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175 Cards in this Set
- Front
- Back
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What is a Package Mortgage
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A mortgage includes the residence and the property inside the house.
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The disclosure required within 3 business days of the application that leads to advice for the borrower about whether the mortgage terms are a good fit for the borrower are called ?
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Mortgage Service Disclosure Settlement
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What does TRID stand for ?
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TILA-RESPA Integrated Disclosure
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According to the new standards of TILA-RESPA, a complete loan application is defined as ?
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The initial 6 items of information that the MLO receives and nothing further
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The "Loan Estimate" is required for use on all mortgages originated after what date?
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October 3, 2015
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What is a Deed of Reconveyance?
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A document issued by the mortgage holder indicating that the borrower has paid the mortgage in full
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What is the Alienation Clause?
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A document that states you must repay your mortgage if you sell your home to a new owner; nearly all mortgages have this clause.
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What is the Acceleration Clause?
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A document that allows the lender to demand payment in full if the borrower defaults on a loan.
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What is RESPA is also known as?
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Regulation X
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What is RESPA ?
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The Real Estate Settlement Procedures Act; This act was designed to protect borrowers and allow them to make more informed decisions. Requires lenders to provide greater amounts of information to the borrowers.
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What is the FDIC?
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Federal Deposit Insurance Corporation; The US Corporation insuring deposits in the US against bank failure.
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What is Fannie Mae?
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Fannie Mae is a Government Sponsored Enterprise (GSE). Fannie Mae is responsible for purchasing mortgages from banks, which allows them to free up loans for borrowers. Fannie Mae is privately owned, however, is Government Sponsored.
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What is Freddie Mac?
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Freddie Mac is a Government Sponsored Enterprise (GSE). Freddie Mac, like Fannie Mae purchases mortgages from banks, which allows banks to free up loans for borrowers. The difference between Freddie Mac and Fannie Mae is Freddie Mac mostly purchases loans from smaller banks and Fannie Mae mostly purchases commercial loans.
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What is TILA?
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Truth in Lending Act; Federal law enacted in 1968. TILA sets forth information that must be disclosed to borrowers prior to extending credit. That information includes: Fees incurred from the loan (application and origination loan fee), points, and document preparation fees, together with third-party fees for credit reports, appraisals, inspections, and title insurance.
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What does section 8 of RESPA state?
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Section 8 of RESPA prohibits anyone from giving or receiving a thing of value for the referral services. Lenders cannot pay and Real Estate Agents may not receive, fees for referrals.
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What is Yield Spread Premium?
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A fee (money or rebate) paid to the Loan Officer or Broker by the lender for originating a loan a higher interest rate, in exchange for lower or no up front costs.
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What is a Good Faith Estimate?
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The estimated cost of the mortgage loan. Must be provided at the time of the application, or mailed within 3 business days. Helps the borrower make an informed decision regarding the loan.
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What is a HELOC?
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Home Equity Line of Credit; a loan set up as a line of credit on an agreed term with the collateral being the borrowers equity in their house.
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What is a Reverse Mortgage?
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A loan available to homeowners, 62 years and older, that allows them to convert part of their equity in their home into cash. No payments are required until the owner dies or the home is sold.
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What is a Chattel Mortgage?
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A legal term used to describe a loan arrangement in which an item of "movable personal property" is used as collateral for the loan. Most commonly used for mobile home purchases.
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What is Regulation Z?
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Regulation Z is a part of TILA that mandates that written disclosures be provided about important credit terms such as interest rates and finance charges.
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What is a HUD-1 Form?
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The HUD-1 form is a form prepared by closing agents itemizing all charges imposed on a buyer and a seller in real estate transactions. The HUD-1 is used primarily to settle reverse mortgage and mortgage refinance transactions.
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What is a Blanket Mortgage?
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A mortgage (loan) which covers two or more pieces of real estate. The real estate is held as collateral on the loan, however, the individual pieces of property can be sold separately without ending the entire original loan.
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What is a Bridge Loan?
