Mortgage test original

What is a mortgage?

A written instrument using real property to secure repayment of a debt

Primary market

Consumer market where loans are originated

Secondary market

Market where existing loans are bought and sold

Mortgage banker

Lends using their own funds and closes in their own name

Mortgage broker

Facilitates loans for a fee without lending their own money

Fannie Mae

Largest mortgage investor; government-sponsored enterprise

Freddie Mac

Provides secondary market for savings and loan institutions

Ginnie Mae

Guarantees government-backed mortgage securities but does not buy or sell loans

CFPB

Consumer Financial Protection Bureau that enforces consumer protection laws

RESPA

Law that prevents kickbacks and reduces settlement costs

Section 8 RESPA

Prohibits kickbacks and referral fees

Section 9 RESPA

Prohibits seller requiring specific title company

Escrow limits

1/12 annual amount plus 2-month cushion

Foreclosure timeline

Cannot begin until borrower is 120 days delinquent

TILA

Promotes informed use of consumer credit

APR

Total cost of credit expressed as a percentage

Finance charge

Total cost of borrowing including fees and interest

3/7/3 rule

3 days disclosures, 7 days before closing, 3 days after redisclosure

ECOA

Prevents discrimination in lending

Protected classes ECOA

Race, sex, religion, age, marital status, etc.

Fair Housing Act

Prohibits discrimination in housing

Redlining

Denying loans based on location demographics

Steering

Guiding buyers to certain neighborhoods based on protected class

HMDA

Tracks lending data to detect discrimination

LAR

Loan Application Register submitted annually

Conventional loan

Not government-backed loan

FHA loan

Government-insured loan with 3.5% down payment

VA loan

Loan for veterans with no down payment

USDA loan

Rural housing loan with income limits

Conventional DTI

28/36 ratio

FHA DTI

31/43 ratio

VA DTI

41% back-end ratio

LTV

Loan amount divided by property value

DTI

Monthly debt divided by income

Per diem interest

Daily interest paid at closing

TRID

Combines TILA and RESPA disclosures

Loan Estimate (LE)

Replaces Good Faith Estimate and initial TIL

Closing Disclosure (CD)

Replaces HUD-1 and final TIL

Mortgage fraud

Misrepresentation of material facts

Fraud penalty

Up to $1,000,000 fine and/or 30 years prison

5 C’s of underwriting

Credit, Capacity, Cash, Collateral, Character

Fixed-rate mortgage

Same payment for life of loan

ARM

Adjustable interest rate mortgage

HELOC

Revolving line of credit using home equity

Reverse mortgage

Loan where borrower receives payments from equity

PMI

Insurance for conventional loans under 20% down

MIP

FHA mortgage insurance premium

FCRA

Protects consumer credit information

Free credit report

One free report per year per bureau

Do Not Call hours

8 AM to 9 PM