SAFE National Exam Review

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Liability Insurance:

insurance coverage that protects against claims alleging a property owner's negligence or action resulted in bodily injury or damage to another person. It is normally included in homeowner's insurance policies.

Owner's Policy:

insurance policy that protects the buyer from title defects.

Duration:

the number of years it will take to receive the present value of all future payments on a security to include both principal and interest.

Estate:

the ownership interest of a person in real property. The sum total of all property, real and personal, owned by a person.

Late Payment Charges:

the penalty the homeowner must pay when a mortgage payment is made after the due date grace period.

Medium Term Notes:

unsecured general obligations of Fannie Mae with maturities of one day or more and with principal and interest payable in U.S. dollars.

When calculating income for a borrower paid on commission: A. use W-2 income less expenses reported on IRS 2106 B. use an average of the previous 6 months C. simply divide W-2 income by 12 D. use income reported on IRS from 4506

Notary Public:

a person who serves as a public official and certifies the authenticity of required signatures on a document by signing and stamping the document.

Liabilities:

a person's financial obligations such as long-term/short-term debt, and other financial obligations to be paid.

Which of the following is least likely to be held in an escrow or reserve account? A. hazard insurance reserve B. property tax reserve C. HOA fees D. mortgage insurance premium

Under which of the following situations would flood insurance be automatically required? A. The property is in Flood Zone "A" B. The property is adjacent to a river C. The property is an area known to have a high water table D. The property is in Flood Zone "C"

What is the recommendation for the maximum gross appraisal adjustment as a percentage of value? A. 25 B. 20 C. 15 D. 30

A borrower closes on a 5/1 ARM with 2/6 caps at an interest rate of 5.5 percent. The margin is 2.5%. At the ned of year three, the index is 6%. What will the borrower's note rate be at the end of year 3? A. 5.5% B. 8.5% C. 7.5% D. 6.5%

AARMR

American Association of Residential Mortgage Regulators

BSA

Bank Secrecy Act

Which of the following would NOT apply to a discount point? A. Could be eliminated by the borrower accepting a higher interest rate B. Amount paid by the borrower to permanently buy down the interest rate C. Amount paid by the borrower to temporarily buy down the interest rate D. One percent of the loan amount

CRV

Certificates of Reasonable Value

CFR

Code of Federal Regulations

CSBC

Conference of State Bank Supervisors

CFPB

Consumer Finance Protection Bureau

CHARM

Consumer Handbook on Adjustable Rate Mortgages

Continuing Education

COFI

Cost of Funds Index

COSI

Cost of Savings Index

CC&R

Covenants, Conditions and Restrictions

ECOA

Equal Credit Opportunity Act

203(b)

FHA's single family program which provides mortgage insurance to lenders to protect against the borrower defaulting; 203(b) is used to finance the purchase of new or existing one to four family housing; 203(b) insured loans are known for requiring a low down payment, flexible qualifying guidelines, limited fees, and a limit on maximum loan amount.

HVAC:

Heating, Ventilation and Air Conditioning; a home's heating and cooling system.

HECM

Home Equity Conversion Mortgage

LTV

Loan to Value

LIBOR

London Inter-Bank Offer Rate

MSA

Metropolitan Statistical Area

MTA

Monthly Treasury Average

MARS

Mortgage Assistance Relief Services

NMLS

Nationwide Mortgage Licensing System

NPI

Non-public Personal Information

PITI

Principal, Interest, Taxes, and Insurance

Qualified Mortgage

QRM

Qualified Residential Mortgage

RESPA

Real Estate Settlement Procedures Act

S.A.F.E.

Secure and Fair Enforcement (For Mortgage LIcensing)

SRP

Service Release Premium

Capacity:

The ability to make mortgage payments on time, dependent on assets and the amount of income each month after paying housing costs, debts, and other obligations.

Debtor:

The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.

Mortgage Qualifying Ratio:

Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ration is 28:36.

TILA

Truth in Lending Act

Veterans Affairs

YSP

Yield Spread Premium

Bridge Loan:

a short-term loan paid back relatively fast. Normally used until a long-term loan can be processed.

Life Cap:

a limit on the range interest rates can increase or decrease over the life of an adjustable-rate mortgage (ARM).

Conventional Loan:

a private sector loan, one that is not guaranteed or insured by the U.S. government.

Affidavit:

a signed, sworn statement made by the buyer or seller regarding the truth of information provided.

Credit Risk:

a term used to describe the possibility of default on a loan by a borrower.

Appreciation:

an increase in property value

Building Code:

based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

RESPA (Real Estate Settlement Procedures Act)

law protecting consumers for abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships.

Home Warranty:

offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; coverage extends over a specific time period and does not cover the home's structure.

Capital Improvement:

property improvements that either will enhance the property value or will increase the useful life of the property.

Modification:

when a lender agrees to modify the terms of a mortgage without refinancing the loan.

(Q16512) A borrower is funding on their new loan on January 28. The loan amount is $220,000 and the interest rate is 6.5 percent. What is the entry for interest which will show on the Closing Disclosures? A. $156.72 B. $39.18 C. $143.25 D. $117.54

$156.72

Lien Waiver:

A document that releases a consumer (homeowner) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.

A borrower obtains a one year arm, which starts at 4%, has a margin of 3%, and 2/6 caps. At the end of the first year, the index is 5%. What is the fully indexed rate? A. 8 B. 6 C. 9 D. 7

A borrower receives $900 per month in social security income, after $100 is deducted from their check for Medicare. How much income should be used to qualify the borrower for a mortgage? A. $1,250 B. $1,000 C. $1,125 D. $900

A form with language advising the borrower that they are not obligated to complete a loan transaction simply because they have received disclosures is required under which act? A. Truth in Lending Act B. Regulation X C. Real Estate Settlement Procedures Act D. Fair Housing Act

A lender mails the early disclosures required under the Truth in Lending Act on Monday. Assuming no holidays, what is the earliest the lender may collect an application fee from the borrower? A. Friday B. Saturday C. Wednesday D. Thursday

A lender's title policy covers all of the following except: A. property taxes B. CC&R issues C. mechanic's liens D. survey issues

A transaction where Freddie Mac sells mortgage backed securities on the securities market can best be described as: A. the capital market B. Federal Reserve activities C. the primary mortgage market D. the secondary mortgage market

According to federal statute or rule, which of the following activities would require a loan originator license? A. Offering financing to another employee of the loan originator's company B. Offering financing on an investment property owned by the originator C. Offering financing to the loan originator's child D. Offering financing on the primary residence of the loan originator

An individual was convicted of a felony 3 years ago. Which of the following best describes the individual's ability to obtain a loan originator license? A. The individual would not be eligible for licensure until 7 year have lapsed since the conviction B. the individual is permanently barred from licensure C. the individual would be eligible for licensure immediately as long as the felony did not involve fraud, dishonesty, breach of trust, or money laundering D. the individual would be eligible for licensure depending on state law

As state in the Act, the purpose of the Truth in Lending Act is to do which of the following? A. Assure meaningful disclosure of credit terms to consumers B. Prevent lenders from charging interest rates which are unfair to consumers C. Protect consumers from abusively high interest rates D. Require consumers be provided with a good faith estimate of closing costs at the time of loan application

HMDA can best be described as: A. A reporting law meant to discover discrimination by lenders B. A federal statute which states borrowers have a right to a free copy of their credit report every 12 months C. A section of RESPA which limits the amount of money which can be held in a borrower's escrow account D. Homeowners Mortgage Delinquency Act

If a borrower has an $80,000 first mortgage, a $20,000 second HELOC on which they have $5,000 in remaining credit, and the property appraises for $100,000, what is the HCLTV? A. 100% B. 95% C. 80% D. 75%

In order to qualify for licensure, a license applicant must complete at least how many hours of pre-licensing education? A. 20 B. 10 C. 30 D. 18

On an ARM loan, which of the following will not be found on the note? A. Fully indexed rate after 1 year B. Adjustment parameters C. Margin D. Identification of index

The Red Flags Rule is required under: A. FACTA B. HMDA C. TILA D. RESPA

The SAFE Act mandates that pre-licensing education include all of the following EXCEPT: A. 4 hours of loan program training B. 3 hours of federal law training C. 3 hours of ethics training D. 2 hours of non-traditional mortgage product training

The definition of a mortgage loan originator would include all of the following, except: A. an individual who takes a mortgage loan application, but does not receive or expect compensation B. an individual who take a mortgage application and negotiates the terms of the application for compensation C. a licensed real estate broker being compensated by a lender for negotiating the terms of a mortgage loan D. an individual who negotiates the terms of a mortgage loan

The final APR for a loan is disclosed: A. on the Closing Disclosure B. on the Note C. on the final TIL Statement D. on the final Loan Estimate

When two businesses have a controlled business arrangement under RESPA, which of the following would NOT be required? A. a disclosure informing the consumer of the ownership of the entities B. a disclosure informing the consumer of an estimate of the settlement provider's charges C. a disclosure informing the consumer of the arrangement D. a disclosure informing the consumer of his option to choose another settlement provider

Which of the following best describes a lender's obligation under the Ability-to-Repay rule? A. Lenders must make a reasonable determination regarding the borrower's ability to repay the loan B. Lenders must always require 2 years of tax returns in order to assess income C. Lenders guarantee the borrower's payments for the first 24 months of the loan D. Lenders may not close loans with a debt-to-income ratio above 43%

Which of the following fees would NOT be used in calculating APR? A. Title insurance B. Closing fee C. Underwriting fee D. Mortgage insurance

Which of the following is NOT true under RESPA with respect to affiliated business relationships? A. The referral fee and kickback restrictions apply to companies with an affiliated business relationship B. Family members owning different companies can qualify the companies as having an affiliated business relationship C. A borrower can use two companies on the same transaction if the companies have an affiliated business relationship D. A lender cannot require the use of a settlement provider if the lender and the provider have an affiliated business relationship

Which of the following is inteded to insure that consumers are provided with information on the nature and costs of the settlement process? A. RESPA B. Regulation Z C. Statement on Non-Traditionnal Mortgage Product Risks D. TILA

Which of the following is least likely to be considered non-public personal information? A. borrower's employer's address B. borrower's DOB C. borrower's home address D. borrower's home phone number

Which of the following is most likely a fraud red flag? A. the borrower is purchasing a home down the street from their current home as their primary residence B. the borrower has a new job D. the borrower is moving from another state D. the borrower's down payment is coming from the sale of another home

Which of the following is not contained on a deed of trust? A. Interest rate B. Loan amount C. Legal description D. Borrower's name

Which of the following is true concerning the refundability of a VA funding fee? A. VA funding fees are never refundable B. VA funding fees are refundable if the borrower becomes disabled C. VA funding fees are refundable if the borrower is a wounded veteran D. VA funding fees are refundable if the borrower is active military

Which of the following is true if a borrower effectively rescinds on a refinance transaction on their primary residence? A. the borrower is entitle to a refund of their prepaid appraisal fee B. borrowers can only rescind on investment properties and second homes C. the borrower must reimburse the lender for third party fees spent D. the borrower is entitled to damages from the lender

Which of the following lists contains a piece of information which will usually not be found on the 1008? A. borrower's income, appraised value of property, interview date B. subject property address, LTV, appraised value C. DTI, LTV, appraised value D. borrower's name, borrower's SSN, underwriter's name

Which of the following situations is LEAST likely to be fraudulent? A. A borrower claims to make $250,000 per year, but has very little debt. B. A borrower claims to make $250,000 per year, but owns almost no personal property. C. A borrower lists "CPA" as their job title, but has no schooling. D. A borrower has 6 children, but is buying a 2 bedroom condominium.