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A bridge loan, also known as a "swing loan" in California, is a short term loan used to “bridge” the gap between escrow closings from one property to another. This can allow you extra time to sell your own home and still buy the home you are pursuing.
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What is a Cash Out Mortgage?
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A Cash Out Mortgage, or Cashout Refinance (Refi) is a refinance of the current loan (change of terms and interest rate.) Allows the borrower to receive the equity on the existing loan. Fees involved in a refi are closing costs, and a new interest rate.
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What is amortization ?
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Amortization is the paying off of debt with a fixed repayment schedule in regular installments over a period of time. In the beginning of the loan, most of the monthly payment goes toward interest. The following payments result in more of the payment going towards the principal rather than the interest.
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What is negative amortization?
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Negative amortization is an increase in the principal balance of a loan caused by making payments that fail to cover the interest due.
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What does it mean to Rescind?
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Canceling, nullifying, terminating, or dishonoring a contract.
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What is a Non-Traditional Mortgage?
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Anything other than a 30-year, fully amortized, fixed rate loan.
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Why would a conventional loan with a 15 year term have a lower interest rate than a conventional loan with a 30 year term.
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It poses less of a risk to the Lender than a year 30 year loan.
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A loan not insured or guaranteed by a government entity is an example of what kind of loan?
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A Conventional Loan
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When loans meet Fannie Mae/Freddie Mac standards and can be sold on the secondary market, they are referred to as what?
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Conforming
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True or False: Conventional mortgages can involve Adjustable Rate Mortgages (ARMs.)
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True
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True or False: Nonconforming loans do not meet the standards to be sold to Fannie Mae or Freddie Mac.
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True
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What is a Sub-Prime Loan?
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A subprime loan is a type of loan offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are turned away from traditional lenders because of their low credit ratings or other factors that suggest they have a reasonable chance of defaulting on the debt repayment.
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"At the end of the term, the property value might be lower than the loan balance and not qualify for a refi that could pay the balloon payment." This statement is an example of what?
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Negative Amortization
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What is a Hybrid-Mortgage?
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A Hybrid-Mortgage combines the best features of an adjustable mortgage and a fixed mortgage. For example, a Hybrid-Mortgage would a fixed interest rate for 10 years and then increase in interest rate every year.
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What are the terms of a 5/25 interest only/fixed loan?
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The loan is interest only for the first five years, and then fully amortized at a fixed rate for the duration of the loan.
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What is a Graduated Payment Mortgage (GPM?)
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GPM is a mortgage with low initial monthly payments which gradually increase over a specified time frame. These plans are mostly geared towards young people who cannot afford large payments now, but can realistically expect to raise their incomes in the future.
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What is a Growth Equity Mortgage (GEM)?
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A fixed rate mortgage on which the monthly payments increase over time according to a set schedule. The interest rate on the loan does not change, and there is never any negative amortization.
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What is the advantage to the borrower of a Growth Equity Mortgage (GEM)?
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Saves interest; Any increase in payments goes directly to reduce the principal balance. This pays the loan off sooner and saves interest for the borrower.
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In the “Guidance on Nontraditional Mortgage Product Risk,” the agencies that jointly wrote this document define nontraditional mortgage products (NMPs) as what?
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Mortgage products that allow borrowers to defer principal and sometimes interest.
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True or False: The Department of Housing and Urban Development (HUD) is one the agencies that wrote “Guidance on Nontraditional Mortgage Product Risk” .
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False
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True or False: “Guidance on Nontraditional Mortgage Product Risk,” addresses issues of: Mortgage fraud and consumer protection principles.
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True
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When it comes to nontraditional mortgage products, an institution’s qualifying standards should avoid an over-reliance on what?
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Credit Scores
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True or False: When underwriting a loan, the main consideration should be the borrower’s repayment capacity by final maturity at the fully indexed rate.
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True
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The document which combines the Truth in Lending Statement required by TILA and the Good Faith Estimate required by RESPA is what?
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The Loan Estimate
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Until the Loan Estimate disclosure and other required disclosures are delivered to the borrower, an MLO may charge the borrower which fee?
