Mortgage and Lending Concepts

A comprehensive set of flashcards covering key terminology and concepts related to mortgage lending and regulations essential for exam preparation.

TRID

A regulation to help borrowers understand home financing terms.

Loan Estimate (LE)

A disclosure combining the Good Faith Estimate (GFE) and the initial Truth in Lending disclosure (TIL).

Closing Disclosure (CD)

A disclosure combining the HUD-1 and the final Truth in Lending disclosure (TIL).

Credit Report Fee

The only fee a lender/mortgage broker can charge before the Loan Estimate is provided under TRID.

Penalty for violating TRID

$1,000,000.

Loans not covered by TRID

HELOCs, reverse mortgages, and mobile homes not attached to real property.

Tolerances under TRID

Permissible changes to costs between the Loan Estimate and Closing Disclosure.

Zero tolerance fees

Fees that consumers cannot shop for, includes transfer taxes and loan origination fees.

10% tolerance fees

Fees that can change but cannot exceed a cumulative total of 10%. Includes title insurance if on the lender's list.

No tolerance fees

Fees that borrowers shop for on their own, can change indefinitely.

Redisclosure time frame

Must occur within 3 business days of a valid change in circumstance.

Loan application completeness requirements

Must include the address of subject property, loan amount, income, estimated property value, name of borrower, and Social Security number.

Delivery of Loan Estimate

Must be provided within 3 business days of receiving a complete loan application.

Business day according to TRID

Days on which the creditor's offices are open to the public.

Rate lock location

Found on the Loan Estimate (LE).

Validity period for Loan Estimate terms

Valid for 10 days from issuance.

Due date for revised Loan Estimate prior to closing

No later than 4 days before consummation.

Examples of valid changes of circumstance

Includes changes in income, appraised value, or loan product.

Loan Estimate retention period

Must be kept for 3 years after closing.

Closing Disclosure provision time frames

Must be provided at least 3 business days prior to closing.

Redisclosure time frame for Closing Disclosure

Must be given within 3 days of valid changes.

RESPA enforcement agency

Consumer Financial Protection Bureau (CFPB).

Penalty for violating RESPA

$10,000 and/or 1 year in prison.

Who created RESPA

U.S. Congress.

RESPA coverage

Protection on loans for owner-occupied residential properties containing 1-4 units.

RESPA exceptions

Includes bridge, commercial, construction, and agricultural properties.

Section 6 of RESPA

Focuses on mortgage servicing and servicing abuses.

Service application time frame

Servicer must apply full payment to account the day it is received.

Payoff request response time frame

Lender must respond within 7 business days after receiving a written request.

Force-placed insurance definition

Insurance that the lender procures when the borrower's existing policy lapses.

Force-placed insurance notification time frames

First notice at least 45 days prior, second notice no earlier than 30 days and at least 15 days before billing.

Role of a servicer

Collects mortgage payments, taxes, insurance, and other dues during the mortgage life.

Section 8 of RESPA

Prohibits kickbacks, fee splitting, and unearned fees.

RESPA Section 8 prohibition

Prohibits giving and receiving a portion of fees without actual services.

Qualified Written Request (QWR) definition

Request for information about mortgage servicing or error assertion.

Section 9 of RESPA

Prohibits home sellers from requiring buyers to use specific title services.

Escrow analysis frequency

Annual review to ensure adequacy of funds in escrow accounts.

Escrow account excess return time frame

Excess over $50 must be returned within 30 business days.

Maximum escrow payment collection period

1/12 or 1 month of total disbursements.

Maximum escrow cushion

Limited to 1/6 or 2 months of total annual disbursements.

Escrow closing notice provision time frame

Must be provided 3 business days prior to account closure.

RESPA required disclosures

Include Know Before You Owe booklet, AFBA, servicing disclosures, etc.

Home Loan Toolkit purpose

Helps borrowers calculate home affordability and inform questions to ask lenders.

Affiliated Business Arrangement (AFBA) timeframe

Indicated within 3 days of completed loan application or at referral time.

Mortgage Servicing Disclosure purpose

Inform borrowers if their loan servicing may be transferred.

Initial Escrow Statement purpose

Estimates taxes and insurance to be paid from escrow in the first year.

Initial Escrow Statement timeline

Usually provided at settlement but can be up to 45 days after.