Which of the following terms would apply when calculating the maximum loan amount available to a VA borrower? A. entitlement B. guarantee fee C. UFMIP D. insured amount

Which of the following would NOT be required if a mortgage company wishes to utilize electronic signatures on required disclosures? A. a permanent recording of the IP address from which the documents were accessed B. hardware and software requirements must be disclosed to the borrowers C. borrowers must be given the option to receive the disclosures in paper form D. borrowers must be able to withdraw their consent to receive the disclosures electronically

Which of the following would need to be licensed? A. A real estate broker who receives payment from a mortgage broker B. A loan originator for a state chartered credit union C. A loan originator who originates on behalf of a state housing finance agency D. A loan originator who only originates loans for the purpose of purchasing timeshare plans

(Q16026) What is the maximum cushion servicers can hold in a borrower's reserve account? A. 2 months taxes, 2 months insurance B. 1 month taxes, 1 month insurance C. 2 months taxes, 1 month insurance D. Whatever the lender deems as "reasonable under the circumstance"

A. 2 months taxes, 2 months insurance

(Q16196) How often must telemarketers consult the Do-Not-Call registry for updates? A. 31 days B. 30 days C. 60 days D. 45 days

A. 31 days

(Q16239) A borrower requesting maximum FHA financing must have a credit score of at least? A. 580 B. 500 C. 640 D. 620

A. 580

(Q16340) Which of the following statements concerning double contracts is most accurate? A. A double contract involves the buyer and the seller agreeing on two separate purchase prices in order to facilitate financing. One sales price is disclosed to the lender and the other represents the actual sales price. This is considered loan fraud, because the lender is not aware of the situation. B. A double contract is the legal document used to facilitate an illegal flipping transaction. C. A double contract involves a buyer putting a prope\rty under contract and then selling the property before the original buyer actually closes on the property. This is fraudulent, because it inflates appraisals in the area. D. Double contracts are generally acceptable to lenders as long as both purchase prices are disclosed to the lender.

A. A double contract involves the buyer and the seller agreeing on two separate purchase prices in order to facilitate financing. One sales price is disclosed to the lender and the other represents the actual sales price. This is considered loan fraud, because the lender is not aware of the situation.

(Q16383) Which of the following is not a required element of a company's safeguard policy as required by GLB? A. Contract with a federally insured company to destroy documents B. Select appropriate service providers and contract with them to implement safeguards C. Evaluate and adjust procedures in light of relevant circumstances D. Designate one of more employees to coordinate safeguards

A. Contract with federally insured company to destroy documents

(Q16253) What does the acronym FHA stand for, when referring to the agency which oversees the FHA loan program? A. Federal Housing Administration B. Federal Housing Agency C. Federal Housing Association D. Federal Housing Authority

A. Federal Housing Administration

(Q16250) All of the following could be used to correctly describe Fannie Mae EXCEPT: A. Government owned B. Private sector C. Government regulated D. Government sponsored

A. Government owned

(Q6584) Under which of the following circumstances would it be appropriate to represent that a loan program is endorsed by the government? A. If the advertisement is for an FHA loan B. It is never appropriate C. If a link to HUD's website is included in the advertisement D. If the advertisement includes a disclaimer that the government doesn't actually endorse the program

A. If the advertisement is for an FHA loan

(Q15884) Which of the following is not true concerning ECOA? A. It requires the disclosure of the APR on all advertisements which contain an interest rate B. It is also referred to as Regulation B C. It requires lenders guess regarding a borrower's race based on the borrowers appearance if the borrower fails to disclose their race D. It requires lenders to give borrowers a copy of their appraisal or a notice stating they are entitle to a copy of the appraisal

A. It requires the disclosure of the APR on all advertisements which contain an interest rate

(Q16333) The acronym LIBOR stands for: A. London Interbank Offer Rate B. Lending in Borrowers Occupancy Regulation C. Lending Industry Board of Review D. Loan Income Balance Offer Rate

A. London Interbank Offer Rate

(Q6550) Which of the following is not mandated by federal law to be considered as part of the licensing process for a loan originator? A. Origination history B. Financial responsibility C. Criminal history D. Determination that originator will operate honestly and fairly

A. Origination history

(Q15471) Lucy Lender prepares to close a mortgage for Betty Borrower. Lucy realizes the TIL form is inaccurate and is not within the tolerance set forth by TILA. What must Lucy do in order to comply with TILA? A. Redisclose accurately at least three days before closing B. Cancel the transaction C. Require Betty to waive her rights under Reg Z D. Mail the accurate forms within 3 days after closing

A. Redisclose accurately at least three days before closing

(Q15378) Which of the following would be considered a "dwelling" under the Truth in Lending Act? A. Residential condominium B. Residential 5-plex C. Office building D. Residential apartment building

A. Residential condominium

(Q15944) Which of the following would be considered a "dwelling" under the Truth in Lending Act? A. Residential condominium B. Residential 5-plex C. Residential apartment building D. Office building

A. Residential condominium

(Q16457) Two unrelated business partners own property as joint tenants. Which of the following is true? A. the partners together own 100 percent of the property and their interests are not separated B. It is possible that one partner owns a larger share of the property than the other C. Each partner has the right to his separate share of the property and rents D. If one partner were to die, his share of the property would go to his estate, not the other partner

A. The partners together own 100 percent of the property and their interests are not separated

(Q15931) Which of the following circumstances is least likely to lead to a determination that two entities are operating a sham affiliated business arrangement under RESPA? A. The same person owns both entities B. Both entities share the same employees C. One entity shares office space with the other entity D. One entity's business comes exclusively from referrals from another entity

A. The same person owns both entities

(Q16240) Which of the following is true regarding a borrower's ability to qualify for FHA financing if their credit score is 560: A. They are eligible for FHA financing up to 90 percent LTV. B. They are not eligible for FHA financing. C. The are eligible for FHA financing up to 85 percent LTV. D. They are eligible for FHA financing up to 96.5 percent LTV.

A. They are eligible for FHA financing up to 90 percent LTV.

(Q6527) All of the following would be exempt from licensing requirements EXCEPT: A. an individual who negotiates a loan modification on behalf of a borrower B. an individual who negotiates a loan modification on behalf of a lender C. manufactured housing retailer not compensated by a mortgage broker, lender, or originator D. responsible individual if they are not originating mortgages

A. an individual who negotiates a loan modification on behalf of a borrower

(Q16328) A loan which is not completely paid off at the end of the term could be a: A. balloon B. fully amortized loan C. hybrid ARM D. pay option ARM

A. balloon

(Q16354) Flipping is: A. illegal if all of the facts are not disclosed to the lender B. always legal C. always illegal D. unethical but legal

A. illegal if all of the facts are not disclosed to the lender

(Q16319) Which of the following loans would not require any monthly payment? A. reverse mortgage B. negative amortizing mortgage C. All loans require a monthly payment D. interest only mortgage

A. reverse mortgage

(Q16141) Which of the following would not be considered a settlement service? A. servicing B. appraisal services C. origination services D. escrow services

A. servicing

(Q16298) According to the Statement on Subprime Mortgage Lending issued by the Federal Reserve and other agencies, prepayment penalties on sub-prime mortgages: A. should not extend past the fixed period of the loan B. should not extend past 5 years C. should not extend past 3 years D. should not be offered

A. should not extend past the fixed period of the loan

(Q16344) An example of a red flag under the Red Flags rule would include all of the following except: A. the borrower has moved from another state B. the borrower is on active duty in the military C. the credit report contains a different address for the borrower than the one supplied D. mail sent to the borrower is returned as undeliverable

A. the borrower has moved from another state

(Q16352) The Red Flags Rule identifies all of the following as possible red flags except: A. the fact that the borrower is buying an investment property B. the borrower fails to respond to a request for additional information C. the fact that the borrower's address is invalid D. the fact that the borrower's identification looks altered

A. the fact that the borrower is buying an investment property

ARM:

Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.

APR

Annual Percentage Rate

AML

Anti-Money Laundering

A borrower closes in April. Their first payment is due June 1. If their insurance is due at the end of November, how many months of insurance payments must be collected at closing to properly fund the escrow account (not account for any cushion)? A. 5 B. 6 C. 7 D. 4

A borrower closes on a one year ARM with 2/6 caps and a margin of 2%. The start rate was 4.5%. At the end of year 1, the index is 5%. At the end of year 2, the index is 6%. At the end of year 3, the index is 9%. What is the borrower's interest rate at the end of year 3? A. 11% B. 10% C. 8.5% D. 6.5%

A borrower goes to the closing on a refinance of his primary residence. At closing, it is discovered that the TIL is inaccurate. Which of the following is most correct? A. The mortgage company has until the rescission period expires to deliver accurate disclosures. B. The mortgage company must give accurate disclosures and allow three days for the borrower to review them before attempting to close the transaction again. Once three days have lapsed, the transaction can be closed again. The borrower still has three days after closing to rescind the transaction. C. The mortgage company must give accurate disclosures before the transaction is closed. If the mortgage fails to do so, the borrower can rescind the transaction at any time during the three years after closing. If accurate disclosures are given, borrower has three days from receipt of the disclosures to rescind. D. The mortgage company is obligated to reduce the interest rate to a point at which the disclosure is accurate.

A borrower has $5,000 for a down payment on a purchase price of $150,000,. How much would the seller be allowed to contribute to the buyer's closing costs? A. $5,000 B. 3% of the sales price C. 3% of the loan amount D. 6% of the sales price

A borrower obtains a 3/1 ARM, with 2/6 caps, and margin of 2.5%, and a start rate of 4.0%. At the ed of the 3rd year, the index is 6.0%. What will the interest rate be after the first adjustment? A. 11% B. 6% C. 7% D. 8.5%

A borrower requesting an FHA 30 year loan at a 95% LTB at a loan amount equal to or less than $625,000 would be subject to a monthly MI factor of: A. 1.30% B. 0.80% C. 0.55% D. 0.90%

A lender decides they will only give copies of appraisals to borrowers if requested. According to ECOA: A. this is allowed, as long as the borrower is given a disclosure at the time of loan application B. this is not allowed C. this is allowed, as long as the borrower is given a disclosure within 3 days of the time of loan application D. this is allowed, as long as a written disclosure is given to the borrower at some point in the loan process

A mortgage lender underwrites and closes a mortgage file, but it is funded by the lender who is purchasing the loan from the originating lender. This is an example of what? A. Mortgage brokering B. Table funding C. Warehouse lending D. Wholesale lending

A report of condition submitted to the NMLS is accurately described as: A. an official report of condition B. a mortgage call report C. a licensee condition report D. audited financial statements

An individual was convicted of a felony 9 years ago. Which of the following best describes the individual's ability to obtain a loan originator license? A. The individual would not be eligible for licensure until 10 years have lapsed since the conviction. B. The individual would be eligible for licensure as long as the felony did not involve fraud, dishonesty, breach of trust, or money laundering. C. The individual is permanently barred from licensure. D. The individual would be eligible for licensure as long as the felony was not related to the financial industry.

Four borrowers on the same loan are refinancing a loan subject to a right of rescission. In order to effectively rescind the transaction, how many of the borrowers must rescind? A. 3 B. 1 C. 4 D. 2

Inquiring as to whether income is derived from alimony, child support, or separate maintenance is prohibited by which federal law? A. Regulation D B. Regulation B C. Regulation C D. Regulation Z

Pre-paid finance charges are defined as which of the following? A. Closing costs paid by the borrower at closing. B. Finance charges that are paid separately before, at the time of consummation, or withheld from the loan proceeds. C. Finance charges which are paid to third parties as part of a residential mortgage transaction at the time of closing. D. Finance charges which are paid outside of closing and are not included on the settlement statement or in APR calculations.

SRP compensates: A. a title company for issuing title insurance B. a lender for the transfer of servicing rights C. a borrower for obtaining a loan D. a broker for closing a loan above par

The Truth in Lending Act requires certain disclosures to be: A. delivered to the borrower within 3 business days B. mailed or delivered to the borrower within 3 business days C. mailed to the borrower within 3 calendar days D. mailed or delivered to the borrower within 3 calendar days

The maximum loan to value for a VA loan is: A. 90% B. 100% plus allowable closing costs and fees C. 95% D. 100%

Under which of the following circumstances could a borrower be charged a fee for the preparation of a settlement statement? A. If the borrower requests a copy of the settlement statement 48 hours prior to closing. B. A borrower may not be charged a fee for the preparation of a settlement statement. C. If the borrower requests a copy of the settlement statement 24 hours prior to closing. D. If the borrower requests the lender prepare the settlement statement rather than the escrow agent.

