 2: Rebuttable Presumption

A

a creditor falls under this when they comply with all the requirements outlined under Safe Harbor; however the loan is considered Higher-Priced under TILA

24
Q

Higher-Priced Mortgage Loan (HPML)

A
  • one with an APR higher than a benchmark weight called Average Prime Offer Rate (APOR)
  • any closed-end consumer credit loan, purchase, or refinance which is secured by the principal dwelling of the borrower
25
Q

2 HPML categories

A
  • standard

- prime

26
Q

Thresholds

A
  • First Lien Mortgages margin 1.5%
  • First Lien Jumbo loans margin 2.5%
  • Junior (subordinate) Mortgages margin 3.5%
27
Q

HPML requirements

A
  • Ability to repay must be verified
  • Escrow accounts
  • Creditors originating an HPML are prohibited from imposing a Pre-Payment Penalty
28
Q

HOEPA

A
  • to address abusive lending practices and require additional disclosure data for HCLs.
  • designed to (define HCLs and protect consumers from aggressive predatory practices
29
Q

HOEPA Protections

A
  • specific disclosures requirements
  • ability-to-repay requirements
  • restrictions on transaction terms
  • a pre-loan counseling requirement
  • restrictions on certain fees and practices
30
Q

Loan types covered

A
  • real property or person property
  • mortgages on manufactured housing
  • primary residence
31
Q

loan types not covered

A
  • reverse mortgages
  • standalone construction loans w/ term of more than 1 year
  • loans originate and financed by a housing finance agency
  • loans originated under the USDA Rural Development Direct Loan Program (USDA Guaranteed Loans are not exempt)
  • Mortgages secured by vacation or second homes (must be primary residence)
32
Q

HOEPA High Costs Thresholds

A
  • points and fees
  • APR
  • PPP
33
Q

Points and Fees threshold for HCL

A
  • 5% of a loan amount >= $22,052

- 8% of a loan amount < $22,052 or $1,103 (whichever is less

34
Q

APR thresholds

A
  • 6.5% for first lien transaction with a loan amount >= $50,000
  • 8.5% for first lien transaction with a loan amount < $50,000 and secured by personal property serving as the primary residence
  • 8.5% for second lien transaction
35
Q

Prepayment Penalty Threshold (PPP) (no prepayment penalty may be charged

A
  • > 36 months after consummation

- >2% of the loan amount

36
Q

Restrictions on rates and fees

A
  • increasing the interest rate when in default
  • late fees cannot be more than 4% of the past due payment
  • points and fees cannot be financed
  • fees for payoff statements are generally banned
37
Q

limitations on loan terms for High-Cost mortgages

A
  • balloon payments are generally banned unless its a bridge loan with a term less than a year, when payment schedule is adjusted to accommodate seasonal or irregular income, or a creditor is serving a rural or under served area
  • negative amortization
  • due-on-demand features
38
Q

HOEPA prohibited practices

A
  • refinancing any high-cost mortgage with another high-cost mortgage within one year unless it is in the consumer’s “best interest”
  • collateral-based lending
  • paying a contractor directly from the proceeds
  • advanced payments
  • selling a high-cost mortgage without providing s high-cost mortgage notice to the assignee
  • recommending default on an existing loan in order to refinance a borrower with a high-cost mortgage
  • purposely structuring a transaction to evade HOEPA coverage
  • pre-payment penalties
  • originating a high-cost loan without assessing ability to repay
  • originating a high-cost loan without requiring an escrow account

NDUSA (16 decks)

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