Loan-to-Value Ratio (LTV) - correct answer The percentage of the lesser of the appraised value or sales price that the lender will lend.
ex: If a
... [Show More] borrower is approved for an 80% loan, it means that the lender will loan up to 80% of the sales price or appraised value, whichever is lower.
Package Mortgage - correct answer Includes both real and personal property ( fixtures and furnishings)
Blanket Mortgage - correct answer Covers more than one piece of property.
Wraparound Mortgage - correct answer Method of financing which preserves the low, existing interest rate on the original note.
Open-End Mortgage - correct answer Permits additional borrowing on the same note. This is sometimes called a credit card mortgage or a home equity line of credit - HELOC.
Budget Mortgage - correct answer The monthly house payment includes principal, interest, taxes and insurance (known as PITI)
Collateral -Dependent Loans - correct answer A hard money loan is a specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate.
Character - correct answer Is a measure of the willingness of a borrower to make on-time payments. Credit character is revealed in the borrower's credit report.
Capacity - correct answer Is a measure of the borrower's ability to repay the debt, and is demonstrated through current earnings and job stability.
Capital - correct answer Is the sum of all assets that the borrower has accumulated.
Collateral - correct answer Is something of value that can be pledged as security for repayment.
Yield - correct answer Is the return that the investor recieves over the life of the loan. (Also known as profit)
Originator - correct answer The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower.
Mortgage Broker - correct answer Typically functions as a middleman between the borrower and the lender, negotiating, selling or arranging loans to be delivered to larger investors. At one time originated up to 80% of all mortgage loans. (Back on the rise)
Mortgage Banker - correct answer Entities which provide their own funds for the purpose of providing mortgage financing, as opposed to commercial banks/savings associations. (Held, or "Warehoused")
Correspondent Lender - correct answer Usually smaller in scale than mortgage bankers or brokers, these lenders typically extend loans with their own funds, at their own risk.
Processing - correct answer Once application is complete the file moves into this phase.
Underwriting - correct answer The detailed process of evaluating a borrower's loan application to determine the risk involved for the lender.
Closing - correct answer The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender.
Servicing - correct answer Includes collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance ( and managing escrow and impound funds) remitting funds to the note holder, and following up on delinquencies.
Supply and Demand - correct answer an economic concept that states that the price of a good rises and falls depending on how many people want it and depending on how much of the good is available.
Funding - correct answer The process of transferring funds to a title or escrow company for disbursement
The Safe Act - correct answer Designed to enhance consumer protection and reduce fraud. (Key component of HERA)
M1 - correct answer Is defined as the sum of currency held by the public and transaction deposits at depository institutions.
M2 - correct answer Is defined as M1 plus saving deposits, small-denomination time deposits (those issued in amounts of less than $100,000) and retail money market mutual funds shares.
Fiat Money - correct answer Is currency that is not backed by any precious metals at all.
Monetary Policy - correct answer Is the maintenance of a stable money supply that provides for growth in the economy while keeping inflation in. The federal reserves is responsible for this policy in the United States.
Fiscal Policy - correct answer Federal Government spending. Approved by Congress. At the treasury level, funds can be raised to pay for government spending by raising taxes and increasing borrowing.
Federal Reserve (The Fed) - correct answer is the central bank of the United States
Monetary inflation - correct answer When there is an excess of money supply in the market.
Demand-pull inflation - correct answer When there is more money in the market and less goods for sale.
Cost-push inflation - correct answer Occurs when the cost of production and offering services increase, thereby causing manufacturers and tradespeople/vendors to rais their prices accordingly.
Discount rate - correct answer The interest rate charged member banks that borrow from the Federal Reserve Systems
Federal Funds Rate - correct answer Is the rate that the Federal reserve charges banks for unsecured loans, most of which are for a very short term.
Trouble Asset Relief Program (TARP) - correct answer Was created to restore the nations financial stability and restart economic growth.
United State Mint - correct answer Created by Congress in 1972 and became part of the Department of the Treasury in 1873. The primary mission is to serve the American people by manufacturing, distributing, and circulating precious metal coins, collecting coins and national medals. Also entrusted with providing security over assets.
The Federal Deposit Insurance Corporation (FDIC) - correct answer An agency created in 1933 to insure individuals' bank accounts, protecting people against losses due to bank failures (Insures deposits only)
The Federal Home Loan Bank (FHLB) System - correct answer A system of regional banks from which local lending institutions everywhere in America borrow funds to finance housing, economic development, infrastructure and jobs.
The Federal Housing Administration (FHA) - correct answer Provides mortgage insurance on loans made by blank- approved lenders throughout the US and its territories. Insures mortgages on single-family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
FHA mortgage insurance - correct answer Provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans.
Community Development Block Grants (CDBG) - correct answer To help communities with economic development, job opportunities and housing rehabilitation
HOME Investment Partnership Program - correct answer Block grants to develop and support affordable housing for low-income residents.
Rental assistance - correct answer In the form of section 8 certificates or vouchers for low-income households.