Under which of the following circumstances would an attorney need to be licensed in order to participate in mortgage loan origination activities? A. The attorney was a member of the state bar B. The attorney was compensated for services ancillary to their legal practice by a mortgage broker C. The attorney negotiates an interest rate for their client as part of their representation of that client D. The attorney was compensated for services ancillary to their legal practices by their client

Under which of the following circumstances would it be appropriate to use a borrower's current lender in an advertisement? A. it is never appropriate B. if the ad includes a conspicuous statement that the advertiser is not affiliated with the borrower's lender C. if the borrower's lender is a matter of public record in the borrower's state D. if the advertiser's information is included in the fine print

What is the Fannie Mae guideline for net adjustments on an appraisal? A. 20% B. 15% C. 10% D. 25%

When must a borrower receive notice of a lender's servicing transfer history? A. Never. This disclosure is not required. B. Either at the time of application or within 3 days of application. C. Within 30 days of the transfer of servicing. D. Within 15 days of the transfer of servicing.

When must the seller receive a copy of the Closing Disclosure? A. three business days prior to closing B. at or before consummation C. at or before the seller signing documents D. six business days prior to closing

Which of the following approaches to appraisals is most likely to include an adjustment for depreciation to the improvements on the subject property? A. comparable approach B. cost approach C. income approach D. market approach

Which of the following best describes the order in which payments will be applied according to the standard deed of trust? A. Principal, escrow, interest B. Interest, principal, escrow C. Late fees, principal, interest D. Interest, escrow, principal

Which of the following is NOT true under RESPA with respect affiliated business relationships? A. a borrower can use two companies of the same transaction if the companies have an affiliated business relationship B. the referral fee and kickback restrictions apply to companies with an affiliated business relationship C. a lender cannot require the use of a settlement provider if the lender and the provider have an affiliated business relationship D. Family members owning different companies can qualify the companies as having an affiliated business relationship

Which of the following is a government-owned entity which facilitates home ownership in the United States? A. Fannie Mae B. Ginnie Mae C. Freddie Mac D. FHLMC

Which of the following is least likely to be held in an escrow or reserve account? A. hazard insurance reserve B. HOA fees C. mortgage insurance premium D. property tax reserve

Which of the following is least likely to be used to describe a loan amount which exceeds conforming loan limits? A. Non-conforming B. Sub prime C. Jumbo D. Niche

Which of the following is not a requirement for the servicing notice given in the event of a transfer of servicing? A. It must include contact information for the current lender B. It must be given within 30 days of the transfer C. It must include contact information for the new lender D. It must inform the borrowers that they may make payments to either lender for 60 days

Which of the following is not an allowable method of delivery for the privacy notice required under the GLB act? A. Internet site B. Oral delivery C. Hand delivery D. Mail

Which of the following is not included on the TIL disclosure? A. APR B. Monthly escrow payment C. Total interest paid D. Monthly P&I payment

Which of the following is not set forth as a licensing requirement in the SAFE Act? A. Grant permission for the regulator to obtain a credit report B. Complete state required education C. Submit fingerprints D. Obtain a surety bond or pay into a state fund

Which of the following is true regarding continuing education? A. An originator may not repeat any topics used for renewal the previous year B An originator may not repeat a course used in the previous renewal year C. An originator must complete their education within the 2 years prior to renewal D. An originator may not complete their education through the same provider as they used in the previous year

Which of the following items is most likely to be added back to a self-employed borrower's income? A. charitable contributions B. depreciation C. state taxes D. mortgage interest

Which of the following loans would not have monthly mortgage insurance at closing? A. 10 year FHA loan, 85% LTV B. All options would have monthly mortgage insurance C. 20 year FHA loan, 80% LTV D. 30 year FHA loan, 60% LTV

Which of the following pieces of information is NOT found on form 1008? A. borrower's SSN B. mortgage loan originator's name C. subject property address D. borrower's DTI

Which of the following statements is not correct concerning FHA transactions? A. HUD is not the lender on the transaction, but rather insures the lender against loss on the mortgage B. FHA is a self-funded program and is funded through the funding fees paid by the FHA borrower C. If an FHA file is underwritten manually, the borrower can qualify at income ratios of 31 and 43 percent D. Maximum FHA loan amounts vary depending on the location of the property

Which of the following was enacted to "assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available . . . and avoid the uninformed use of credit?" A. Fair Housing Act B. Truth in Lending Act C. Equal Credit Opportunity Act D. Real Estate Settlement Procedures Act

Which of the following would NOT be an acceptable charge on an FHA forward mortgage loan? A. appraisal fee B. tax service fee C. 1% origination fee D. discount fee

Which of the following would NOT be considered part of negotiating the terms of a residential mortgage loan? A. Indirectly communicating with a borrower regarding mortgage loan terms B. Requesting documentation necessary to render a credit decision C. Expecting to receive payment for recommending a set of loan terms to a borrower D. Steering a borrower to a particular lender

Which of the following would be considered an appropriate advertisement strategy? A. none of these options would be considered appropriate B. portray the lender as a HUD approved lender C. structure ad to appear as if it is coming from the borrower's current lender D. structre ad to appear as if it comes from a governnment agency

Which of the following would not be considered a settlement service as defined by RESPA? A. Title search B. Property condition inspection C. Credit report D. Pest inspection

Which of the following would not be found on the uniform note? A. borrower name B. legal description C. loan terms D. interest rate

What is the maximum punishment for committing loan fraud? A. $5,000 per occurrence unless intentional B. $1,000,000 fine, 30 years in prison, or both C. $1,000 per occurrence D. $10,000 fine, one year in prison, or both

B. $1,000,000 fine, 30 years in prison, or both

(Q16447) A borrower receives $2,500 per month in rental income. How much of the income may be used to qualify the borrower for a loan? A. $1,800 B. $1,875 C. $2,000 D. $2,500

B. $1,875

(Q16499) Emmie is purchasing a home with a purchase price of $350,000. He has been approved for a loan with an 85 percent LTV. What is his down payment? A. $50,000 B. $52,500 C. $35,000 D. $297,500

B. $52,500

(Q16339) What is the factor for the UFMIP on an FHA transaction? A. 2.25 percent of the base loan amount B. 1.75 percent of the base loan amount C. 1.0 percent of the total loan amount D. 1.5 percent of the total loan amount

B. 1.75 percent of the base loan amount

(Q15801) The Truth in Lending Act requires certain disclosures to be sent within how many days of receipt of the loan application? A. 5 calendar days B. 3 business days C. 3 calendar days D. 5 business days

B. 3 business days

(Q16441) A borrower is paid $250 per week. If their housing expense is $600 per month and their only debt is a car payment for $250 per month, what is their primary debt to income ration? A. 60 B. 55.38 C. 100 D. 78.4

B. 55.38

(Q16275) The acronym COFI can best be described as: A. A popular margin used for adjustable rate mortgages B. A popular index used for adjustable rate mortgages C. An incorrect spelling of a popular morning beverage D. A popular start rate used for adjustable rate mortgages

B. A popular index used for adjustable rate mortgages

(Q16011) Which of the following is not included on the TIL disclosure? A. Late fee disclosure B. Amount of a prepayment penalty C. Payment schedule D. Amount financed

B. Amount of a prepayment penalty

(Q16389) Which of the following terms would be associated with the income approach to appraisals? A. Neighborhood analysis B. Capitalization rate C. Construction costs D. Comparable sales

B. Capitalization rate

(Q16362) Which of the following is commonly used to combat fraud? A. IRS from 2106 B. Chain of title C. title insurance D. double contracts

B. Chain of title

(Q16365) Which of the following would not need to receive a privacy notice? A. customers of a financial institution who do not share information B. Consumers of a financial institution who do not share information C. Consumers of a financial institution who do share information D. Customers of a financial institution who do share information

B. Consumers of a financial institution who do not share information

(Q15910) Which of the following would not need to receive a privacy notice? A. Customers of a financial institution who does not share information B. Consumers of a financial institution who does not share information C. Customers of a financial institution who does share information D. Consumers of a financial institution who does share information

B. Consumers of a financial institution who does not share information

(Q16307) Which of the following loans would be assumable? A. No mortgage loans are assumable B. FHA mortgage C. All mortgage loans are assumable D. Conventional 30 year fixed rate mortgage

B. FHA mortgage

(Q16289) Which of the following affects changes in the index in an adjustable rate mortgage? A. Lender's decision B. Market conditions C. Margin D. Borrower's payment history

B. Market conditions

(Q16371) Which of the following is not necessary for express consent for telephone marketing? A. Written consent B. Non-electronic delivery C. Clear and conspicuous verbiage D. Affirmative consent

B. Non-electronic delivery

(Q16243) When would a lender be required to cancel private mortgage insurance? A. Once the borrower has made 24 payments and a new appraisal shows the equity at 80% B. Once the LTV reaches 78% based on lower of original appraisal or purchase price C. After 5 years D. Once the LTV reaches 78% based on a new appraisal

B. Once the LTV reaches 78% based on lower of original appraisal or purchase price

(Q6561) Which of the following activities would require a loan originator license? A. Answering questions from a borrower regarding completion of a loan application B. Presenting possible loan terms to a borrower C. Describing the loan process to a borrower without discussing loan terms D. Receiving a loan application but doing nothing with it but passing it on a to a licensee

B. Presenting possible loan terms to a borrower

(Q16391) Under which of the following circumstances would a lender be required by federal law to drop mortgage insurance upon the borrower's request? A. Principal balance reaches 80 percent of the current appraised value B. Principal balance reaches 80 percent of original purchase price C. Principal balance reaches 70 percent of the current appraised value D. Principal balance reaches 85 percent of original purchase price

B. Principal balance reaches 80 percent of original purchase price

(Q16472) Which of the following best describes the process of releasing a lien from the title of a property? A. Deed release B. Reconveyance C. Deed transfer D. Conveyance

B. Reconveyance

(Q15992) Which of the following gives a borrower the right to review the Closing Disclosures prior to closing? A. Regulation C B. Regulation X C. Regulation B D. Regulation Z

B. Regulation X

(Q6539) Which of the following is NOT considered part of taking a residential mortgage loan application? A. Receiving an application for the purpose of facilitating a credit decision B. Rendering a credit decision on a loan application C. Directly receiving a loan application from a prospective buyer D. Indirectly receiving a loan application from a borrower

B. Rendering a credit decision on a loan application

(Q56469) The amount of interest the borrower pays over the loan term as a percentage of the loan amount is referred to as the: A. ARM B. TIP C. TIL D. APR

B. TIP

(Q16380) If a loan file contains fraudulent documentation, which of the following is LEAST likely to happen? A. The mortgage loan originator could be fined up to $1,000,000, imprisoned for up to 30 years, or both B. The borrower's interest rate could be increased C. The mortgage loan originator could be required to repurchase the loan D. The mortgage loan originator could be responsible for any financial loss resulting on the loan

B. The borrower's interest rate could be increased

(Q15365) Which of the following circumstances is least likely to lead to a determination that two entities are operating a sham affiliated business arrangement under RESPA? A. One entity's business comes exclusively from referrals from another entity B. The same person owns both entities C. One entity shares office space with the other entity D. Both entities share the same employees

B. The same person owns both entities

(Q16325) A loan which allows the borrower to receive monthly payments rather than make monthly payments is: A. most likely fraudulent B. a reverse mortgage C. a pay option ARM D. a hybrid ARM

B. a reverse mortgage

(Q6572) State regulators may typically use all of the following tools in disciplining a loan originator EXCEPT: A. license suspension B. criminal prosecution C. license revocation D. civil penalties

B. criminal prosecution

(Q16326) A loan which requires payments consisting of enough principal and interest to completely pay the loan off at the end of the loan term is a(n): A. negatively amortizing mortgage B. fully amortizing mortgage C. HECM D. balloon mortgage

B. fully amortizing mortgage

(Q16249) With respect to FHA loans, the FHA: A. issues private mortgage insurance B. insures the loans, thereby protecting the lender C. guarantees the loans, thereby protecting the lender D. acts as the lender

B. insures the loans, thereby protecting the lender

(Q6517) An individual who collects, receives, distributes, and analyzes information common for the processing of a mortgage loan is defined as a: A. loan originator B. loan processor C. office assistant D. clerical worker

B. loan processor

(Q6534) A loan processor who states to the public on their business card that they are able to engage in the activities of a loan originator: A. must obtain a processing license B. must be licensed C. must pay an additional fee to qualify for exemption D. is exempt from licensure

