Dodd-Frank, CFPB, and Mortgage Lending Practices Flashcards

Vocabulary-style flashcards covering mortgage lending regulations, definitions, and formulas from the lecture transcript.

LTV

$\text{loan amount} / \text{value}$ with value being the lesser of price or appraisal.

CCLTV

$$\frac{\text{Mortgage 1} + \text{Mortgage 2}}{\text{value}}$$

Front-End (Housing) Ratio

$$\frac{\text{PITI}}{\text{Gross Monthly Income}}$$

Back-End (Debt) Ratio

$\frac{\text{PITI} + \text{long term debt}}{\text{Gross Monthly Income}}$—also known as the debt ratio.

Interest (Note) Rate Formula

$$\text{Index rate} + \text{Margin} = \text{Interest (note) rate}$$

RESPA / Regulation X

A regulation referred to as REXPA in learning tips, dealing with transparency and consumer protection in real estate settlements.

Yield Spread Premiums

Bonuses that lenders previously paid to brokers to inflate the cost of loans, incentivizing subprime lending.

Housing Counseling

A service overseen by an office within HUD to boost homeownership and rental education through classes and counseling.

Ability-to-Repay (12 CFR 1026.43 (c))

A final rule requiring creditors to make determinations based on verified information like income, employment, debt obligations, and credit history.

Qualified Mortgage (QM)

A loan category meeting specific product features with a maximum term of 30 years and points/fees generally less than or equal to $3\%$ of the loan amount.

APOR

Average Prime Offer Rate, used as a benchmark for determining High-Rate and High-Fee loans.

Balloon Loan

Any loan where the final payment is substantially larger than all the preceding payments as scheduled.

High-Rate, High-Fee Mortgage

Also called Section 32 Mortgages, regulated under the Home Ownership Equity Protection Act (HOEPA).

Phishing

A criminal process of attempting to acquire sensitive information like usernames or passwords by masquerading as a trustworthy entity in an electronic communication.

Closed-End Mortgage

A mortgage with a specific number of payments and a set end date.

Gramm-Leach-Bliley Act (GLBA)

Implemented by Regulation P, it establishes consistent practices for the use of customer information through Financial Privacy and Safeguards rules.

Higher Priced Mortgage

A first-lien mortgage for a primary residence that exceeds the APOR by $1.5$ percentage points or more.

MAP Rules (Regulation N)

Rules designed to prohibit misrepresentations regarding mortgage products in commercial communications.

NPPI

Nonpublic Personal Information, defined as personally identifiable financial information resulting from a transaction or service performed for a consumer.

Pretexting

Attempting to gain unauthorized access to personal nonpublic information through impersonation on electronic communication, also called social engineering.

Triggering Terms

Specific terms in an advertisement, such as the down payment or monthly payment amount, that require full disclosure of all loan terms.

Uniform Residential Loan Application (URLA)

Also known as the 1003 or Fannie Mae Form 1003, it paints a picture of the borrower's financial stability.

Desktop Underwriter (DU)

An Automated Underwriting System specific to FNMA (Fannie Mae) guidelines for mortgage lender access.

FICO Score

A credit scoring method developed by Fair Isaac Corporation ranging from $300$ to $850$.

Gift Letter

A document for gifted funds stating that the money is a gift with no expectation of repayment.

Money Laundering

An illegal process that conceals the origin of money by using it for other purposes through bank transfers and purchases.

Verification of Deposit (VOD)

A form signed by an applicant to verify balances in bank accounts with financial institutions.

USDA Rural Housing Service (RHS)

A federal entity providing credit to farmers and rural areas through direct or guaranteed loan programs.

Biweekly Mortgage Payment Plan

A plan where a borrower makes a half payment every two weeks, resulting in 26 half payments (13 full payments) per year.

Graduated Payment Mortgage

A loan where payments are lower at the beginning and increase over a period of three to seven years before leveling off.

Negative Amortization

A situation where a payment made is less than the accrued interest, and the difference is added to the balance of the loan.

Option ARM

A 30-year adjustable-rate mortgage offering four monthly payment options, including minimum and interest-only payments.

Contract for Deed (CD)

A contract where the seller acts as the lender and retains legal title until all terms are met; also called a land contract.

Blanket Mortgage

A mortgage that uses more than one parcel of land as collateral for a loan, often containing a partial release clause.

Loan Estimate (LE)

A TRID disclosure provided no later than three business days after a complete application to help consumers understand loan features and costs.

Closing Disclosure (CD)

A TRID form that integrates mortgage disclosures under TILA and RESPA, provided to the consumer three business days before closing.

Compensating Factors

Strong borrower characteristics like a history of savings or a substantial down payment that reflect low credit risk despite falling outside standard guidelines.

Title Insurance

Insurance that protects against undiscovered title defects or encumbrances; includes both Owner's and Mortgagee's policies.

Encumbrance

Any claim, right, or interest in property held by someone other than the property owner, such as a mortgage or tax lien.

Secondary Mortgage Market

A national market consisting of private investors and agencies like Fannie Mae and Freddie Mac that buy and sell existing mortgages.

Table Funding

A technique where a mortgage broker closes a loan in their name using temporarily borrowed funds and transfers the loan to the investor immediately.

Unique Identifier

A number assigned by the NMLS&R that must be included on advertising and business cards for mortgage loan originators.