List of HUD counselors provision timeframe

Must be given within 3 days of completed loan application.

Who must speak to HUD counselors

Borrowers obtaining HECM, high-cost mortgages, or first-time homebuyers.

Servicing Transfer Disclosure requirements

Must be sent if servicing rights are sold or transferred.

Servicing Transfer Disclosure sending timeframe

Must be sent at least 15 days before transfer.

New servicer sending timeframe

Must send Servicing Transfer Disclosure within 15 days after transfer.

Payment grace period after servicing transfer

60 days where previous lender forwards payments.

Good Faith Estimate (GFE) definition

Similar to LE for reverse mortgages, provided within 3 days of application.

HUD-1 Settlement Statement purpose

Provides an itemized list of credits and charges to the borrower.

Settlement services definition

Services occurring at or prior to home purchase.

Truth in Lending Act (TILA) enforcement agency

Consumer Financial Protection Bureau (CFPB).

TILA administering agency

Federal Reserve Board (FRB).

TILA applicability exclusions

Does not apply to commercial, agricultural, or business credit.

TILA coverage thresholds

Applies to credit transactions payable in 5 or more installments.

TILA disclosure retention period

Must be kept for 2 years.

TILA penalty for first violation

$14,435.

Annual Percentage Rate (APR) definition

Cost of getting the mortgage expressed as a yearly rate.

APR components and exclusions

Includes financed services but not third-party fees.

Interest rate definition

Cost charged by a lender as a percentage of the loan principal.

Finance charge definition

Overall cost of consumer credit imposed by the creditor.

TILA disclosures examples

Include ARM disclosures, balloon payment disclosures, and loan estimates.

ARM disclosure timing

Must be given 60 days prior to interest rate changes.

When Home is on the Line disclosure timing

Must be provided within 3 days of completed application for HELOCs.

CHARM booklet definition

Provides information about Adjustable Rate Mortgages' features and risks.

Transfer of Ownership Disclosure timing

Must be sent within 30 days after mortgage assignment.

Mortgage Disclosure Improvement Act (MDIA) requirements

Mandates timing and redisclosure rules for LE and CD.

Events starting rescission period

Requires signed notes and delivery of disclosures.

Rescission timeframe post-closing

Midnight on next business day, usually Tuesday after Friday closing.

Extended rescission period for disclosures issues

Up to 3 years from closing.

Escrow return timeframe post-rescission

Must return within 20 calendar days after notice of rescission.

Rescinding rights waiver

Requires a written statement including emergency explanation.

Loans with rescission rights

Includes refinancing, reverse mortgages, HELOCs.

Loans without rescission rights

Includes second homes, investments, purchases.

Loan Originator Compensation Rule purpose

Protects consumers and ensures loan originators are qualified.

Loan documentation retention requirement

Records of compensation paid must be maintained for 3 years.

Dual compensation definition

Prohibits loan originators receiving payment from both consumer and creditor.

Compensation for loan originators

Must only be based on principal loan amount.

Yield-spread premium compensation history

Previously paid for rates above par, now prohibited.

Loan steering definition

Directing borrowers towards loans for higher compensation.

Loan Originator Compensation Rule amendment

Is part of the Truth in Lending Act (TILA).

Qualified Mortgage (QM) attributes

Less risky, easier to understand, caps on lender fees.

Ability-To-Repay rule requirements

Ensures borrowers can afford their loan at the outset.

Excessive loan features prohibitions in QM

Includes balloon payments and negative amortization.

QM APR exceedance percentages

Set thresholds above Average Prime Offer Rate (APOR) for loans.

Information to establish Ability to Repay

Lenders must document financing factors including income and debts.

Loans exempt from ATR rule

Includes temporary loans, reverse mortgages, and timeshares.

Improper rate used in ARMs

Teaser rates cannot be used to assess repayment capabilities.

Home Ownership and Equity Protection Act (HOEPA) purpose

Created to prevent predatory lending practices.

High-cost mortgage classification

Defined by APR exceeding APOR by specified percentages.

Mortgages considered high-cost by fees

If points and fees exceed defined percentages.

Transactions exempt from high-cost mortgages

Includes reverse mortgages and construction loans.

Key features of high-priced mortgage loans

Include terms for escrow accounts and consumer protections.

Credit Opportunity Act purpose

Ensures equal credit opportunities in lending.

Office enforcing ECOA

CFPB.