B. must be licensed

(Q16297) According to the Statement on Subprime Mortgage Lending issued by the Federal Reserve and other agencies, a sub-prime mortgage is: A. any mortgage to a borrower with a credit score under 680 B. not easily defined C. any mortgage to a borrower who is unable to document their income D. any mortgage to a borrower with a credit score under 620

B. not easily defined

A 5/25 loan is considered: A. a pay option ARM B. an adjustable rate loan C. a fixed rate loan D. a hybrid ARM

A borrower closes in July. How many months of property taxes will need to be collected to properly fund the escrow account? A. 6 B. 2 C. We would need to know the due date of the taxes in order to calculate this answer. D. 8

A borrower has $5,000 for a down payment on a purchase price of $150,000. How much would the seller be allowed to contribute to the buyer's closing costs? A. 3% of the loan amount B. 6% of the sales price C. 3% of the sales price D. $5,000

A borrower is funding their loan on the 28th of July. Their first payment is September 1. What is the entry for the odd day's interest if the loan amount is $150,000, and the interest rate is 5.5 percent? A. $67.80 B. $91.67 C. $90.40 D. $22.60

A borrower owes $200,000 on a first mortgage, and $50,000 on a line of credit with a maximum amount of $100,000. If the property appraises for $500,000, what is the LTV? A. 70% B. 50% C. 40% D. 60%

A creditor is required to guarantee the fees on the Loan Estimate for: A. 5 days B. 30 days C. 10 days D. 21 days

A lender mails early disclosures on Monday. Assuming no holidays, what is the earliest the transaction may be consummated? A. following Thursday B. following Wednesday C. following Tuesday D. following Monday

A loan originator collects an appraisal fee from a borrower in connection with a loan application. While the borrower remitted $400 for the appraisal, the borrower was only given a credit for a payment of $350 at closing for the appraisal. Which of the following is true? A. The mere act of collecting the appraisal fee before closing is a violation of federal law only. B. The mere act of collecting the appraisal fee before closing is a violation of state and federal law. C. The inaccurate accounting for the deposit is most likely a violation of state law. D. As long as the appraisal did not cost more than $350, no laws have been violated.

A mortgage licensee completes a continuing education course in May 2010. Which of the following is true? A. The course may be used to renew for 3 years. B. The course may be used to renew for 5 years. C. The course may only be used for renewal in 2010. D. The course may be used for either 2010 or 2011 renewal.

According to RESPA, one entity is an affiliate of another if the entity owns more than what percentage of the other entity? A. 10% B. 5% C. 1% D. 20%

An individual meets with a prospective borrower regarding a loan application. During the meeting, the individual discusses loan terms and even quotes interest rates. However, no loan application is taken from the borrower. Which of the following is most correct regarding licensing requirements of the individual? A. The individual needs to be licensed in order to conduct such meetings under all circumstances. B. Because no interest rate was locked, the individual does not need to be licensed. C. As long as the individual did not represent to the public any ability to act as a loan originator, the individual would not need to be licensed. D. The fact that the individual did not actually receive payment means no license is required.

An unlicensed loan processor is selling their home. The processor would like to originate the mortgage loan on behalf of the buyer of their home. Which of the following is true? A. The processor may not be compensated on the transaction B. The processor would not need to licensed as a mortgage loan originator as long as their employer is properly licensed since the property involved currently serves as their residence C. The processor would not need to be licensed D. The processor would need to be licensed as a mortgage loan originator

Assume an application is taken on a Thursday. Assuming no federal holidays, by which day must the Loan Estimate be issued? A. Monday B. Friday C. Tuesday D. Wednesday

Employees of an exempt depository institution who originate mortgage loans: A. must pass the SAFE exam B. must be licensed C. must be registered D. are exempt from licensure and registration

If a borrower has a fixed rate mortgage and her taxes and insurance are included in her monthly payments, which of the following does not change over the life of the loan? A. Principal amount in payment B. Interest amount in payment C. Principal amount combined with interest amount in payment D. Tax amount in payment

If a borrower is delinquent, the loan servicer must attempt contact with the borrower: A. by the 60th day of delinquency B. by the 15th day of delinquency C. by the 36th day of delinquency D. by the 30th day of delinquency

Insurance which protects the lender in the event that previously undetected encumbrances on a property are discovered can best be described as: A. Owner's policy of title insurance B. Endorsement coverage on a title insurance policy C. Lender's policy of title insurance D. Private mortgage insurance

Loan payoffs must be credited: A. within 24 hours of receipt of payment B. withing 48 hours of receipt of payment C. the day the payment is received D. withing 72 hours of receipt of payment

Lucy closes a refinance on Betty's primary residence. However, Lucy forgets to provide Betty with the proper notice of rescission rights. Which of the following is true? A. The transaction is void and should be cancelled. B. The transaction is rescindable at any time during the life of the loan. C. Betty can rescind for 3 years from recording. D. Betty cannot rescind for 3 days following recording.

On an FHA loan, which of the following best describes what determines the borrower's monthly mortgage insurance payment over the life of the loan? A. original total loan amount B. original base loan amount C. principal balance D. statutory loan limit

Registration requirements would apply to all of the following except: A. employees of a credit union B. employees of a wholly owned subsidiary of a federally regulated bank C. employees of a mortgage lender D. employees of an institution regulated by the Farm Credit Administration

Richie Rich has been approved for a 90% loan. Richie is under contract to purchase a home for $400,000 and put $5,000 earnest money down with the contract. If Richie's lender is charging 1% origination, 1% discount, and the title company fees total to $1,350, how much does Richie need to bring to closing? A. $48,550 B. $46,850 C. $43,550 D. $49,350

The APR factors in the effects of all the following expense except: A. Origination fee B. Mortgage insurance premium C. Hazard insurance premium D. Processing fee

Under the Truth in Lending Act, what is the earliest point a fee for an appraisal report may be collected? A. 3 days after the delivery of the early disclosures B. 5 business days after mailing or delivery of the early disclosures C. After delivery of the early disclosures D. At the time of application

What is the statute of limitations for loan fraud? A. 3 years B. 5 years C. 10 years D. 7 years

When would a business' tax returns be required as documentation of income for a borrower? A. if the borrower owns 15% of the company B. if the borrower is an officer of the company C. if the borrower owns more than 25% of the company D. if the borrower receives a K-1 from the company

Which of the following best describes a loan with a principal balance exceeding Fannie Mae guidelines? A. balloon B. illegal C. jumbo D. sub-prime

Which of the following best describes a loan with a principal balance exceeding Fannie Mae guidelines? A. illegal B. jumbo C. sub-prime D. balloon

Which of the following best describes the FHA mortgage coverage guaranteed to FHA lenders? A. 90% of the loan amount B. 97% of the loan amount C. 100% of the loan amount D. 97% of the original appraised value

Which of the following best describes the federal limitation on the shortest adjustment period allowed on an ARM? A. 1 month B. 6 months C. no limit D. 3 months

Which of the following is NOT a purpose of RESPA? A. eliminate kickbacks B. limit amount held in escrow accounts C. require accurate disclosure in advertising D. require effective advance disclosure of costs

Which of the following is true regarding an originator who acts as an instructor for a continuing education course? A. Originators may not instruct continuing education courses B. The originator may not use the course for license renewal C. The originator will receive credit for twice the hours for which the course is approved by the NMLS D. The originator will receive credit for the course according to the number of hours for which the course is approved by the NMLS

Which of the following issues is not addressed in the standard deed of trust and note for an owner occupied primary residence? A. how quickly the borrower must occupy the property B. insurance on the property C. actual amounts for taxes and insurance D. keeping hazardous substances on the property

Which of the following statements most accurately describes Freddie Mac? A. a privately held corporation with no government affiliation which lends money for conventional purposes B. a government agency which was created in order to facilitate home ownership, especially for lowerr income families, through the offering of FHA and other government programs C. a publicly traded private entity which is government sponsored. It was created in order to facilitate home ownership D. a government agency which was created to facilitate home ownership through the offering of conventional loan programs for middle-income families

Which of the following transactions would carry monthly mortgage insurance? A. Conventional 80% first, 15% second, with a combined LTV of 95% B. VA 100% LTV, 30 year fixed C. FHA 30 year fixed, 20% down D. FHA 15 year fixed, 30% down

Which of the following would be covered by a lender's title policy, but not by a standard owner's title policy? A. recorded liens B. recorded encumbrances C. CC&R issues D. boundary dispute

Which of the following would be least necessary in protecting customers' non-public information? A. implement security procedures for storage rooms B. perform background checks on any employee with access to personal information C. run background checks on all appraisers hired D. implement measures to protect electronic transmissions of customer information

Which of the following would not be considered a settlement service as defined by RESPA? A. real estate brokerage services B. appraisal services C. hazard insurance services D. title insurance services

Which of the following would not be considered part of negotiating the terms of a residential mortgage loan? A. indirectly communicating with a borrower regarding mortgage loan terms B. steering a borrower to a particular lender C. requesting documentation necessary to render a credit decision D. expecting to receive payment for recommending a set of loan terms to a borrower

Which of the following would not be exempt from the Do Not Call Rules? A. political organization B. airlines C. surveyor attempting to sell service D. charitable organization

(Q16474) If a borrower makes $60,000 per year, what is the most a housing payment for the borrower could be under conventional manual underwriting guidelines? A. $1,300 B. $1,500 C. $1,400 D. $1,200

C. $1,400 (28%)

(Q16432) A borrower obtains a loan for $250,00 at 5.0%. If they make their required monthly payment of $1,432.05 for the first two months. What is the principal balance of the loan after the second payment? A. $248,355.24 B. $249,397.62 C. $249,297.99 D. $250,000.00

C. $249,397.99

(Q20813) What is the maximum fine which may be levied for violation of state law? A. $10,000 per violation B. $25,000 total regardless of number of violations C. $25,000 per violation

C. $25,000 per violation

(Q16437) A borrower is purchasing a home for $350,000, which appraises for $375,000. The borrower wants to put 10 percent down. What is the loan amount? A. $345,000 B. $375,000 C. $315,000 D. $337,500

C. $315,000

(Q6535) A license applicant fails the licensing exam for the second time. How long must they wait before retaking the exam? A. 2 months B. no waiting period is required C. 1 month D. 6 months

C. 1 month

(Q15854) The Uniform Residential Loan Application is also known as: A. 2106 B. 4506 C. 1003 D. 1008

C. 1003

(Q6553) The SAFE Act mandates that pre-licensing education include all of the following EXCEPT: A. 3 hours of ethics training B. 2 hours of non-traditional mortgage product training C. 4 hours of loan program training D. 3 hours of federal law training

C. 4 hours of loan program training

(Q6533) According to the SAFE Act, in order to renew a mortgage license, a licensee must complete: A. 9 hours of continuing education, including 2 hours of state law B. 8 hours of continuing education, including 1 hour of state law C. 8 hours of continuing education including 1 hour of elective credit D. 9 hours of continuing education, including 1 hour of state law

C. 8 hours of continuing education including 1 hours of elective credit

(Q15904) Which of the following situations would be acceptable under RESPA? A. A mortgage loan originator requires all borrowers to use a credit reporting company which is owned by the mortgage loan originator's mortgage company B. A mortgage loan originator does not required the use of a certain title company, but receives a bonus from a certain title company if his borrowers use the title company C. A mortgage loan originator requires all borrowers to use the title company which is located in the same building as the mortgage loan originator, but with which the mortgage loan originator or the mortgage loan originator's company has no other relationship D. A mortgage loan originator requires all borrowers to use his brother's title company

C. A mortgage loan originator requires all borrowers to use the title company which is located in the same building as the mortgage loan originator, but with which the mortgage loan originator or the mortgage loan originator's company has no other relationship

(Q16363) Which of the following is least likely to indicate fraud with respect to occupancy status? A. Borrower is moving from a 5,000 square foot home to a 1,500 square foot home B. Borrower claims to be selling their primary residence, but it is not listed C. Borrower is moving from another state D. Borrower is purchasing a home in the same neighborhood as their current home

C. Borrower is moving from another state

(Q16286) Which of the following would not be an acceptable FHA transaction? A Borrower purchases a single family home as his primary residence B. Borrower purchases a duplex and lives in one of the units C. Borrower purchases a single family residence for his brother to live in D. Borrower purchases a four-plex and lives in one of the units