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Credit Report Fee
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The Loan Estimate is required for use on all mortgage loans originated after which date?
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October 3, 2015
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True or False: Section 10 requires lenders to impose an escrow account on all loans with an LTV over 80%.
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False
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What is a Closing Disclosure?
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A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).
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True or False: If the settlement agent prepares the entire Closing Disclosure, the settlement agent becomes responsible for its accuracy and delivery ?
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True; The creditor always maintains full responsibility for the accuracy and timely delivery of the document.
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The Closing Disclosure must be received by the borrower in which time frame?
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Three business days before consummation (the point at which something is complete or finalized.)
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True or False: In a loan transaction that offers a three day (3) right of rescission, each consumer who has the right to rescind, must receive the Closing Disclosure.
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True
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Under TRID, the Closing Disclosure includes which forms?
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The Final Truth in Lending Statement and the HUD-1 Settlement Statement.
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How many pages does the new integrated Closing Disclosure form contain?
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5
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The integrated Closing Disclosure breaks down fees paid by the borrower and seller according to when?
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At closing and before closing.
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What is disclosed on the integrated Closing Disclosure for the borrower that previous forms did not contain?
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Whether or not changes had occurred between the initial Loan Estimate and the Closing Disclosure. (This information is on page 3 and is referred to as a Calculating Cash to Close)
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What is TIP?
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Total interest percentage; The total amount the borrower will pay over the term of the loan as a percentage of the loan amount.
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True or False: TIP was added to the integrated disclosure form. |
True
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If a borrower’s payment is late, under which time-frame will the lender charge a late fee?
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More than 15 days late
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What is the maximum late fee the lender can charge?
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5% of principal and interest payment.
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What type of interest is the borrower granting when they take out a loan to purchase the property?
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Security Interest
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True or False: Mortgage Interest is included in Impound Accounts
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False
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True or False: Regarding an appraisal for a property: the borrower is the appraiser’s client, and the client has paid for the appraisal, the borrower is entitled to a copy of the appraisal.
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False; The borrower is not the appraiser's client. |
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Adjustable Rate Mortgage disclosures required to be signed at closing need to be provided to whom?
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Only to a borrower who expresses an interest in receiving a copy.
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True or False: Regarding the consummation of the loan, it is when the borrower becomes contractually obligated to the lender.
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True
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In a timeshare transaction, when must the lender deliver the Closing Disclosure to the consumer?
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On the day of consummation of the loan.
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What is the CFPB?
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Consumer Financial Protection Bureau; An agency of the United States government responsible for consumer protection in the financial sector. CFPB jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies operating in the United States.
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When may a revised Loan Estimate not be issued?
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After the creditor provides the Closing Disclosure.
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To provide disclosures in a timely manner, the lender must put a revised Loan Estimate in the mail in which time frame?
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7 business days; 3 business days for delivery, and the revised Loan Estimate must be received 4 business days prior to the consummation of the loan.
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Which borrowers must sign the Closing Disclosure?
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All borrowers on the loan
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A revised Closing Disclosure must be issued within which time frame?
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Three (3) business days prior to consummation.
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Which time frame applies to a Closing Disclosure that has become inaccurate and results in a change to the amount paid by the consumer?
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30 business days
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Which time frames must be observed by the lender to correct non-numerical clerical errors and refunds for tolerance violations?
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60 days, according to TILA
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The Mortgage Service Disclosure is provided in which time frame? |
This disclosure is provided within three (3) business days of completed application.
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True or False: The mortgage broker cannot be expected to know of the Partial Payment Policy of each lender he/she works with.
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False; The mortgage broker (MLO) is expected to know the partial payment policy of each wholesaler he/she works with so the disclosure can be accurate.
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When provisions of TILA refer to a creditor extending credit to a consumer, what does that mean?
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People, not a company
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True or False: Under TILA, the definition of credit does not apply to loans less than one million dollars.
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False
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True or False: Business and commercial use under TILA would include "Owner-occupied single family residence."
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False; TILA does not apply to business or commercial transactions.
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Under TILA, what is the test that separates owner-occupancy from a business or commercial loan?
