Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CLI Prelicensing > Unit 13 > Flashcards

Unit 13 Flashcards

1
Q

Conventional Loan

A

a mortgage that has no direct federal involvement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

FHA/VA Loan

A

loans with federal involvement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

RE Financing Market has 3 basic components

A
  1. government influences, primarily through FED
  2. primary mortgage market
  3. secondary mortgage market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Reserve requirements

A

the minimum level of funds that an institution must maintain

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

primary mortgage market

A

made up of lenders that originate mortgage loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How is income on a loan realized

A
  1. finance charges collected at closing

2. recurring income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Major lends in primary mortgage market

A
  1. savings association and commercial banks
  2. insurnace companies
  3. credit unions
  4. pension funds
  5. endowment funds
  6. investment group financing
  7. mortgage banking companies
  8. mortgage brokers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Mortgage brokers

A

intermediaries who bring borrowers and lenders together; locate potnetial borrowers, process the loan application, submit the application to lenders for final approval; do not service loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)

A

requires states to license mortgage loan originators according to national standards and all state agneices to participation in teh NMLS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

NMLS

A

sole system of licensure for mortgage companies for 57 state agencies and sole system for licensure for MLO’s for 59 state and territorial agencies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Secondary Mortgage Market

A

loans are bought and sold only after they have been funded (closed)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does the secondary mortgage market help with?

A

raise capital to make additional mortgage loan; helps when money is in short supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does the secondary mortgage market help stimulate?

A
  1. housing construction market

2. mortgage market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How does the lender benefit from the secondary mortgage market?

A
  1. raising additional capital
  2. avoiding interest rate risks
  3. making a profit on the sale
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Pools

A

a number of mortgage loans assembled into blocks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Government Sponsored Enterprises

A

key players in the secondary mortgage market to help increase loan opportunities for homebuyers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Government Sponsored Enterprises

A
  1. Fannie Mae
  2. Freddie Mac
  3. Ginnie Mae
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How does Fannie Mae Work

A

buys a block or pool of mortgages that they then use as collaterial for mortgage-backed securities that are sold on the global market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are Fannie Mae’s secondary market functions

A

Conventional, FHA-insured, VA Guaranteed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are Freddie Mac’s secondary market functions

A

Mostly conventional loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are Ginnie Mae’s secondary market functions

A

special assistance loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the most importnat feasures of GSEs

A

standardization loan application, credit report, appraisal and other forms that are required for loans purchased, detailed guideliens for lending process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Farmer Mac

A

created a secondary market for agricultural mortgage and rural utilities loans and the portinos fo agriculture and rural development loans garanteed by the USDA

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How does Farmer Mac work?

A

guarantee payment of principal and interest on the loans it purchases and pools those loans for sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

How does Ginnie Mae differ from other secondary markets?

A

part of governmetn; government agency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How does Ginnie Mae work?

A

administer special assistance programs and guarantees investment securities issued by private offerors and backed by pools of FHA-insured and VA-guaranteed mortgage loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

pass-through certificate

A

a security interest in a pool of mortgages that proves for a monthly pass-through of principal and interest payments directly to the certificate holder

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What’s the biggest difference with Ginnie Mae

A

pass-through certificates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

How are mortgage loans classified

A

Loan-to-Value Ratio (LTV)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Loan to Value Ratio

A

ratio of debt to the value of the property where value is the sales price or approased value, whichever is less

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

If you have a low LTV radio, what happens to the down payment?

A

higher

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

what does a higher down payment mean for a lender?

A

a more secure loan, minizing risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is the real name for Ginnie Mae

A

Government National Mortgage Association

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is the real name for Farmer Mac

A

Federal Agricultural Mortgage Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What is the real name for Fannie Mae

A

Gederal National Mortgage Association

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What is the real name for Freddie Mac

A

Federal Home Loan Mortgage Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What are the most secure loans

A

conventional loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Why are conventional loans most secure

A

LTV ratio is lowest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

How does a conventional loan vendor determine the loan amount?

A

appraised value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Private Mortgage Insurance

A

private insurance for a loan with less than 20% down payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

What does the lender carefully evalue when making a conventional loan?