C. Borrower purchases a single family residence for his brother to live in

(Q16404) The booklet required to be given to borrowers who are contemplating a variable rate loan is referred to as the: A. RESPA booklet B. HMDA booklet C. CHARM booklet D. ARM booklet

C. CHARM booklet

(Q16265) Which of the following terms applies to a VA mortgage? A. UFMIP B. Insuring fee C. Certificate of eligibility D. Mortgage insurance certificate

C. Certificate of eligibility

(Q16372) Which of the following would not establish a relationship, which would provide for the longer established business relationship exemption under the Do-Not-Call rules? A. Consumer purchases a good from the seller B. Financial transaction between consumer and seller C. Consumer inquiry into the purchase of a good D. Consumer purchases a service from a seller

C. Consumer inquiry into the purchase of a good

(Q15908) Which of the following has a continued relationship with a financial institution according to the privacy rule? A. Borrower B. Consumer C. Customer D. Client

C. Customer

(Q16305) Which of the following refers to Fannie Mae's automated underwriting system? A. Loan Prospector B. Automated Plus C. Desktop Underwriter D. Desktop Decisions

C. Desktop Underwriter

(Q16279) Which of the following entities was formed by the federal government in order to facilitate home ownership, but is a publicly held corporation now separate from the federal government? A. Federal Housing Administration B. GNMA C. Fannie Mae D. Ginnie Mae

C. Fannie Mae

(Q16338) Freddie Mac was originally known as: A. Federal Depository Mortgage Corporation B. Fair Housing Authority C. Federal Home Loan Mortgage Corporation D. Federal National Mortgage Association

C. Federal Home Loan Mortgage Corporation

(Q56463) Which of the following is true regarding the borrower's intent to proceed as required under federal rule? A. It may not be communicated via email B. It may not be communicated verbally C. It may be communicated however the borrower chooses D. It must be communicated in writing

C. It may be communicated however the borrower chooses

(Q16506) Which of the following directly affects mortgage rates? A. White house economic policy B. The prime lending rate C. Loan default rate D. Federal reserve decisions

C. Loan default rate

(Q16282) With respect to an adjustable rate mortgage, which of the following is set by the lender at closing and does not vary throughout the term of the loan? A. Balloon period B. Fully indexed Rate C. Margin D. Index

C. Margin

(Q15905) Which of the following would not be considered a financial institution under the provisions referenced in the GLB Act? A. Mortgage lender B. Mortgage servicer C. None of the answers D. Mortgage broker

C. None of the answers

(Q15381) What are finance charges which are withheld from the proceeds of the loan considered? A. Periodic interest charges B. Third party fees C. Pre-paid finance charges D. P.O.C. charges

C. Pre-paid finance charges

(Q6565) According to federal statute or rule, which of the following activities would require a loan originator license? A. Negotiating loan terms through a licensed originator B. Negotiating loan terms with no expectation of compensation C. Presenting loan terms to a borrower when the terms are still subject to verification of information D. Telling a borrower that a loan offer has been sent

C. Presenting loan terms to a borrower when the terms are still subject to verification of information

(Q15372) Which of the following does not apply to a high cost loan? A. Home Ownership and Equity Protection Act B. TILA C. Section 32 of RESPA D. Section 32 of Regulation Z

C. Section 32 of RESPA

(Q15776) Which of the following transactions would not require the use of a HUD-1 Closing Disclosures? A. Settlement involving a loan being used to purchase a condominium to be used as an investment property B. Settlement involving a loan being used to purchase a 4-plex which is to be used strictly as an investment property C. Settlement involving a cash purchase of a home to be used as a primary residence D. Settlement involving a refinance of a loan on a primary residence

C. Settlement involving a cash purchase of a home to be used as a primary residence

(Q15354) Which of the following best describes HOPA? A. Also known as Section 32 B. Covers high cost loans C. The PMI act D. The Homeowners Equity Protection Act

C. The PMI act

(Q16522) Which of the following best describes the cost approach to appraisals? A. The appraiser compiles a list of sales prices for similar properties to the subject and compares them to the cost of the subject property. B. The appraiser uses the Building Cost Index (BCI) to determine appreciation rates for the subject area based on increases in building costs. C. The appraiser estimates the cost to reconstruct the property. D. The appraiser uses the monthly income from the property, but then nets our any costs associated with owning the property to determine the capitalization rate.

C. The appraiser estimates the cost to reconstruct the property

(Q56548) Assume a borrower completes a lender's online loan application, including all six required elements, but never hits "submit". Which of the following is true regarding the lender's obligation to issue a Loan Estimate? A. The lender is required to contact the borrower B. The lender is required to issue a Loan Estimate once they realize all six pieces of information have been submitted C. The lender is not required to issue a Loan Estimate D. The lender must issue a Loan Estimate within three days of when the borrower resubmitted the last required piece of information

C. The lender is not required to issue a Loan Estimate

(Q16528) Where could a borrower look to determine whether or not their conventional loan, which is not a high cost loan, contains a prepayment penalty? A. The good faith estimate only B. The assurances of their mortgage loan originator C. The promissory note, allonge to note, or addendum to note and the good faith estimate D. The deed of trust

C. The promissory note, allonge to note, or addendum to note and the good faith estimate

(Q56453) Assume a Loan Estimate is mailed on Monday. The borrower receives the Loan Estimate on Wednesday, and signs and returns it to the lender. What is the earliest date the lender could charge the borrower for the appraisal? A. Thursday B. Saturday C. Wednesday D. Friday

C. Wednesday

(Q16356) A buyer wishes to purchase a property but is unable to qualify. They pay their brother to apply for the loan and state he will occupy the property. This is an example of the use of: A. appraisal inflation B. flipping C. a strawbuyer D. equity skimming

C. a strawbuyer

(Q6576) A negligent false statement to the NMLS will generally be considered to be: A. a violation of federal law only B. a violation of state law only C. a violation of federal and state law D. neither a violation of state or federal law

C. a violation of federal and state law

(Q6579) "Best Efforts" agreements, wherein an originator is entitled to compensation for attempting to arrange financing is generally considered: A. acceptable as long as the agreement is in writing B. acceptable if the agreement is notarized C. a violation of state law D. acceptable is the loan originator reasonably believed the loan was approvable

C. a violation of state law

(Q6537) According to the SAFE Act, which of the following is included in the renewal requirement for a mortgage loan originator license? A. complete at least 2 hours of state law and renew by December 31 B. complete at least 2 hours of state law and renewal within 12 months of original licensure C. complete at least 3 hours of course relating to federal law and renew by December 31 D. complete at least 2 hours of ethics and renew October 31

C. complete at least 3 hours of courses relating to federal law and renew by December 31

(Q6573) Which of the following would NOT typically be considered a prohibited act under state law? A. advertising rates which are not currently available B. failing to provide a disclosure required under federal law C. declining a borrower's loan application by mistake D. engaging in deceptive practices

C. declining a borrower's loan application by mistake

(Q6567) Which of the following would NOT be considered an "administrative or clerical task"? A. collection of information necessary for processing a loan B. receiving income documentation from a borrower C. receiving a loan application D. distribution of information necessary to process a loan

C. receiving a loan application

(Q16413) The 1003 is also known as: A. the appraisal B. the Uniform Underwriting and Transmittal Summary C. the Uniform Residential Loan Application D. the Mortgage Credit Analysis Worksheet

C. the Uniform Residential Loan Application

Payment Due Date:

Contract language specifying when payments are due on money borrowed. The due date is always indicated and means that the payment must be received on or before the specified date. Grace periods prior to assessing a late fee or additional interest do not eliminate the responsibility of making payments on time.

A borrower fund on a loan on June 24th (June has 30 days). The loan amount is $200,000, and the loan is a 30 year fixed rate at 6.5%. What will be the charge for odd days interest paid at closing by the borrower? A. $284.96 B. $910.00 C. $213.72 D. $249.34

A borrower obtains a one year arm, which starts at 4%, has a margin of 3%, and 2/6 caps. At the end of the first year, the index is 5%. What is the interest rate after the first adjustment? A. 9% B. 8% C. 7% D. 6%

A lender mails the early disclosures required under the Truth in Lending Act on Monday. Assuming no holidays, what is the earliest the lender may collect an application fee? A. Thursday B. Saturday C. Wednesday D. Friday

Advertising mortgage terms which are not available is considered: A. material NMLS omission B. unlicensed activity C. mortgage fraud D. a deceptive practice

An individual applicant for a mortgage license had a mortgage license revoke in another state 3 years prior to the license application. Which of the following is true? A. The applicant must wait another 7 years to apply B. The applicant may petition for special consideration for licensure, which may be granted based on the circumstances C. The applicant must wait another 2 years to apply D. The applicant will never be eligible for a mortgage license in any state

An individual applicant for a mortgage license had a mortgage license revoked in another state 3 years prior to the license application. Which of the following is true? A. The applicant may petition for special consideration for licensure, which may be granted based on the circumstances B. The applicant must wait another 7 years to apply C. The applicant must wait another 2 years to apply D. The applicant will never be eligible for a mortgage license in any state

Assume a borrower was allowed to shop for title insurance and chose a provider listed on the creditor's preferred provider list. Which of the following best describes the applicable tolerance? A. No tolerance requirement B. Zero tolerance C. Tolerance depends on certain factors D. 10% tolerance

Assume a lender mails a loan estimate on Monday. What is the earliest day they could charge the borrower for an appraisal? A. Wednesday B. Tuesday C. Monday D. Thursday

Communicating indirectly with a borrower for the purpose of reaching a mutual understanding about prospective loan terms is considered: A. exempt for licensure B. taking a loan application C. a processing function D. offering or negotiating the terms of a loan

Employees of an exempt depository institution who originate mortgage loans: A. must be licensed B. are exempt from licensure and registration C. must pass the SAFE exam D. must be registered

Freddie Mac was originally known as: A. Federal Depository Mortgage Corporation B. Federal National Mortgage Association C. Fair Housing Authority D. Federal Home Loan Mortgage Corporation

If a borrower effectively rescinds a transaction, which of the following is true? A. Borrower is entitled to a refund of all costs except for the appraisal, as long as the borrower had signed the disclosure stating the appraisal was not refundable. B. Borrower is entitle to a refund of the appraisal if the appraisal fee was paid to the appraiser directly. C. Borrower is not entitled to a refund of any costs. D. Borrower is entitled to a refund of all costs paid to the lender.

If a lender advertises a program which allows the amount of credit extended to exceed the value of the property securing the loan, which of the following is true? A. the lender must include a warning to contact a CPA if the rate is adjustable B. the lender must provide a link to a counseling service C. the lender has violated federal law D. the lender must include disclosures regarding the tax implications of the program

Including misrepresentations regarding the amount of credit available to a borrower in an advertisement is specifically prohibited by: A. ECOA B. TILA C. RESPA D. MAPS rule

The Guidance on Non-Traditional Mortgage Lending was issued by: A. a coalition of state regulatory agencies B. HUD C. FTC D. the Federal Reserve

The insurance which provides coverage in addition to the basic title insurance policy is most accurately referred to as: A. Add on policy B. Encumbrance policy C. Supplemental policy D. Endorsement

The rule dealing with the disclosure of costs at settlement is: A. Regulation Y B. Regulation C C. Regulation Z D. Regulation X

The term "aggregate analysis" refers to: A. The process used to determine whether or not a TIL disclosure is within tolerance levels B. The process used to reconcile differences in comparables on an appraisal C. The calculation used to determine whether or not a mortgage qualifies as a high cost loan under section 32 D. The calculation used to determine how much can be held in an escrow account

Under the Red Flags Rule, a mortgage broker would be: A. considered a financial institution B. required to register with the FTC C. exempt D. considered a creditor

Under which of the following scenarios could a borrower cancel a transaction after closing has already occurred? A. Borrower closes on a refinance transaction for a primary residence on Monday and changes him on the following Monday. The week contained no holidays and all disclosures were proper. B. Borrower closes on a refinance transaction for an owner-occupied vacation home on Monday and changes his mind 2 days later C. Borrower closes on a purchase transaction for a primary residence, but changes his mind within 3 days of closing. D. Borrower closes on a refinance transaction for his primary residence and did not receive the proper rescission notice. Borrower changes his mind and wants to cancel 18 months later.