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If the owner will occupy the house for more than 14 days.
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What is Nominal Interest Rate?
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The interest rate before taking inflation into consideration. Also refered to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest.
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What are Origination Points?
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Origination Points are the type of fee borrowers pay to lenders or loan officers in order to compensate them.
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What are Discount Points?
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Discount points are a type of prepaid interest or fees mortgage borrowers can purchase that lowers the amount of interest they have to pay towards their mortgage. Generally, 1 point equals .25% and cost 1% of the loan.
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Under TILA, the standard way to inform consumers of the true cost of borrowing money is by disclosing what?
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The Annual Percentage Rate (APR)
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Under TILA, how long must the loan broker (MLO) keep evidence of compliance with disclosure requirements?
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2 years
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True or False: The Mortgage Servicing Disclosure Statement is loan disclosure required only in specific circumstances.
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False; the Mortgage Servicing Disclosure Statement is a standard form issued within three (3) business days of receiving the loan application.
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True or False: The MLO must disclose the APR when receiving a phone call just checking for an interest rate quote.
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False
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True or False: On a loan transaction, Finance Charges are expressed as the cost of consumer credit as a rate.
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False; Finance Charges are expressed as a Dollar Amount, not a rate.
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True or False: According to TILA, Seller's Points are included as a Finance Charge.
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False; Points paid by the seller are not part of a finance charge paid by the borrower.
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True or False: An Appraisal Review Fee is a finance charge under TILA.
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True
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True or False: According to the 2009 amendment to TILA, the average prime offer rate includes data used for a construction loan, regarding the average prime offer rate.
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False
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True or False: Average prime rate offer data applies to a loan used to purchase a home.
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True
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True or False: Under the 2009 amendment to TILA, lenders are prohibited from asking the appraiser to consider additional factual information about the subject or comparable properties.
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False; There is nothing wrong with providing the appraiser with additional information regarding the subject property.
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The Home Ownership and Equity Protection Act (HOEPA) is enforced by which entity?
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Consumer Financial Protection Bureau (CFPB)
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What is the Home Ownership and Equity Protection Act (HOEPA) ?
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The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees.
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HOEPA is also known as what?
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Section 32
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High Cost Loan Triggers of HOEPA include what?
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The High Cost Loan is triggered by APR or Total Finance Charge.
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True or False: HOEPA is triggered when the APR exceeds the Average Prime Offer Rate (APOR) by more than 6.5% on first lien loans of $50,000 or higher and more than 8.5% on first lien loans of less than $50,000.
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True; The rates are more stringent since the TRID disclosures went into effect.
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True or False: Regarding the APR Trigger of HOEPA for a second lien loan, HOEPA is triggered when the APR exceeds the APOR BY 8.5%.
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True
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True or False: USDA Section 502 Loans are covered under HOEPA
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False
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What is a USDA Section 502 Loan? |
A rural housing loan program, offered to very low-income families or individuals (below 60% of the area median) with terms up to 38 years. Borrowers must have the means to repay the loans, but be unable to secure reasonable credit terms elsewhere.
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True or False: HOEPA covers Home Equity loans
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True
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What is a Balloon Loan? What is a Balloon Payment?
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A Balloon Loan is a loan that is repaid with a series of regular payments and one much larger payment at the end. A Balloon Payment is the final large payment of the Balloon Lan and is sometimes more than twice the normal mortgage payment.
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True or False: A prepayment penalty is strictly prohibited on a HOEPA loan.
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True
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What is the Homeowners Protection Act (HPA)
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A law designed to reduce the unnecessary payment of private mortgage insurance (PMI) by homeowners who are no longer required to pay it. The HPA mandates that lenders disclose certain information about PMI. The law also stipulates that PMI must be automatically terminated for homeowners who accumulate the required amount of equity in their homes
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A Higher Priced Loan is known as what?
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Section 35 Loan
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What is the purpose of the Equal Credit Opportunity Act (ECOA)?
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To ensure that all consumers have an equal opportunity to obtain credit.