Ginnie Mae (GNMA) - correct answer Was established in the U.S in 1968 to promote homeownership. It is wholly-owned government association that operates a mortgage-backed securities program designed to facilitate the flow of capital into housing industry. Does not issue, sell or buy pass-through mortgage-backed securities or purchases mortgages loans. It simply guarantees (insures).
Federal Fair Housing Act of 1968 - correct answer An act prohibiting discrimination in the sale or rental of housing on the basis of race, color, religion or national origin sex, handicap and familial status.
Department of Housing and Urban Development (HUD) - correct answer A federal cabinet department is active in national housing programs. Its mission is to create strong, sustainable, inclusive communities and quality affordable homes. It prevents housing discrimination through public education and enforcement are administered by the Assistant Secretary for Fair Housing and Equal Opportunity (FHEO)
NMLSR - correct answer All residential mortgage loan originators must now be registered with the Nationwide Mortgage Licensing System and Registry.
Consumer Financial Protection Bureau (CFPB) - correct answer Established by the Dodd-Frank Act. The Bureau has the authority to examine and enforce consumer protection regulations for all mortgage-related businesses, large non-bank financial companies, and banks and credit unions with assets greater than $10 billion.
Redlining - correct answer A practice in which banks refuse to make loans to people living in certain geographic locations.
Equal Credit Opportunity Act (ECOA) - correct answer The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status. Ensures that all consumers are given an equal chance to obtain credit.
Truth in Lending Act (TILA) - correct answer A United States federal law that is designed to protect consumers in any credit transactions by requiring clear disclosure of key terms of lending arrangments all associated cost.
Trigger Terms - correct answer Specific credit terms that may not be advertised unless the advertisement includes other detailed information.
The Federal Fair Credit Reporting Act (FCRA) - correct answer Sometimes called the Fair Credit Reporting Dispute Act, is a federal law designed to protect consumers against unfair credit reporting practices and protect and credit privacy. To assure the consumer that these agencies are fair, accurate and exhibit confidentiality in their credit reporting methods.
U.S. Department of Agriculture (USDA) - correct answer Also referred to a "Section 502 loan" is insured by the U.S. Department of Agriculture. The program offers 100% financing (no down payment) for qualified borrowers. First time and repeat home buyers can obtain this loan. The program is for primary residence only; no second homes or investor financing is available under this program. The program is for purchases and refinancing only and cash-out refinances are Not allowed.
USDA Farm Loans (FSA) - correct answer Is an agency of the US Dept of Agriculture. Farm Loan Programs for a farmer or rancher who is unable to obtain credit elsewhere to start, purchase, sustain, or expand a family farm.
Office of Consumer Credit Commissioner (OCCC) - correct answer Regulates the credit industry and educates consumers and creditors. Agency efforts help produce a fair, lawful and healthy credit environment for social and economic prosperity in Texas.
Texas Department of Housing and Community Affairs (TDHCA) - correct answer Is responsible for affordable housing, housing related and community service programs, and the regulation of the states manufactured housing industry.
Texas Veterans Land Board (VLB) - correct answer a division of the General Land Office of Texas that administers three programs to assist Texas veterans in purchasing a principal residence and/or land and in financing home improvements
Regulation X - correct answer The Consumer Financial Protection Bureau's (CFPB)( Blank )which implement the Real Estate Settlement Procedures Act (RESPA) Ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protection from unnecessarily high settlement charges caused by certain abusive practices.
RESPA Section 8 - correct answer Prohibits kickbacks, fee-splitting, and unearned fees.
Loan Estimate (LE) - correct answer Form replaced the GFE form and the initial TILA disclosures and includes some new disclosures. The form must be provided by the mortgage broker or creditor upon receipt of an application. The creditor or broker must give the form to the consumer no later than 3 business days after the consumer applies for a mortgage loan.
Closing Disclosure Delivery Requirement - correct answer The TRID rule requires that the consumer receives the Closing Disclosure no later than 3 business days before consummation.
Secondary Market - correct answer Exists for the purchase and sale of existing mortgages to investors. Designed to provide greater liquidity to the residential real estate market by providing for a steady supply of funds from investors. Wherein loan originators such as mortgage bankers and brokers can sell their loans and thus recover cash for originating more loans.
Federal National Mortgage Association (FNMA) - correct answer Plays a vital role in financing mortgages and increasing homeownership opportunities in the US. Began in 1938 as an agency of the federal government and was created to bring stability to the US housing market. In 1968, it became a privately owned and managed corporation. US Congress re-chartered it as a private company. Mandating that it operate with private capital on a self-sustaining basis to enhance the flow of funds through the secondary market home buyers.The largest investor in home mortgage today.
Freddie Mac (FHLMC) - correct answer Federally chartered corporation. Established in 1970 for the purpose of purchasing mortgages in the secondary market. Is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, saving institutions and credit unions can make available to homeowners and multi-family investors.
Conservatorship - correct answer Legal right given to a person to manage the property and financial affairs of a person deemed incapable of doing that for himself or herself.
The Housing and Economic Recovery Act (HERA) - correct answer Enacted on July 30, 2008, is a major housing law that serves multiple purposes:
The modernization of the Federal Housing Administration (FHA) , foreclosure prevention, and the enhancement of consumer protections.