A
  1. property

2. prospective borrower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

What is the maximum loan limit for a single-family home

A

$679,650

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Nonconforming Loans/Jumbo Loans

A

loans that exceed the stated limits; not marketable; held in lender’s investment portfolio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Homeowner’s Protection Act of 1998

A

requires that the lender automatically terminate the PMI payment if the borrower has accrued at least 22% equity in the home and is current on mortgage payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Federal Housing Administration (FHA) Loan

A

refers to a loan that is insured by the agency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Other types of FHA loans

A

adjustable rate mortgages, home improvement and rehabilitation loans, loans for the purchase of condominiums

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Prepayment privilages for FHA loan

A

the borrower under a VA-guaranteed loan can prepay the debt at any time without penalty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

Assumption rules for VA Loans

A

VA-guaranteed loans made on or after March 1, 1988 are no longer assumable without prior consent from the lender

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

Farm Service Agency (FSA)

A

federal agency of teh department of agriculture that offers programs to help families purchase or operate family farms and has taken over function of the former Farmers Home Administration (FmHA)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Rural Housing and Community Development Services (RHCDS)

A

FSA provides loans to help familities purchase or improve single-family homes in rural areas

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

2 categories of FSA loan programs

A
  1. guaranteed loans that are made and serviced by private lenders and guarateed for a specific percentages by the FSA
  2. Loans made directly by the FSA
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

Farm Credit System (Farm Credit)

A

provides loans to farmers, ranchers, rural homeowners, argicultural cooperatives, rural utility systems, and agribusinesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Do Farm Credit loans take deposits?

A

no

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

How are loanable funds raised for Farm Credit loans?

A

through bonds and notes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

Package Loan

A

includes real and personal property; popular for condos; usually include furniture, drapes, kitchen range, microwave oven, refrigerator, dishwasher, washer, dryer, and other applicances as part of the sales price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

Blanket Loan

A

covers more than one parcel or lot

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

What are blanket loans used for?

A

by developers to finance subdivisions, finance purchase of improved properties, consolidate multiple loans on a single property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

What do blanket loans usually include?

A

partial release clause

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

Partial release clause

A

permits the borrower to obtain the release of any one lot or parcel from the blanket lien by repaying a certain amount of the loan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

Open-end loan

A

provides a security interest when a note is execuited by the borrower to the lender, but also secures any future advances of funds made by the elnder to the borrower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

What is the interest rate on the intial amount borrowed in an open ended loan?

A

fixed, but future advances may be charged at market rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

Why would someone prefer an open-ended loan?

A

less costly alterative; allows borrower to icnrease the debt to its original amount or the maximum amoutn stated in teh note after the debt has been reduced by payments over a period of time

63
Q

Construction loan

A

made to finance the construction of improvements on real estate such as homes, apartments and office buildings

64
Q

Sale adn leaseback arrangements

A

used to fiannce large commercial or industrial properties; not loans

65
Q

Buydown

A

a way to temporariliy (or permanently) lower the interest rate on a mortgage or deed of trust loan

66
Q

Home equity loan

A

a source of funds that takes advantage of the equity built up in a home

67
Q

draws

A

disburse of funds in payments by the lender during construction

68
Q

What does the lender do before releasing a draw?

A

inspects the work

69
Q

End loan/take-out loan

A

permanent loan that will pay off the construction financing lender when the work is completed by paying the principal owed on the construction loan

70
Q

What does the borrower pay interest on for construction loans?

A

money that has actually been disbursed

71
Q

What type of financing are construction loans typically?

A

short-term or interim financing

72
Q

How are draws made?

A

made to the general contractor or the owenr for the part of the construction work that has been completed since the previous payment

73
Q

What must the general contractor provide for construction loans?

A

must provide the lender adquate waivers that release all mechanics’ lien rights for the work covered by the payment

74
Q

How do sale-and-leaseback loans work?

A

land and building are sold to an investor who then leases it back to the seller who can do business as a tenant

75
Q

What can a home equity loan be used for?

A
  1. finance a purchase of an expensive item
  2. consolidate existing intallment loans or credit card debt
  3. pay medical, education, home improvement, or other expenses
76
Q

How can a home equity loan be taken out?

A
  1. fixed loan

2. line of credit

77
Q

Home Equity Line of Credit (HELOC)

A

lender extends a line of credit that the borrower can use at will

78
Q

What is a downside to HELOC?

A

the full amoutn of the line of credit will appear on the borrower’s credit report, even though it isn’t being used

79
Q

What is the upside to HELOC?

A

could eventually lead to a new first mortgage loan

80
Q

What are the benefits to a home equity loan?

A
  1. only amount borrowed will be subject to higher rate

2. interest paid on a home equity loan of up to $100k is tax deductible

81
Q

Negative to home equity loan?

A

carries higher interest rate than a purchase loan

82
Q

How does a buydown work?

A

a lump sum is paid in cash to the lender at the closing with the payment offsetting and reducing the interest rate and monthly payments during the mortgage’s first few years; after first 2 years, the rate rises

83
Q

How does the federal government regulate lending practices?