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What is ECOA also known as?
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Regulation B; Think of "BECOA"
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ECOA is enforced by which federal agency?
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ECOA is enforced by the Consumer Financial Protection Bureau (CFPB)
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True or False: ECOA was originally passed in 1969 to prohibit lending discrimination on the basis of sex or marital status.
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False; While it is true ECOA was established to prohibit lending discrimination on the basis of sec or marital status, ECOA was established in 1974.
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True or False: According to ECOA, MLO's are prohibited from discouraging a potential borrower from applying for a loan based on their membership in a protected class.
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True; To advise a potential borrower not to even apply based on age or any of the other protected classifications would be a violation of ECOA.
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True or False: According to ECOA, Disability is protected classification.
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False; Disability is a protected classification, however, not under ECOA.
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True or False: According to ECOA, Sexual Orientation is protected classification.
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False; Sexual Orientation is not a protected classification under ECOA.
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According to ECOA, when the MLO is inquiring about marital status, the one term that should not be used is what?
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"Divorced"; The correct term should be unmarried, since it includes divorced, single, and widowed.
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According to ECOA, creditors must notify applicants of a lending decision within what time frame?
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Within 30 business days of filing a completed application.
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When a loan application is approved, what is issued by a creditor?
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A Commitment Letter
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According to ECOA, if a loan application is incomplete, what is issued by a creditor?
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A Notice of Incomplete Application.
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According to ECOA, when a loan application is declined, what is issued by a creditor?
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A Statement of Adverse Action; It includes reasons for the decline, as well as contact information for all three major credit reporting agencies.
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According to ECOA, borrowers have the right to request a copy of the appraisal report used in the decision-making process within what time frame?
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90 days.
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The purpose of the Home Mortgage Disclosure Act (HMDA) is what?
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The purpose of the Home Mortgage Disclosure Act (HMDA) is to discover discriminatory practices.
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The Home Mortgage Disclosure Act (HMDA) is enforced by which federal agency?
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The Home Mortgage Disclosure Act (HMDA) is enforced by the Consumer Financial Protection Bureau (CFPB)
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The Home Mortgage Disclosure Act (HMDA) is also known as what?
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Regulation C; The acronym for this law is usually pronounced HUMDA, so just remember CHUMDA.
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True or False: HMDA applies to one-to-four family residential properties, but not for vacant land, new construction, or loans that are sold as part of a pool for servicing.
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True; HMDA applies to one-to-four family residential properties, but not for vacant land, new construction, or loans that are sold as part of a pool for servicing.
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Regulation C of The Home Mortgage Disclosure Act (HMDA) requires lending institutions to submit a report to their supervisory agencies. This report is called what?
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This report is called the Loan/Application Register. (LAR)
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Financial institutions must submit their report to their supervisory agencies regarding loans and applications how often and when?
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Once a year every March.
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According to the Loan/Application Register, what is true regarding the issue of race and ethnicity?
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If the applicant declines to provide this information (race/ethnicity), it is their right to due so, and it will not be held against them in the loan process.
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The Fair Credit Reporting Act (FCRA) is also known as what?
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Regulation V; Some remember it by substituting a V for the F. Think: "Vair Credit Reporting Act."
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True or False: The Fair Credit Reporting Act (FCRA) deals with deceptive and unfair practices in lending.
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False; The Fair Credit Reporting Act (FCRA) does not deal with deceptive and unfair practices in lending.
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True or False: The Fair Credit Reporting Act (FCRA) requires periodic evaluation of compliance.
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False; The Fair Credit Reporting Act (FCRA) does not require periodic evaluation of compliance.
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True or False: When the information in the credit file resulted in a "Notice of Incomplete Application", a consumer is entitled to a free credit report.
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False; A "Notice of Incomplete Action" would not result in a free credit report to the consumer.
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Which agency publishes guides for consumers that explain all of their rights under The Fair Credit Reporting Act (FCRA)?
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The answer is the Consumer Financial Protection Bureau (CFPB). They also offer many publications and tools that assist the public.