Under which of the following situations would an appraiser use the income approach to appraising a property? A. The property is an area which is primarily rental properties B. The property is being used by the seller as an investment property C. All comparable sales for the property are rental properties D. The new buyer is going to use the property as a rental property

When calculating income for a self-employed borrower, which of the following is most true? A. After subtracting expenses listed on IRS 2106, the last two years' W-2s must be obtained and averaged B. It is always best to get self-employed borrowers approved on a stated income C. Simply divide the bottom line income from the 1040s by 12 to calculate the monthly income D. Start with the borrower's net income and add non-cash flow items, such as depreciation

Which of the follow does not control how much discount is charged on permanent buydowns? A. Financial Markets B. Loan Officers C. Mortgage Companies D. Federal Reserve

Which of the following activities would require a loan originator license? A. Arranging a loan closing B. Making an underwriting decision C. Providing general explanations to borrowers, such as explaining loan terminology D. Providing current interest rates but not offering to lock an interest rate

Which of the following contains only items which should be used in calculating conventional income ratios? A. Property tax payments, utility payments, credit card payments B. Monthly rent expense on current home, credit card payments, child support obligations C. Mortgage insurance payments, disability insurance payment, homeowners insurance payment D. Car payments, boat payment, homeowner's association dues

Which of the following contains only terms which apply to VA loans? A. Residual income, funding fee, insuring B. Upfront Mortgage Insurance Premium, 100% financing, base loan amount C. Guarantee fee, veterans, eligibility D. Residual income, guarantee, certificate of reasonable value

Which of the following does not need to be mailed to the borrower within three days of the loan application for a purchase transaction? A. Booklet entitle "Buying your home: Settlement Costs and Helpful Information" B. Good Faith Estimate C. TIL Disclosure D. Right of Rescission Notice

Which of the following is commonly used to combat fraud? A. IRS from 2106 B. Title insurance C. Double contracts D. Chain of title

Which of the following is intended to insure that consumers are provided with information on the nature and costs of the settlement process? A. Regulation Z B. TILA C. State on Non-Traditional Mortgage Product Risks D. RESPA

Which of the following most accurately describes when an individual may be compensated for referring services related to a federally regulated mortgage transaction? A. Never B. If the individual renders a service C. If the referral fee is disclosed on the settlement statement D. If the individual has ownership in the entity to which the referral is made

Which of the following terms describes the fee charged to the borrower to insure an FHA loan? A. funding fee B. insuring fee C. guarantee fee D. up front mortgage insurance premium

Which of the following terms does NOT describe a mortgage? A. A lien on the property B. An instrument which secures a promissory note C. An encumbrance on the title to the property D. A leasehold interest in the property

Which of the following would least likely be subject to federal privacy laws? A. Career Counselor B. Financial planner C. Contract processor D. Appraiser

Which of the following would not be considered a Pre-Paid Finance Charge? A. mortgage insurance premium B. UFMIP C. flood certification fee D. title insurance premium

Which of the following would not be considered a valid changed circumstance? A. Inaccurate information B. Natural disaster C. New information D. Technical error on the disclosure

Which of the following would not be on a note? A. P&I payment B. Loan term C. Statement requiring notices to be done in writing D. PITI

With respect to an adjustable rate mortgage (ARM), which of the following is set by the lender at closing and does not vary throughout the term of the loan? A. fully indexed rate B. Balloon period C. index D. margin

YSP compensates; A. a title company for issuing title insurance B. a lender for obtaining a loan C. a borrower for obtaining a loan D. a borrower for closing a loan above par

(Q16435) A borrower makes $60,000 per year. The borrower's spouse makes $3,000 per month. The borrower's monthly housing expense is $1,500, they have a car payment of $500, a boat payment of $350, a phone bill of $150, and a car insurance payment of $100. What is the borrower's back end DTI? A. 32.5 B. 30.6 C. 31.25 D. 29.38

D. 29.38

(Q16475) Which of the following forms would allow a lender to receive a copy of a borrower's tax returns from the IRS? A. 2392 B. 2106 C. 1040 D. 4506

D. 4506

(Q6532) A license applicant fails the licensing exam for the third time. How long must they wait before retaking the exam? A. 1 month B. 2 months C. no waiting period is required D. 6 months

D. 6 months

(Q16377) When may a mortgage loan originator give preferential treatment to a borrower? A. Anytime B. Never C. Never unless the borrower is a member of a minority race D. Anytime as long as it is not based on a class covered by ECOA

D. Anytime as long as it is not based on a class covered by ECOA

(Q16454) Which of the following would be an acceptable source for a down payment? A. Seller's contribution up to 6 percent of the sales price B. Seller's contribution up to 3 percent of the sales price C. Cash on hand D. Grant from non-profit agency, resulting from the seller's contribution

D. Grant from non-profit agency, resulting from the seller's contribution

(Q16480) Which of the following is least likely to be held in an escrow or reserve account? A. Mortgage insurance premium B. Property tax reserve C. Hazard insurance reserve D. HOA fees

D. HOA fees

(Q16248) Which of the following contains payments, all of which may be a payment option on an option ARM? A. 30 year payment, 15 year payment, 20 year payment B. 2 percent of principal balance, interest only payment C. Interest only payment, 10 year payment, 30 year payment D. Interest only payment, 30 year payment, 15 year payment

D. Interest only payment, 30 year payment, 15 year payment

(Q16530) Which of the following would usually not be found on the standard deed of trust? A. Loan amount B. Legal description C. Borrower name D. Interest rate

D. Interest rate

(Q16538) Which of the following is most true concerning a VA funding fee? A. It is not charged to active members of the military B. It is not charged to veterans C. It is always refundable D. It is non-refundable

D. It is non-refundable

(Q16493) Which of the following would not be on a note? A. Loan amount B. Borrower's name C. Interest rate D. Legal description

D. Legal description

(Q6542) Which of the following activities would not require a loan originator license? A. Advertising loan origination services on a billboard B. Distributing rate sheets to prospective borrowers offering to originate mortgage loans C. Handing out business cards identifying yourself as a loan originator D. Originating mortgage loans while employed by a federally chartered financial institution

D. Originating mortgage loans while employed by a federally chartered financial institution

(Q15398) The requirement that borrowers receive the Consumer Handbook on Adjustable Rate Mortgages is required under which regulation? A. Regulation C B. Regulation X C. Regulation M D. Regulation Z

D. Regulation Z

(Q16518) Which of the following could a lender do in the event of an early default by a borrower who is 30 days late on a conventional mortgage secured by their primary residence? A. Increase the borrower's interest rate to the state allowed default interest rate B. Immediately conduct a trustee's sale C. Immediately begin foreclosure proceedings and discontinue accepting any payments from the borrower D. Require the originating entity to repurchase the loan, if the default occurs within the period outline in the broker's contract

D. Required the originating entity to repurchase the loan, if the default occurs within the period outlined in the broker's contract

(Q15387) Which of the following is true concerning the closing date under the Truth in Lending Act? A. The TILA does not address the closing date B. The closing date must be at least 7 days after delivery of the early disclosures required under TILA C. The closing date must be at least 10 days after mailing of the early disclosures required under TILA D. The closing date must be at least 7 days after mailing of the early disclosure required under TILA

D. The closing date must be at least 7 days after mailing of the early disclosure required under TILA

(Q16103) Which of the following is true the closing date under the Truth in Lending Act? A. The TILA does not address the closing date B. The closing date must be at least 7 days after delivery of the early disclosures required under TILA C. The closing date must be at least 10 days after mailing of the early disclosures required under TILA D. The closing date must be at least 7 days after mailing of the early disclosures required under TILA

D. The closing date must be at least 7 days after mailing of the early disclosures required under TILA

(Q6547) Which of the following is true regarding an individual who has had a loan originator license revoked by a state agency? A. Each state will decide whether or not the individual is eligible for licensure based on the circumstances surrounding the revocation B. The individual will be eligible for licensure if the revocation was for a technical violation of the law C. The individual will never be able to obtain an originator license D. The individual could be eligible for licensure if the revocation was vacated

D. The individual could be eligible for licensure if the revocation was vacated

(Q15870) Which of the following would be an acceptable reason to decline a loan application? A. Borrower has a habit of going on maternity leave B. Borrower fails to disclose their race C. Borrower is a member of a minority race D. The mortgage loan originator feels the borrower is lying

D. The mortgage loan originator feels the borrower is lying

(Q15859) Which of the following would not be considered a Pre-Paid Finance Charge? A. Mortgage insurance premium B. UFMIP C. Flood certification fee D. Title insurance premium

D. Title insurance premium

(Q15800) A form with language advising the borrower that they are not obligated to complete a loan transaction simply because they have received disclosures is required under which act? A. Real Estate Settlement Procedures Act B. Fair Housing Act C. Regulation X D. Truth in Lending Act

D. Truth in Lending Act

(Q16266) Residual income applies to which of the following types of loans? A. FHA B. Conventional C. Jumbo D. VA

D. VA

(Q16531) According to the standard deed of trust, how soon must a borrower on an owner occupied loan occupy the property? A. Within 30 days of closing B. Within 15 days of closing C. Within 90 days of closing D. Within 60 days of closing

D. Within 60 days of closing

(Q16355) A person who acts as a borrower on a loan because the actual buyer is unable to qualify is referred to as: A. a flip buyer B. a substitute buyer C. a proxy buyer D. a strawbuyer

D. a strawbuyer

(Q6545) Communicating directly or indirectly with a borrower regarding prospective mortgage terms is: A. considered taking a loan application B. typically not referenced in state law C. does not require a license until payment is received D. considered part of negotiating the terms of a mortgage loan

D. considered part of negotiating the terms of a mortgage

(Q6544) A mortgage underwriter who works as an independent contractor: A. does not need to be licensed B. needs to be license only if they communicate directly with borrowers C. only needs to be licensed if working for a federally chartered bank or credit union D. must be licensed

D. must be licensed

(Q6516) Which of the following types of compensation to a mortgage licensee would NOT be considered compensation? A. loan origination fee B. discount on other services C. loan discount points D. principal and interest payment

D. principal and interest payment

(Q15841) RESPA does all of the following except: A. requires the advance disclosure of closing costs B. eliminates referral fees C. limits the amount of money a servicer may hold in an escrow account D. requires the disclosure if finance terms

D. requires the disclosure if finance terms

(Q6570) The number assigned to a loan originator by the NMLS is referred to as the: A. registration number B. national license number C. license number D. unique identifier

D. unique identifier

(Q15823) A disclosure advising the borrower of their right to receive a copy of their appraisal must be delivered: A. any time during the processing of the loan B. at the time of application C. only if the loan is declined D. within 3 days of the application

D. within 3 days of the application

(Q15972) A disclosure advising the borrower of their right to receive a copy of their appraisal must be delivered: A. any time during the processing of the loan B. at the time of application C. only if the loan is declined D. within 3 days of the application

D. within 3 days of the application

DTI

Debt to Income

FICO Score:

FICO is an abbreviation for Fair Isaac Corporation and refers to a person's credit score based on credit history. Lenders and credit card companies use the number to decide if the person is likely to pay his or her bills. A credit score is evaluated using information from the three major credit bureaus and is usually between 300 and 850.

"B" Loan or "B" Paper:

FICO scores from 620-659. Factors include two 30 day late mortgage payments and two to three 30 day late installment loan payments in the last 12 months. No delinquencies over 60 days are allowed. Should be two to four years since a bankruptcy. Also referred to as Sub-Prime.

"C" Loan or "C" Paper:

FICO scores typically from 580-619. Factors include three to four 30 day late payments and four to six 30 day late installment payments or two to four 60 day late payments. Should be one two two years since bankruptcy. Also referred to as Sub-Prime.

FCRA

Fair Credit Reporting Act

FACTA

Fair and Accurate Credit Transaction Act of 2003

FEMA

Federal Emergency Management Agency

FFIEC

Federal Financial Institutions Examination Council

Freddie Mac:

Federal Home Loan Mortgage Corporation (FHLM); a federally chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers. Also known as a Government Sponsored Enterprise (GSE).

FHA

Federal Housing Administration

Fannie Mae:

Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers. Also known as a Government Sponsored Enterprise (GSE).