A
  1. Truth of Lending Act (TILA)
  2. Equal Credit Opportunity Act (ECOA)
  3. Community Reinvestment Act of 1977 (CRA)
  4. Real Estate Settlement Procedures Act (RESPA)
84
Q

When does Regulation Z generally apply?

A

when a credit transaction is secured by a residence

85
Q

Creditor (Regulation Z)

A

any person who extends consumer credit more than 25 times each year or more than 5 times each year if the transactions invovle dwellings as security

86
Q

3 day right of recission

A

the borrower has 3 business day in which to rescind thetransaction by notifying the lender; for most consumer credit transactions covered by Regulation Z

87
Q

What does the 3 day right of recission apply to?

A

refinancing a home mortgage or taking out a home equity loan

88
Q

What does the 3 day right of recission not apply to?

A

owner-occupied residential purchse-money or first mortgage or deed of trust loans

89
Q

All media includes

A

newspapers, flyers, signs, billboars, websites, radio, TV ads, direct mailings

90
Q

Triggering Terms

A

specific credit terms (down payment, monthly payment, dollar amount of the finance charge, term of loan)

91
Q

What must be included in advertisements with triggering terms to comply with regulation Z?

A
  1. cash price
  2. Required Down Payment
  3. Number, amounts and due days of all payments
  4. APR
  5. Total of all payments to be made over the term of the mortgage
92
Q

Equal Credit Opportunity Act (ECOA)

A

prohibits discrimination in the lending process based on the credit applicant’s race, color, religion, national origin, sex, maritual status, age, or receipt of public assistance

93
Q

Equal Credit Opportunity Act (ECOA)

A

prohibits discrimination in the lending process based on the credit applicant’s race, color, religion, national origin, sex, maritual status, age, or receipt of public assistance

94
Q

What does ECOA require?

A

credit application be considered only on the basis of income, the stability of the source of that income, net work, and credit rating

95
Q

If a loan application is rejected, what does ECOA and FCRA require of lendors?

A

the lendor details the reason for rejection in a statement that must be provided to the loan application within 30 days; loan applicant has right ot get a free copy of the report

96
Q

Agency that enforces ECOA

A
  1. Federal Trade Commission

2. Department of Justice

97
Q

Community reinvestment

A

refers to the responsibility of financial institutuion to help meet their communities’ needs for low-income and moderate-income housing

98
Q

Community Reinvestment Act of 1977 (CRA)

A

financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms

99
Q

What does the law require CRA statements contain

A
  1. definition of the geographic boundaries of its community
  2. identify the types of community reinvestment credits offered
  3. comments from public about institution’s performance in meeting the community’s needs
100
Q

Real Estate Settlement Procedures Act (RESPA)

A

applies to any residential real estate transaction involving a new first mortgage loan; designed to ensure that the buyer and seller are boht fully informed of all costs related to closing the transaction

101
Q

Automated underwriting

A

can shorten loan approvals from weeks to minutes; tends to lower cost of loan application and approval

102
Q

Freddie Mac automated underwriting system?

A

Loan Prospector

103
Q

Fannie Mae automated underwriting system?

A

Desktop Underwriter

104
Q

What is the problem with using automated underwriting systems?

A

application of credit scores may not be accurate or fair, which could result in making it more difficult for low-income and minority borrowers to obtain mortgages

105
Q

What do underwriters need to consider?

A
  1. collateral
  2. credit reputation
  3. capacity
106
Q

What do underwriters look at for collateral

A

house value, down payment, property type

107
Q

What to underwriters look at for capacity?

A

income, debt, cash reserves, product type

108
Q

What do underwriters look at for credit reputation?

A

credit scores, human judgement

109
Q

Federal Reserve System’s role

A

to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate

110
Q

How many federal reserve districts are there?

A

12

111
Q

What does the Fed regulate?

A

the flow of money and interest rates in teh marketplace through its member banks by controlling the rate charged for loans it makes to them as well as their reserve requirements

112
Q

discount rate

A

rate charged for loans

113
Q

Prime rate

A

base rate

114
Q

What happens when discount rates rise

A

interest rates on all sorts of loan rise, making funding harder to obtain

115
Q

How does the Fed stimulate the economy?

A

by increasing the amount of money in circulation by buying Treasury securities

116
Q

How does the Fed control inflation?

A

by decreasing the amount of money in circulation by selling Treasury securities

117
Q

What is a loan to a borrower?

A

means of financing an expenditure

118
Q

What is a loan to a lender?