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According to the Fair Credit Reporting Act (FCRA), credit reporting agencies may not report outdated negative credit information. How long may a Chapter 7 bankruptcy remain on the report?
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10 years; A Chapter 7 BK is a full liquidation of debts and may remain on the credit report for 10 years.
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According to the Fair Credit Reporting Act (FCRA), credit reporting agencies may not report outdated negative credit information. How long may a Chapter 11 bankruptcy remain on the report?
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7 years; This chapter of bankruptcy is a reorganization of debt and may remain on the report for seven years.
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According to the FCRA, what is the time limit a credit reporting agency may report a criminal conviction?
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There is no time limit for a criminal conviction. While a bankruptcy is a serious event, a criminal conviction has more serious consequences than a bankruptcy.
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True or False: A credit reporting agency may not give out a consumer’s credit file to a prospective employer without the written consent of the consumer.
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True
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The Fair and Accurate Credit Transaction Act (FACTA) is a 2003 amendment to which law?
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The Fair Credit Reporting Act (FCRA)
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The Fair and Accurate Credit Transaction Act (FACTA) was enacted to fight primarily which crimes?
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The Fair and Accurate Credit Transaction Act (FACTA) was enacted to fight Identity Theft. As well as help the consumer dispute inaccurate credit information.
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Which website will result in a free copy of the consumer’s credit report for the consumer?
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www.annualcreditreport.com
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True or False: The Fair and Accurate Credit Transaction Act (FACTA) requires that consumers applying for credit receive the Home Loan Applicant Credit Score Information Disclosure notice, which explains their rights.
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True
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True or False: Regarding the requirements that The Fair and Accurate Credit Transaction Act (FACTA) places on businesses to ensure effective security and disposal of sensitive personal consumer information, that business would be in compliance if they ball up consumer information and double bag it and dispose of it in the trash.
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False; Businesses must burn or shred papers or place all pending loan documents in locked desks, cabinets, or storage rooms.
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True or False: Red flags as noted in The Fair and Accurate Credit Transaction Act (FACTA) generally includes straw buyers involved in a transaction.
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False; Straw buyers are not usually the problem with identity theft or inaccurate credit information.
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The National Do Not Call Registry is under the oversight of which federal agency?
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The Federal Trade Commission (FTC) is the agency that manages the Do Not Call Registry.
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True or False: The National Do Not Call Registry applies to political organizations seeking to promote their positions or raise money.
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False; The National Do Not Call Registry does not apply to political organizations seeking to promote their positions or raise money.
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What is the purpose of the National Do Not Call Registry ?
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The National Do Not Call Registry is intended to give U.S. consumers an opportunity to limit the telemarketing calls they receive.
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True or False: Telemarketers representing third party sellers, are exempt from the National Do Not Call Registry.
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False; Any "for profit" organization is not exempt from the Nation Do Not Call Registry.
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True or False: Regarding the requirements of the National Do Not Call Registry, Companies must keep national lists of customers and prospects updated every 30 days.
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False; The lists must be updated every 90 days.
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Scenario Question: Triniton, Inc. has two violations of The National Do Not Call Registry. What is the maximum total of their fines?
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$32,000; The fine for each violation is $16,000; therefore, the total fine would be $32,000 since there is two violations.
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True or False: Regarding the National Do Not Call Registry, A telemarketer or seller may call a consumer with whom it has an established business relationship for up to eighteen months after the consumer’s last purchase, delivery, or payment, even if the consumer’s number is on The National Do Not Call Registry.
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True ; 18 months if there is an established business relationship, a business may contact a consumer even if their phone number is on The National Do Not Call Registry.
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Who is covered by the National Do Not Call Registry?
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The National Do Not Call Registry applies to any plan, program, or campaign to sell goods or services through interstate phone calls. This includes telemarketers who solicit consumers, often on behalf of third party sellers. It also includes sellers who provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment.
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What does the National Do Not Call Registry say about an Established Business Relationship?
