General Mortgage - Part 5

A promissory note includes…

Identification of the borrower and the lender

The borrower’s promise to repay the loan

Amount of the loan

Interest rate charged on the unpaid principal

Period of the term for repayment of the loan

Reference to the real estate used to secure the loan

Provisions for the imposition of late charges for overdue payments

Signature(s) of borrower(s)

Social Security income can be…

Grossed up by as much as 25% for income qualification purposes. Other non-taxed income, such as disability and public assistance, may be grossed up as well.

Closing costs include…

Origination fees

Property taxes

Title insurance

Escrow costs

Appraisal fees

Taxes

Fees owed to state and local government

The debt-to-income ratio is…

The relationship between a borrower’s monthly debt obligations and their gross monthly income. It is expressed as a percentage.

“Equity” is defined as…

The difference between the fair market value of a property and the current balances of any liens against the property.

Strategies for paying off a fixed-rate loan more quickly include…

Prepayment and bi-weekly payments. Prepayment allocates more funds to the loan principal as time goes by. A bi-weekly plan amounts to an additional mortgage payment every year.

Borrowers cannot secure an FHA loan without paying…

UFMIP (upfront mortgage insurance premiums) and annual MIPs (annual mortgage insurance premiums)

Ability to Repay Rule requires ARM qualification based on…

The fully-indexed rate.  This requirement applies to all ARM transactions except for open-end home equity loans.

Balloon payments are prohibited for…

Qualified mortgages, unless the loan is a balloon payment qualified mortgage from a small creditor.  Balloon payments are also generally prohibited for loans covered by HOEPA.

Qualified Mortgage Rule creates…

Presumption of compliance with ability-to-repay standards and a safe harbor from liability for loan originators making qualified mortgages. 

QM Rule creates a conclusive presumption of compliance for…

Prime mortgages, not subprime or higher-priced mortgage loans.

QM Rule creates a rebuttable presumption of compliance for…

Higher-priced mortgage loans.

Qualified mortgage prerequisites…

No negative amortization

No deferment of principal (e.g., no interest-only payments)

No balloon payment feature (unless a small creditor balloon payment QM)

Term does not exceed 30 years

Points and fees do not exceed 3% total loan amount

APR does not exceed APOR by more than 2.25%

Balloon payment qualified mortgage requirements…

No negative amortization

Term of at least five years; does not exceed 30 years

Compliance with 3% points and fees cap

Verification of consumer’s income and assets

Determination of consumer’s DTI 

Loan has a fixed rate

Loan will be held by the creditor for at least three years

Creditor is a small creditor in a rural/underserved area

Nontraditional loans made illegal by the ATR Rule include…

No Ratio

No Income, No Assets (NINA)

Stated Income, Stated Assets (SISA)

No Income, Verified Assets (NIVA)

Stated Income, Verified Assets (SIVA)

No Doc

A non-qualified mortgage may include…

Interest-only payments

Negative amortization

A payment-option feature

Balloon payments

FHA seller concessions…

Limited to 6% of sales price

VA maximum guaranty amount for veteran with full entitlement…

25% of the loan amount, for a loan greater than $144,000