The SAFE ACT is a KEY component of HERA :
-it is designed to enhance consumer protection and reduce Fraud by requiring national minimum standards for mortgage training, including prelicensing education and annual continuing education
Way to Remember: in order to be SAFE, you need a HERA! (female version of a hero)
FHFA (Federal Housing Finance Agency) - correct answer On September 7, 2008 this agency placed Fannie Mae and Freddie Mac in Conservatorship. Appoint (blank) as a conservator or receiver of the GSEs.
Farmer Mac - correct answer Is a government-sponsored enterprise with the mission of providing secondary market for agriculture real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans.
Front Ratio - correct answer Is used to qualify a borrower for a loan based upon the proposed house payment and his or her gross monthly income (GMI). The house payment is the monthly payment of principal, interest, taxes and insurance (PITI).
Back Ratio - correct answer The ratio of the borrowers total recurring monthly debts.
Conventional Loan - correct answer Refers to a loan made with real estate as security and which does not involve government participation in the form of insuring or guaranteeing the loan.
Real Estate Mortgage Investment Conduit (REMIC) - correct answer Allows for the indirect investment in mortgages through the sale of securities. Purchases "pools" of mortgages
Primary Mortgage Market - correct answer The market where borrowers and lenders come together to create and negotiate terms of a mortgage transaction.
Commercial Banks - correct answer Perform a variety of functions, from being a depository institution to providing lines of credit and loan products to the communities in which they are charted. Working capital is primarily generated through deposits from clients.
Credit Unions - correct answer Not-for-profit banks set up by organizations that exist to serve their members. Return surplus income to their members in the form of dividends.
Bonds - correct answer An instrument of corporate or governmental debt. (An IOU)
Real Estate Investment Trust (REIT) - correct answer An investment vehicle created by congress in 1960. The effort to make it possible for small investors to invest in larger commercial properties by purchasing shares in the organization that owns the real estate.
Lifting Clause - correct answer A clause which gives the borrower the ability to replace the primary instrument with another without affecting the subordinate instrument's position.
Lock-in Clause - correct answer Is a condition of a mortgage loan which prohibits prepayment of the loan prior to a certain date.
Alienation (Due on Sale) Clause - correct answer Reserves the right of the lender to call the note (Declare the entire balance due) if the borrower sells the property without repaying the loan.
Release Clause - correct answer When included in a loan instrument, a (Blank clause) allows for a portion of the loan to be paid in exchanged for the lender releasing part of the property from the mortgage. Also called blanket Mortgage
Subordinate Clause - correct answer A clause in which a holder of a mortgage permits a subsequent mortgage to take priority.
Exculpatory clause - correct answer Is used to limit the borrower's personal liability in the event of a default on a loan.
Nonrecourse Clause - correct answer Often used by loan originators when selling loans on the secondary market. Protects the seller of the security from liability in the event of a default by the borrower.
Acceleration Clause - correct answer A provision in a written mortgage or note, stating that in the event of default, the entire amount of the principal becomes payable.
Escalation Clause - correct answer a clause allowing the lender to raise the existing interest rate - although most often associated with an adjustable rate mortgage, it can be used to overcome an alienation clause
Assumption Clause - correct answer Allows a new borrower to take over the payments on an existing loan under specified terms and conditions.
Interest - correct answer money paid at a particular rate for the use of money loaned to a person or entity, it is the cost of borrowing the money.
Interim Interest - correct answer The accounting for amortized home loans assumes that there are only 12 months in a year, consisting of the first day of each month. The account begins on the first day of the month following the day the loan closes. The borrower pays interest for the period between the closing day and the day the principal repayment record begins. (Prepaid interest)
Loan Amortization - correct answer the repayment of a loan using equal monthly payments that cover a portion of the principal and the interest on the declining balance. The amount of the monthly payment going toward interest payment starts off large and steadily declines, while the amount going toward the principal starts off small and steadily increases
Fixed-Rate Mortgages - correct answer Locks in the borrower's interest rate over the life of the mortgage.
Points - correct answer Is a unit of measure. (Discount charges)
Margin - correct answer The percent added to the index in order to calculate the payment interest rate.
Discounted Initial Rate (teaser rate) - correct answer A lower interest rate is offered by the lender during the first year or more of the loan.
Lifetime Cap - correct answer Limits the total amount the interest rate may increase over the life of an adjustable-rate mortgage loan.
Initial Adjustment Cap - correct answer ARMs that offer a fixed rate period during the first years of the loan usually have an initial rate cap that is higher than the per adjustment cap
Balloon Note - correct answer Partially amortized and most commonly done with secondary mortgages.
Sub-Prime Loans - correct answer Have risk-based pricing. The rates are not published on these loans. Borrowers are rated A-F with a prime borrower having an A rating. A minus to F-rated borrowers will pay 1 to 5 % higher than those with good credit. These are non-conforming loans.
prepayment penalties - correct answer More than two-thirds of sub-prime loans have this. [Show Less]