A

an investment

119
Q

What does serving a loan involve

A
  1. collecting payments
  2. accounting
  3. bookkeeping
  4. preparing insurance and tax records
  5. processing payments of taxes and insurance
  6. following up on loan payment and delinquency
120
Q

What type of lenders are savings associations and commerical banks?

A

fiduciary lenders

121
Q

Insurance companies

A

accumulate large sums of money from premiums paid by their policyholders

122
Q

Credit unions

A

cooperative organizations whose members place money in savings accounts

123
Q

Pension funds

A

have large amounts of money availbale for investment

124
Q

Who handles real estate activity for pension funds?

A

mortgage bankers and mortgage brokers

125
Q

What are endowment funds used for mostly?

A

low-risk commerical and industrial properties

126
Q

Who uses investment group financing?

A

large real estate projects (highrise apartment buildings, office complexes, shopping centers)

127
Q

How do mortgage banking companies originate loans?

A

with money belonging to insurance companies, pension funds, and individuals, as well as funds of their own

128
Q

Private mortgage Insurance (PMI)

A

an insurance policy that provides the lender with funds in the event of borrower default on the loan

129
Q

How can a borrower obtain a conventional mortgage loan with a down payment of less than 20%

A

Private Mortgage Insurance

130
Q

What does an FHA-insured loan provide?

A

extra security to the lender

131
Q

What do FHA-insured loans protect against?

A

loss from borrower default

132
Q

How are FHA loans competitive?

A

an FHA loan can be made even when the borrower makes a relatively low down payment, resulting in a high LTV

133
Q

What is the most popular FHA loan

A

covers fixed-rate loans for 10-30 years on 1-4 family residences

134
Q

What is the lowest down payment for an FHA loan?

A

3.5%

135
Q

Can an FHA loan charge discount points?

A

yes

136
Q

FHA loan assumption rules

A

a qualified buyer can assume an existing FHA-insured loan

137
Q

Who can bid on HUD foreclosed homes?

A

real estate professionals who are registered with HUD and do not deal with the general public directly

138
Q

HUD’s good Neighbor Next Door program

A

intended to help revitalize certain areas by allowing law enforcement officers, firefighters, EMTs, and Pre-K-12 treachers to purchase eligible property in those areas at a 50% discount off list price; must live in property for at least 36 months

139
Q

What are VA loans for?

A

for the purchase or construction of homes for eligible veterans and their spouses; purchase manufactured homes and the lots on which to place them

140
Q

Criteria for VA Loans

A
  1. 90 days of active service for service people currently on active duty
  2. 90 days of active service for veterans of WW2, Korean War, Vietnam, Gulf War
  3. 181 days active service during interconflict periods between July 26, 1947 - September 6, 1980
  4. 2 years of service during any peactime period since 1980 or full period for which the veteran was called or ordered to active duty
  5. 6+ years of continuous duty as reservist
141
Q

Rules and regulations for VA loans

A
  1. owner must live on property
  2. must apply for certificate of eligibility
  3. Max guarantee a veteran is entitled
142
Q

Limit on VA loans

A

no dollar limit; determiend by lender a qualifications of buyer

143
Q

Certificate of Reasonable Value (CRV)

A

states the property’s current market value based on a VA-approved appraisal; places limit on loan

144
Q

VA funding fee

A

% of loan amount

145
Q

In which cases are there no VA funding fees

A
  1. veteran receiving VA compensation for service-connected disability
  2. ceteren entitled to receive compensation for service-connected disabliity if the veteran did not receive retirement or active duty pay
  3. surviving spouse of a veteran who died in service or from a service-connected disability
146
Q

What cannot be charged to a veteran buyer?

A

commission, brokerage fees, buyer broker fees

147
Q

Regulation Z

A

requires that credit institutuions inform borrowers of the true cost of obtaining credit

148
Q

Who does Regulation Z not apply to?

A

business or commerical loans or teh agrucultural loans of any amount

149
Q

What do finance charge disclosures need to contain?

A

any loan fees, finder’s fees, service charges, points, interest

150
Q

Hepling Families Save Their Home Act

A

Under TILA, requires that consumers be notified of the sale or transfer of their mortgage loans

151
Q

Within what time frame must a mortgage purchaser provide disclosures?

A

30 days

152
Q

Regulation Z requirements for buydowns or reduced-rate mortgages

A

must include both the term to which the interest rate applies and the APR

153
Q

Regulation Z requirements for variable-rate mortgages

A

number and timing of payments, amount of the largest and smallest payments, statement of fact that the actual payments will vary between these two extremes

CLI Prelicensing (23 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions