SAFE Exam Quizlet

Primary Mortgage Market

Where credit institutions originate loans

C. The maximum the rate can increase over the life of the loan

When an ARM has rate caps of 5/2/6, the 6 refers to what?

A. The maximum rate increase at the initial adjustment

B. The start rate for the loan

C. The maximum the rate can increase over the life of the loan

D. The rate maximum the rate can decrease over the life of the loan

B. The borrower qualified at the buydown rate

When utilizing a temporary buydown to lower the interest rate on a FHA loan, which of the following are correct

A. The borrower qualified at the note rate

B. The borrower qualified at the buydown rate

C. The rate cannot be more than 2% below the note rate

D. Seller or builder can pay the discount points to buydown the rate

A. Age

All of the following are violations of the Fair Housing Act EXCEPT

A. Age

B. National Origin

C. Disability

D.Religion

Encrumbrance

Claim against property held by one who is not the legal owner

Trigger Term

Advertised term that requires additional disclosures

Advertising Disclosure

An advertisement must be presented "clearly and conspicuously" to keep from being deceptive, unfair, or otherwise violate a Commission rule

Waving Right of Rescission

Extenuating circumstances such as "bona fide personal financial emergency

Right of Rescission

Right that borrowers have to cancel a loan or line of credit with a lender within three days of closing

Business Day

When creditors office is open to the public, a calendar working day except Sunday or a federal holiday

Application

Financial information used for purposes of obtaining an extension of credit

Disclosure

The act of making new information known

FTC

Federal Trade Commission

Mission is to promote consumer protection and eliminate and prevent anticompetitive business practices

CFPB

Consumer Financial Protection Bureau

Regulatory agency charged with overseeing financial products and services offered to consumers

TILA

Truth in Lending Act

Enacted 1968 promotes the informed use of consumer credit by requiring disclosures about terms and costs and standardizes the manner in which costs with borrowing are calculated and disclosed

Per Diem Interest

Interest charged on a loan for one or more days

Annual Interest Rate Formula

Principal (X) Interest Rate = Annual Interest Rate

Interest Only Mortgage

Mortgage where the mortgagor is only required to pay off the interest that arises from the principal that is borrowed for a set period

Permanent Buydown

Borrower chooses to pay additional "discount points" to buy down the interest rate for the life of the mortgage note

2/1 Buydown

Used on fixed rate loans over two years

Set of two initial temporary-start interest rates that increase in stair-step fashion until a permanent interest rate is reached

Discount Point

A form of pre-paid interest which effectively increases the yield on the loan above the amount of the stated interest rate

CLTV

Combined Loan to Value

An amount in addition to the Loan to Value, which simply represents the first position mortgage or loan as a percentage of the property's value

LTV

Loan to Value

Ratio of a loan to the value of an asset purchased

PITI

Principal, Interest, Taxes, Insurance

Refers to the components of a mortgage payment

DIF

Housing to Debt

Ratio that measures an individual's ability to manage monthly payment and repay debts

Forbearance

Agreement between the lender and the borrower to delay foreclosure

Loan Modification

A permanent restructuring of the mortgage where one or more of the terms of a borrower's loan are changed to provide a more affordable payment

Foreclosure

Legal process to collect debt on mortgaged property

Satisfaction of Mortgage Letter

Document generated and signed by a mortgage lender, acknowledging that the borrower has paid off the mortgage loan in full and the mortgage is not a lien on the property

Subordination Agreement

When two mortgages are on a property, this specifies which mortgage takes precedence

Payoff Statement

Provides homeowner proof the mortgage is paid off

Constructive Note

Legal presumption that anything recorded in a public record can be known by anyone

Actual Note

Direct knowledge that one has of the property

Inquiry Note

Information that should compel a reasonable person to make further inquiries about some aspect of the property

Title Record

Serves as a central repository of information about a parcel of land

SRP

Service Release Premiums

Payment received by lender after selling a loan Based on market value

GNMA

Government National Mortgage Association

Created in 1968, goal to expand affordable housing under HUD

FNMA

Federal National Mortgage Association

Created 1968 works with Fannie Mae to increase affordable lending

FHA

Federal Housing Administration

Insures banks real estate loans and charges borrowers a small premium

HELOC

Home Equity Line of Credit

A loan in which the lender agrees to lend a maximum amount within an agreed period

and is also an open-ended mortgage transaction that is secured

HECM

Home Equity Conversion Mortgage

A FHA insured reverse mortgage that allows the conversion of equity in a home to cash

Balloon Mortgage

A mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period and does not amortize

ARM Interest Rate Adjustment

Margin + Interset = Rate

COFI

Cost of Fund Index

Regional average of interest expenses incurred by financial institutions which in turn is used as a base for calculating variable rate loans

ARM

Adjustable Rate Mortgage

Loan that is lower than fixed rate in beginning

Loan payment changes over time

Adjustable caps that vary

Used to obtain a higher loan amount

Fixed Rate

Interest rate that remains the same over the life of the loan

Non-Conforming Loan

Does not meet Freddie Mac or Fannie Mae guidelines

Conforming Loan

Conforms to terms and conditions set by government

Conventional Loan

Not guaranteed or insured by the government but can still follow federal guidelines

Acceleration Clause

Accelerated loan repayment if property is in default

Exculpatory Clause

Relieves one party form liability due to actions of another party

Defeasance Clause

Creditor can obtain title without foreclosure process

Late Payement Penalty

When fees are attached to late payment

Pre-Payment Penalty

Fixed sum added to loan if loan is paid off early

Contract of Deed

Complete financing and sales contract agreed upon by seller and seller with no note attached

Note

Promise to repay debt

Mortgage

Pledge of collateral to secure a loan

Reconveyance

A document issued by a mortgage holder indicating that the borrower is released from the mortgage debt and transfers the property title from the lender

Conveyance

The act of transferring an ownership interest in real property from one party to another

Mortgage Lock-In-Rate

A guarantee a lender will deliver a specific combination of interest rate and points if the mortgage closes by a specified date

Approval letter

A document that states the loan amount a lender is willing to make a borrower

Pre-Qualification Letter

Estimate of loan amount a borrower can get with limited financial information

Commitment Letter

Indicates a borrower has passed lenders underwriting guidelines and that they are willing to offer the borrower a home loan

Mortgage Approval Letter

Letter subject to property specified for a loan and dependent on an appraisal

AUS

Automated Underwriting System

A computer generated loan underwriting decision, using completed loan application information

Capacity

A borrowers income assets

Credit

The ability of a borrower to obtain goods or services before payment, based on the trust that payment will be made in the future