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A telemarketer may call a consumer with whom it has an EBR for up to 18 months after the consumer's last purchase, delivery, or payment - even if the consumer's number is on the National Do Not Call Registry. In addition, a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. And if a consumer has given a company written permission, the company may call even if the consumer's number is on the National Do Not Call Registry.
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True or False: Regarding a company's internal do not call list,If a consumer is on a company’s internal do not call list, the company cannot call even if there is an EBR.
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True; Being on the company’s internal do not call list trumps everything.
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What is Predatory Lending?
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Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender.
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True or False: Regarding an ARM, the margin usually remains fixed and is not impacted by the movement of interest rates or other factors in the financial markets.
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True
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A cap used with ARMs to protect the borrower from large payment increases is what?
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Mortgage Payment Cap; This is a way lenders can limit payment shock due to interest rate changes and negative amortization.
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True or False: The purpose of interest rate caps regarding ARMs is to eliminate large and frequent mortgage payment increases.
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True; This is the basic idea so borrowers can pay the loan and resolve the debt.
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An initial index value plus the margin equals what?
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Fully Indexed Rate; For example, if the initial index rate is 6.00% and the margin is 2.00%, the fully indexed rate is 8.00%.
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An initial index value plus a lifetime cap equals what?
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Maximum index rate
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What best describes the object of a convertible ARM?
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To convert from an adjustable to a fixed rate loan.
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True or False: Regarding an ARM Conversion Option, the conversion fee is expensive, usually several thousand dollars.
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False; The Conversion usually costs several hundred dollars, not thousands.
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What is the purpose of the Consumer Handbook on Adjustable Rate Mortgages (CHARM)?
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The handbook gives you an overview of ARMs, explains how ARMs work, and discusses some of the issues a borrower may face.
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The Consumer Handbook on Adjustable Rate Mortgages (CHARM Booklet) is prepared by which agency?
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The Federal Reserve and Federal Home Loan Bank Board
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When required, the CHARM Booklet must be provided at which point?
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When the loan application is made or before the payment of any non-refundable fees; whichever comes first.
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According to TILA, when must any notice of change in payment or interest rate be provided to a borrower?
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At least 25 days before and not earlier than 120 days before a new payment takes effect.
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What is a Hybrid ARM?
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It is fixed for a certain number of years, then the interest rate adjusts for the remainder of the term until the debt is liquidated. For example, a 3/27 loan would consist of 3 years fixed and the remaining 27 years would be adjustable.
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True or False: Regarding rate buydowns, Buydowns must be paid by the seller. |
False; A buydown can be paid by the buyer or seller, or even the builder or developer.
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True or False: Regarding rate buydowns, a buydown is the commission the MLO makes on the loan.
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False; The commission the MLO makes on the loan is part of the agreed upon fees made by the lender and broker, not discount points.
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With a temporary buydown, underwriters will qualify a borrower using what rate of interest?
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The Note Rate; Underwriters must be conservative and they are usually not willing to qualify the borrower at the starting rate for an interest rate reduction that may last only two or three years. They must use the note rate.
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What is the "Note Rate"?
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The Note Rate, or Nominal Rate, is the interest rate on face value. It is the interest rate you will pay for the duration of the loan, on a fixed loan of course, and does not include the fees associated with your mortgage. The APR is a better picture of what you will pay for your mortgage.
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A loan with a temporary buydown is classified as what kind of loan?
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Non-Traditional; This is because it has different interest rates.
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What is a "Level Payment Buydown Plan"?
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A buydown plan where the reduction remains constant throughout the buydown period
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What is a "Graduated Payment Buydown Plan"?
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A buydown plan where payments start low but increase each year until they’re sufficient to amortize the loan.
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A lender makes a loan for $220,000 at 7% interest for 30 years. Some interest is prepaid for three years, reducing the interest rate for those three years to 6%. This is an example of what kind of loan?
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Level payment buydown; The first three years the interest rate is reduced the same one percent, hence a level payment buydown.
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A 3-2-1 buydown is best described as what kind of loan?
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Graduated payment buydown; The interest rate is reduced by 2.5% the first year, 2% the second year, and 1.5% the third year, gradually attaining the fully indexed rate.
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