FTC

Federal Trade Commission

FinCEN

Financial Crimes Enforcement Network

GFE

Good Faith Estimate

GPM

Graduated Payment Mortgages

HLT or HCLTV

HELOC Loan to Value

Familial Status:

HUD uses this term to describe a single person., a pregnant woman or a household with children under 18 living with parents or legal custodians who might experience housing discrimination.

HELOC

Home Equity Line of Credit

HMDA

Home Mortgage Disclosure Act

HOEPA

Home Ownership and Equity Protection Act

HUD

Housing and Urban Development

(Q1607) What are finance charges which are withheld from the proceeds of the loan considered? A. Pre-paid finance charges B. Third party fees C. P.O.C. charges D. Periodic interest charges

Pre-paid finance charges

PMI

Private Mortgage Insurance

Credit Repair Companies:

Private, for-profit businesses that claim to offer consumers credit and debt repayment difficulties assistance with their credit problems and a bad credit report.

SAR

Suspicious Activity Report

USC

U.S. Code

UST

Uniform State Test

USDA

United States Department of Agriculture

UFMIP

Up Front Mortgage Insurance Premium

Mortgage-Backed Security (MBS):

a Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS holders.

Chapter 7 Bankruptcy:

a bankruptcy that requires assets be liquidated in exchange for the cancellation of debt.

Multifamily Housing:

a building with more than four residential rental units.

Cash Reserves:

a cash amount sometimes required of the buyer to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

Liquid Asset:

a cash asset or an asset that is easily converted into cash.

Loan Origination Fee:

a charge by the lender to cover the administrative costs of making the mortgage. This charge is paid at the closing and varies with the lender rand type of loan. A loan origination fee of 1 to 2 percent of the mortgage amount is common.

Mortgage Acceleration Clause:

a clause allowing a lender, under certain circumstances, to demand the entire balance of a loan be repaid in a lump sum. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Contingency:

a clause in a purchase contract outlining conditions that must be fulfilled before the contract is executed. Both, buyer or seller may include contingencies in a contract, but both parties must accept the contingency.

Mortgage Banker:

a company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.

Debt-to-Income Ratio:

a comparison or ratio of gross income to housing and non-housing expenses; With the FHA, the monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

Listing Agreement:

a contract between a seller and a real estate professional to market and sell a home. A listing agreement obligates the real estate professional (or his or her agent) to seek qualified buyers, report all purchase offers and help negotiate the highest possible price and most favorable terms for the property seller.

Derivative:

a contract between two or more parties where the security is dependent on the price of another investment.

Earnings Per Share (EPS):

a corporation's profit that is divided among each share of common stock. It is determined by taking the net earnings divided by the number of outstanding common stocks held. This is a way that a company reports profitability.

"A" Loan of "A" Paper:

a credit rating where the FICO score is 660 or above. There have been no late mortgage payments within a 12-month period. This is the best credit rating to have when entering into a new loan.

Inquiry:

a credit report request. Each time a credit application is completed or more credit is requested counts as an inquiry. A large number of inquiries on a credit report can sometimes make a credit score lower.

Callable Debt:

a debt security whose issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity.

Depreciation:

a decrease in the value or price of a property due to changes in market conditions, wear and tear on the property, or other factors.

Budget:

a detailed record of all income earned and spent during a specific period of time.

Appraisal:

a document from a professional that gives an estimate of a property's fair market value based on the sales of comparable homes in the area and the features of a property; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Certificate of Title:

a document provided by a qualified source, such as a title company, that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

Deed:

a document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description and the owner's signature. Also known as the title.

Amenity:

a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, woods, water) or man-made (like a swimming pool or garden).

Equal Credit Opportunity Act (ECOA):

a federal law requiring lenders to make credit available equally without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Bankruptcy:

a federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Interest:

a fee charged for the use of borrowing money.

Balance Sheet:

a financial statement that shows the assets, liabilities and net worth of an individual or company.

Mortgage Broker:

a firm that originates and processes loans for a number of lenders.

Condominium:

a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner also shares financial responsibility for common areas.

Notice of Default:

a formal written notice to a borrower that three is a default on a loan and that legal action is possible.

Assessor:

a government official who is responsible for determining the value of a property for the purpose of taxation.

Ginnie Mae (Government National Mortgage Association) GNMA:

a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as with Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.

FSBO (For Sale by Owner):

a home that is offered for sale by the owner without the benefit of a real estate professional

Fair Housing Act:

a law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Lien:

a legal claim against property that must be satisfied when the property is sold. A claim of money against a property. wherein the value of the property is used as security in repayment of a debt. Examples include a mechanic's lien, which might be for the unpaid cost of building supplies, or a tax lien for unpaid property taxes. A lien is a defect on the title and needs to be settled before transfer of ownership. A lien release is a written report of the settlement of a lien and is recorded in the public record as evidence of payment.

Judgment:

a legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

Mortgage Note:

a legal document obligating a borrower to repay a loan at a stated interest rate during a specified period; the agreement is secured by a mortgage that is recorded in the public records along with the deed.

Note:

a legal document obligating a borrower to repay a mortgage loan at a stated interest rate over a specified period of time.

Power of Attorney:

a legal document that authorizes another person to act on your behalf. A power of attorney can grant complete authority or can be limited to certain acts or certain periods of time or both.

Arbitration:

a legal method of resolving a dispute without going to court.

Foreclosure:

a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.

Forbearance:

a lender may decide not to take legal action when a borrower is late in making payment. Usually this occurs when a borrower sets up a plan that both sides agree will bring overdue mortgage payments up to date.

Broker:

a licensed individual or firm that charges a fee to serve as the mediator between the buyer and seller. Mortgage brokers are individuals in the business of arranging funding or negotiating contracts for a client, but who does not loan the money. A real estate broker is someone who helps find a house.

Mortgage:

a lien of the property that secures the Promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.

Cap:

a limit, such as one placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease, either at each adjustment period or during the life of the mortgage. Payment caps do not limit the amount of interest the lender is earning, so they may cause negative amortization.

Home Equity Loan:

a loan backed by the value of a home (real estate). If the borrower defaults or does not pay the loan, the lender has some rights to the property. The borrower can usually claim a home equity loan as a tax deduction.

Non-Conforming Loan:

a loan that exceeds Fannie Mae's and Freddie Mac's limits.

Mortgage Modification:

a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

Annual Percentage Rate (APR):

a measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.

Credit Enhancement:

a method used by a lender to reduce default of a loan by requiring collateral, mortgage insurance, or other agreements.

Mortgage Insurance Premium (MIP):

a monthly payment--usually part of the mortgage payment--paid by a borrower for mortgage insurance.

Adjustable-Rate Mortgage (ARM)

a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).

Intermediate Term Mortgage:

a mortgage loan with a contractual maturity from the time of purchase equal to or less than 20 years.

Home Equity Line of Credit:

a mortgage loan, usually in second mortgage, allowing a borrower to obtain cash against the equity of a home, up to a predetermined amount.

Biweekly Payment Mortgage:

a mortgage paid twice a month instead of once a month, reducing the amount of interest to be paid on the loan.

Balloon Loan or Mortgage:

a mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10 year); after that time period elapses, the balance is due or is refinanced by the borrower.

Fixed-Rate Mortgage:

a mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.

Credit Union:

a non-profit financial institution federally regulated and owned by the members or people who use their services. Credit unions serve groups that hold a common interest and you have to become a member to use the available services.

Amortization:

a payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest-only. The monthly amount is based on the schedule for the entire term or length of the loan.

Loan to Value (LTV) Ratio:

a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Front End Ratio:

a percentage comparing a borrower's total monthly cost to buy a house (mortgage principal and interest, insurance, and real estate taxes) to monthly income before deductions.

Lender:

a person or company that makes loans for real estate purchases. Sometimes referred to as a loan officer or lenderr.

Co-Signer

a person that signs a credit application with another person, agreeing to be equally responsibly for the repayment of the loan.

Borrower:

a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Points:

a point is equal to 1% of the principal amount of your mortgage For example, if you get a mortgage for $95,000, one point means you pay $950 to the lender. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them.

Mortgage Insurance:

a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Insurance purchased by the buyrr to protect the lender in the event of default. Typically purchased for loans with less than 20% down payment. The cost of mortgage insurance is usually added to the monthly payment. Mortgage insurance ins maintained on conventional loans until the outstanding amount of the loan is less than 80% of the value of the house or for a set period of time (7 years is common). Mortgage insurance also is available through a government agency, such as the Federal Housing Administration (FHA) or through companies.

Loss Mitigation:

a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.

Comparative Market Analysis (COMPS):

a property evaluation that determines property value by comparing similar properties sold within the last year.

Clear Title:

a property title that has no defects. Properties with clear titles are marketable for sale.

Escape Clause:

a provision in a purchase contract that allows either party to cancel part or the entire contract if the other does not respond to changes to the sale within a set period. The most common use of the escape clause is if the buyer makes the purchase offer contingent on the sale of another house.

Conversion Clause:

a provision in some ARMs allowing it to change to a fixed-rate loan at some point during the term. Usually conversions are allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed rate mortgages. There may be additional cost for this clause.

Assumption Clause:

a provision in the terms of a loan that allows the buyer to take legal responsibility for the mortgage from the seller.

Due on Sale Clause:

a provision of a loan allowing the lender to demand full repayment of the loan if the property is sold.

Appraiser:

a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate

Back End Ratio (debt ratio):

a ratio that compares the total of all monthly debt payments (mortgage, real estate taxes and insurance, car loans, and other consumer loans) to gross monthly income.

Credit History:

a record of an individual that lists all debts and the payment history for each. The report that is generated from the history is called a credit report. Lenders use this information to gauge a potential borrower's ability to repay a loan.

No Cash Out Refinance:

a refinance of an existing loan only for the amount remaining on the mortgage. The borrower does not get any cash against the equity of the home. Also called a "rate and term refinance."

Counter Offer:

a rejection to all or part of a purchase offer that negotiates different terms to reach an acceptable sales contract.

Credit Report:

a report generated by the credit bureau that contains the borrower's credit history for the past seven years. Lenders use this information to determine if a loan will be granted.

Loan Officer:

a representative of a lending or mortgage company who is responsible for soliciting homebuyers, qualifying and processing of loans. They may also be called lender, loan representative, account executive or loan rep.

Mortgage Score:

a score based on a combination of information about the borrower that is obtained from the loan application, the credit report, and property value information. The score is a comprehensive analysis of the borrower's ability to repay a mortgage loan and manage credit.

Credit Score:

a score calculated by using a person's credit report to determine the likelihood of a loan being repaid on time. Scores range from about 360-840: a lower score meaning a person is a higher risk, while a higher score means that there is less risk.

Common Stock:

a security that provides voting rights in a corporation and pays a dividend after preferred stock holders have been paid. This is the most common stock held within a company.

Debt Security:

a security that represents a loan from an investor to an issuer. The issuer in turn agrees to pay interest in addition to the principal amount borrowed.

Asking Price:

a seller's stated price for a property.

Escrow Account:

a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

Construction Loan:

a short-term, to finance the cost of building a new home. The lender pays the builder based on milestones accomplished during the building process. For example, once a sub-contractor pours the foundation and it is approved by inspectors the lender will pay for their service.

Encroachments:

a structure that extends over the legal property line on to another individual's property. The property surveyor will note any encroachment on the lot survey done before property transfer. The person who owns the structure will be asked to remove it to prevent future problems.

Interest Rate Swap:

a transaction between two parties where each agrees to exchange payments tied to different interest rates for a specified period of time, generally based on a notional principal amount.

Lease:

a written agreement between a property owner and a tenant (resident) that stipulates the payment and conditions under which the tenant may occupy a home or apartment and states a specified period of time.

Exclusive Listing:

a written contract giving a real estate agent the exclusive right to sell a property for a specific timeframe.

GSE:

abbreviation for government sponsored enterprises: a collection of financial services corporations formed by the United States Congress to reduce interest rates for farmers and homeowners. Examples include Fannie Mae and Freddie Mac.

Predatory Lending:

abusive lending practices that include a mortgage loan to someone who does not have the ability to repay. It also pertains to repeated refinancing of a loan charging high interest fees each time.

