Mortgage Lending and SAFE Exam Preparatory Flashcards

A comprehensive set of vocabulary flashcards covering mortgage terminology, government regulations (RESPA, TILA, ECOA, etc.), loan types, and MLO licensing standards based on lecture notes.

1007

Used for single-family properties which are intended as investment properties.

1025

Used for two- to four-unit properties which are intended as investment properties.

1073

Used for condominiums, PUDs, and row homes/townhouses situated on common ground.

4506

IRS form used to request past information and documentation ($4506-T$ for transcript, $4506-C$ for copy).

1003/URLA

Uniform Residential Loan Application; a standard form used by lenders to obtain personal financial information from borrowers.

1004/URAR

Uniform Residential Appraisal Report.

1004D

Used to update appraisals and report certifications of completion.

2-1 Buydown

Financing offer to reduce your interest rate by $2\%$ the first year and $1\%$ the second year.

3rd Party Authorization

Form that allows a third party to receive or act on your mortgage information.

ABA (Affiliated Business Arrangement)

A business relationship where a referrer has an ownership interest of more than $1\%$ in a settlement service provider.

AC

Appraisal Coordinator.

AMC

Appraisal Management Company.

AML

Anti-Money Laundering; requires financial institutions to detect and report suspicious activity.

APR (Annual Percentage Rate)

Cost of credit expressed as a yearly rate including interest and fees.

ARM (Adjustable-Rate Mortgage)

A mortgage with an interest rate that changes periodically.

ATR (Ability to Repay)

Lenders must verify borrower can repay using $8$ underwriting factors.

AUS (Automated Underwriting System)

Software that evaluates loan eligibility.

Abstract of Title

A concise statement summarizing the history of a piece of property, including all conveyances, liens, and encumbrances.

Acceleration Clause

A loan provision requiring the debtor to pay off the balance sooner if a specific event occurs.

Accrued Interest

Interest that has been earned but not yet paid.

Acquisition Costs

The total cost for property before sales tax, including discounts, incentives, and closing costs.

Ad Valorem

Property tax based on assessed value.

Adjustment Interval

The time between changes in the interest rate or monthly payment on an ARM.

Advance

Withdrawing money from a HELOC during the draw period.

Adverse Action

Denial of credit based on creditworthiness or other permissible criteria.

Air Loan

A fraud scheme where a loan is made on a property that does not exist.

Alienation Clause

Also called a Due-on-Sale Clause; allows lender to demand full repayment if property is transferred without consent.

Amortization

Gradual reduction of a loan balance through periodic payments of principal and interest.

Amortization Term

Length of time it takes to fully repay a loan, usually expressed in months.

Annuity

Fixed sum of money paid periodically, typically monthly or annually.

Appraisal

Determination of a property's fair market value.

Appreciation

An increase in the value of an asset, such as real estate.

Arbitration

Dispute-resolution process where a neutral third party makes a binding decision.

Asset Renting

Fraud scheme where borrowers temporarily rent assets to appear more qualified.

Assumable Loan

A loan that can be transferred to a new borrower under existing terms.

Assumption Fee

Fee paid to the lender when assuming an existing loan.

Average Daily Balance

Total balance for each day in the billing cycle divided by number of days.

BCD

Business Card Directory.

BPMI

Borrower Paid Mortgage Insurance; PMI paid directly by the borrower.

BPS (Basis Points)

Used in computing interest rates ($1\,BPS = 0.01\%$).

BSA (Bank Secrecy Act)

Requires reports of suspicious financial activity and tracking of large cash transactions over $\$10,000$.

Balloon Mortgage

A mortgage with regular payments followed by a large lump-sum (Balloon Payment) due at maturity.

Bankruptcy

Legal process allowing debt relief and reorganization or liquidation of assets.

Basis Point

One one-hundredth of a percent ($0.01\%$), used to express interest rate changes.

Beneficiary

The lender in a Deed of Trust transaction.

Blockbusting

Illegal practice of scaring owners into selling by suggesting minorities will move in.

Bona Fide

Made in good faith without deceit or fraud.

Bona Fide Discount Point

Legitimate fees paid by the borrower to reduce interest rates.

Borrower Credit

A credit provided to the borrower for accepting a higher interest rate.

Bridge Loan

A short-term loan used until permanent financing is secured.

Buy-Down

Money paid upfront to reduce the interest rate.

CD (Closing Disclosure)

A final statement of loan terms and costs provided at least $3$ business days before closing.

CFPB (Consumer Financial Protection Bureau)

Government agency that enforces consumer finance laws and federal financial laws.

CHARM

Consumer Handbook on Adjustable Rate Mortgages.

CLTV

Combined Loan-to-Value ratio.

COE

Certificate of Eligibility (for VA loans).

Chain of Title

Ownership history of a property.

Chattel Loan

Loan secured by personal property.

Clear Title

Title without liens or legal questions.

Closing Costs

Fees paid at closing for services such as appraisal, title, and taxes.

Collateral

Asset pledged to secure a loan.

Conforming Loan

A mortgage that meets Fannie Mae and Freddie Mac guidelines.

Consummation

The point at which a borrower becomes legally obligated on a loan.

Conventional Loan

A mortgage not backed or insured by government programs like FHA or VA.

Conveyance

Legal transfer of property ownership.

DTI (Debt-to-Income Ratio)

Monthly debt payments divided by gross monthly income.

DU (Desktop Underwriter)

Fannie Mae's Automated Underwriting System (AUS).

Discount Point

A fee paid to reduce the interest rate, typically $1\%$ of the loan.

Dodd-Frank Act

Created the CFPB and reformed lending laws to prevent practice abuses that led to the $2008$ financial crisis.

Dual Compensation

Prohibited practice of receiving compensation from both borrower and lender.

ECOA (Equal Credit Opportunity Act)

Regulation B; prohibits discrimination in lending based on race, gender, or other protected classes.

Earnest Money

Deposit to show a buyer's serious intent to purchase property.

Encumbrance

A claim or lien on property.

Equity

The difference between property market value and the mortgage balance owed.

Escrow Account

An account for holding funds for property taxes and insurance.

Escrow Analysis

Periodic review of escrow account to adjust payments.

FACT Act

Amendment to FCRA; includes identity theft protections.

FHA (Federal Housing Administration)

Government agency that insures certain mortgage loans.

FICO

Credit score developed by Fair Isaac Corporation.

FCRA (Fair Credit Reporting Act)

Regulation V; protects accuracy and privacy of credit data and allows consumers to dispute info.

Fannie Mae

Government-sponsored enterprise (GSE) that buys conforming loans.

Finance Charge

Total cost of credit including interest and certain fees.

Form 65

Freddie Mac version of the Uniform Residential Loan Application (URLA).

Fraud for Profit

Organized scheme to defraud lenders for financial gain.

Fraud for Property

Misrepresentation by a borrower to qualify for a loan they intend to repay.

Freddie Mac

GSE that purchases mortgages, similar to Fannie Mae.

Funding

Disbursement of loan proceeds.

GFE (Good Faith Estimate)

Outdated disclosure replaced by the Loan Estimate under TRID.

Gift Letter

Statement confirming that funds given by a family member are a gift, not a loan.

Ginnie Mae

Government agency that guarantees mortgage-backed securities (MBS).

HELOC (Home Equity Line of Credit)

A revolving line of credit secured by the borrower's home.

HOA

Homeowners Association.

HOEPA (Home Ownership and Equity Protection Act)

Regulation Z; regulates high-cost loans and guards against predatory lending.

HUD

Department of Housing and Urban Development.

HUD-1

Former closing form replaced by the Closing Disclosure (CD) under TRID.

HPML (High-Priced Mortgage Loan)

A loan with an APR exceeding the average prime offer rate by certain thresholds.

Index

A benchmark rate tied to an ARM that determines adjustment changes.

Interest-Only Loan

Borrower pays only interest for a specified period.

Jumbo Loan

A loan that exceeds conforming loan limits.

LTV (Loan-to-Value Ratio)

Loan amount divided by the appraised value of the property.