Document Recording:

after closing on a loan, certain documents are filed and made public record. Discharges for the prior mortgage holder are filed first. Then the deed is filed with the new owner's and mortgage company's names.

HUD1 Statement:

also known as the "settlement sheet," or "closing statement" it itemizes all closing costs; must be given to the borrower at or before closing. Items that appear on the statement include real estate commissions, loan fees, points, and escrow accounts.

Premium:

amount paid on a regular schedule by a policy holder that maintains insurance coverage.

EEM (Energy Efficient Mortgage):

an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase.

Loan Acceleration:

an acceleration clause in a loan document is a statement in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

Co-Signed Account:

an account signed by someone in addition to the primary borrower, making both people responsible for the amount borrowed.

Co-Borrower:

an additional person that is responsible for loan repayment and is listed on the title.

Convertible ARM:

an adjustable-rate mortgage that provides the borrower the ability to convert to a fixed-rate within a specified time.

Credit Bureau:

an agency that provides financial information and payment history to lenders about potential borrowers. Also known as a National Credit Repository.

Line of Credit:

an agreement by a financial institution such as a bank to extend credit up to a certain amount for a certain time to a specified borrower.

Lender Option Commitments:

an agreement giving a lender the option to deliver loans or securities by a certain date at agreed upon terms.

Mandatory Delivery Commitment:

an agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.

Credit:

an agreement that a person will borrow money and repay it to the lender over time.

Commission:

an amount, usually a percentage of the property sales price that is collected by a real estate professional as a fee for negotiating the transaction. Traditionally the home seller pays the commission. The amount of commission is determined by the real estate professional and the seller and can be as much as 6% of the sales price.

Nonperforming Asset:

an asset such as a mortgage that is not currently accruing interest or which interest is not being paid.

HELP (Homebuyer Education Learning Program):

an educational program from the FHA that counsels people about the home buying process; HELP covers topics like budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced intitial FHA mortgage insurance premium from 2.25% to 1.75% of the home purchase price.

Good Faith Estimate:

an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

Appraised Value:

an estimation of the current market value of a property

Home Inspection:

an examination of the structure and mechanical systems to determine a home's quality, soundness and safety; makes the potential homebuyer aware of any repairs that may be needed. The homebuyer generally pays inspection fees.

Cost of Funds Index (COFI):

an index used to determine interest rate changes for some adjustable-rate mortgages.

Grantor:

an individual conveying an interest in real property.

Grantee:

an individual to whom an interest in real property is conveyed.

Capital or Cash Reserves:

an individual's savings, investments, or assets.

Homeowner's Insurance:

an insurance policy, also called hazard insurance, that combines protection against damage to a dwelling and its contents including fire, storms or other damages with protection against claims of negligence or inappropriate action that result in someone's injury or property damage. Most lenders require homeowners insurance and may escrow the cost. Flood insurance is generally not included in standard policies and must be purchased separately.

Consideration:

an item of value given in exchange for a promise or act.

Equity:

an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s) from the fair market value of the property.

Collection Account:

an unpaid debt referred to a collection agency to collect on the bad debt. This type of account is reported to the credit bureau and will show on the borrower's credit report.

Prepayment:

any amount paid to reduce the principal balance of a loan before the due date or payment in full of a mortgage. This can occur with the sale of the property, the pay off the loan in full, or a foreclosure. In each case, full payment occurs before the loan has been fully amortized.

Cloud on the Title:

any condition which affects the clear title to real property.

Assets:

any item with measurable value.

Personal Property:

any property that is not real property or attached to real property. For example furniture is not attached however a new light fixture would be considered attached and part of the real property.

Encumbrance:

anything that affects title to a property, such as loans, leases, easements, or restrictions.

Back to Back Escrow:

arrangements that an owner makes to oversee the sale of one property and the purchase of another at the same time.

Lease Purchase (Lease Option):

assists low to moderate income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

PITI Reserves:

cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Origination Fee:

charge for originating a loan; is usually calculated in the form of points and paid at closing. One point equals one percent of the loan amount. On a conventional loan, the loan origination fee is the number of points a borrower pays.

Homeownership Education Classes:

classes that stress the need to develop a strong credit history and offer information about how to get a mortgage approved, qualify for a loan, choose an affordable home, go through financing and closing processes, and avoid mortgage problems that cause people to lose their homes.

National Credit Repositories:

currently, there are three companies that maintain national credit-reporting databases. These are Equifax, Experian, and Trans Union, referred to as credit bureaus.

Payment Change Date:

date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) a or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

Quitclaim Deed:

deed transferring ownership of a property but does not make any guarantee of clear title.

Global Debt Facility:

designed to allow investors all over the world to purchase debt (loans) of U.S. dollar and foreign currency through a variety of clearing systems.

Average Price:

determining the cost of a home by totaling hte cost of all houses sold in one area and dividing by the number of homes sold.

Planned Unit Development (PUD):

development that is planned and constructed as one entity. Generally, there are common features in the homes or lots governed by covenants attached to the deed. Most planned developments have common land and facilities owned and managed by the owner's or neighborhood association. Homeowners usually are required to participate in the association via a payment of annual dues.

Ownership:

documented by the deed to a property. The type or form of ownership is important if there is a change in the status of the owners or if the property changes ownership.

Abstract of Title:

documents recording the ownership of property throughout time.

Credit Counseling:

education on how to improve bad credit and how to avoid having more debt than can be repaid.

Inflation Coverage:

endorsement to a homeowner's policy that automatically adjusts the amount of insurance to compensate for inflationary rises in the home's value. This type of coverage does not adjust for increases in the home's value due to improvements.

FHA (Federal Housing Administration):

established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

HUD (Housing and Urban Development):

established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

Compensating Factors:

factors that show the ability to repay a loan based on less traditional criteria, such as employment, rent, and utility payment history.

Delinquency:

failure of a borrower to make timely mortgage payments under a loan agreement. Generally after fifteen days a late fee may be assessed.

Fair Credit Reporting Act:

federal act to ensure that credit bureaus are fair and accurate protecting the individual's privacy rights enacted in 1971 and revised in October 1997.

Appraisal Fee:

fee charged by an appraiser to estimate the market value of a property.

Application Fee:

fee charged by lenders to process a loan application.

Closing Costs:

fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes. A common estimate of a Buyer's closing costs is 2 to 4 percent of the purchase price of the home. A common estimate for Seller's closing costs is 3 to 9 percent.

Perils:

for homeowner's insurance, an event that can damage the property. Homeowner's insurance may cover the property for a wide variety of perils caused by accidents, nature, or people.

Credit Related Losses:

foreclosed property expenses combined with charge-offs

Credit Related Expense:

foreclosed property expenses plus the provision for losses.

Escrow:

funds held in an account to be used by the lender to pay for home insurance and property taxes. The funds may also be held by a third party until contractual conditions are met and then paid out.

No Cost Loan:

generally, a loan that does not charge for items such as title insurance, escrow fees, settlement fees, appraisal, recording fees or notary fees. It may also offer no points. This lessens the need for upfront cash during the buying process, however, not cost loans have a higher interest rate.

Owner Financing:

home purchase where the seller provides all or part of the financing, acting as a lender.

Offer:

indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

Flood Insurance:

insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.

Conforming Loan:

is a loan that does not exceed Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

Covenants:

legally enforceable terms that govern the use of property. These terms are transferred with the property deed. Discriminatory covenants are illegal and unenforceable. Also known as a condition, restriction, deed restriction or restrictive covenant.

Pre-Approval:

lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guarantee a loan until the property has passed inspection's underwriting guidelines.

Pre-Qualify:

lender informally determines the maximum amount an individual is eligible to borrow. This is not a guarantee of a loan.

Payment Cap:

limit of how much an ARM's payment may increase, regardless of how much the interest rate increases.

Automated Underwriting:

loan processing completed through a computer-based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer.

Partial Claim:

loss mitigation option offered by the FHA that allows a borrower, with help from a lender , to get an interest-free loan from HUD to bring their mortgage payments up to date.

Loan:

money borrowed that is usually repaid with interest.

Gross Income:

money earned before taxes and other deductions. Sometimes it may include income from self-employment, rental property, alimony, child support, public assistance payments, and retirement benefits.

Additional Principal Payment:

money paid to the lender in addition to the established payment amount used directly against the loan principal to shorten the length of the loan.

Deposit (Earnest Money):

money put down by a potential buyer to show that they are serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. During the contingency period the money may be returned to the buyer if the contingencies are not met to the buyer's satisfaction.

Earnest Money (Deposit):

Graduated Payment Mortgages:

mortgages that begin with lower monthly payments that get slowly larger over a period of years, eventually reaching a fixed level and remaining there for the life of the loan. Graduated payment loans may be good if you expect your annual income to increase.

Discount Point:

normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan. In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give you a lower rate and lower payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate will probably go up depending on the index rate.

Negative Amortization:

occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.

Jumbo Loan:

or non-conforming loan, is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

Refinancing:

paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (lower interest rate).

Partial Payment:

payment that is less than the total amount owed on a monthly mortgage payment. Normally, lenders do not accept partial payments. The lender may make exceptions during times of difficulty. Contact your lender prior to the due date if a partial payment is needed.

Guarantee Fee:

payment to Fannie Mae from a lender for the assurance of timely principal and interest payments to MBS (Mortgage Backed Security) security holders.

Fixed Expenses:

payments that do not vary from month to month.

Fixture:

personal property permanently attached to real estate or real property that becomes a part of the real estate.

PMI (Private Mortgage Insurance):

privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Pre-foreclosure Sale:

procedure in which the borrower is allowed to sell a property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower's debt.

Casualty Protection:

property insurance that covers any damage to the home and personal property either inside or outside the home.

Homestead Credit:

property tax credit program, offered by some state governments, that provides reductions in property taxes to eligible households.

Hazard Insurance:

protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.

Insurance:

protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.

Housing Counseling Agency:

provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

Prepayment Penalty:

provision in some loans that charge a fee to a borrower who pays off a loan before it is due.

Loan Fraud:

purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

Merged Credit Report:

raw data pulled from two or more of the major credit-reporting firms.

Cooperative (Co-op):

residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

Collateral:

security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral and can be taken away from the borrower if mortgage payments are not made.

Lock-In:

since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

Preferred Stock:

stock that takes priority over common stock with regard to dividends and liquidation rights. Preferred stockholders typically have no voting rights.

Mortgage Life and Disability Insurance:

term life insurance bought by borrowers to pay off a mortgage in the event of death or make monthly payments in the case of disability. The amount of coverage decreases as the principal balance declines. There are many different terms of coverage determining amounts of payments and when payments begin and end.

Mitigation:

term usually used to refer to various changes or improvements made in a home; for instance, to reduce the average level of radon.

American Society of Home Inspectors:

the American Society of Home Inspectors is a professional association of independent home inspectors.

Float:

the act of allowing an interest rate and discount points to fluctuate with changes in the market.

Adjustment Date:

the actual date that the interest rate is changed for an ARM.

Market Value:

the amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.

Deductible:

the amount of cash payment that is made by the insured (the homeowner) to cover a protion of a damage or loss. Sometimes also called "out-of-pocket expenses." For example, out of a total damage claim of $1,000, the homeowner might pay a $250 deductible toward the loss, while the insurance company pays $750 toward the loss. Typically, the higher the deductible, the lower the cost of the policy.

Interest Rate:

the amount of interest charged on a monthly loan payment, expressed as a percentage.

Mortgagor:

the borrower in a mortgage agreement

Loan Servicer:

the company that collects monthly mortgage payments and disperses property taxes and insurance payments. Loan servicers also monitor nonperforming loans, contact delinquent borrowers, and notify insurers and investors of potential problems. Loan servicers may be the lender or a specialized company that just handles loan servicing under contract with the lender or the investor who owns the loan.

Maturity:

the date when the principal balance of a loan becomes due and payable.

Balloon Payment:

the final lump sum payment due at the end of a balloon mortgage.

Closing:

the final step in property purchase where the title is transferred from the seller to the buyer. Closing occurs at a meeting between the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property. Also known as settlement.

Application:

the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

PITI (Principal, Interest, Taxes, and Insurance):

the four elements of a monthly mortgage payment; payments of principal and interest go directly toward repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Fair Market Value:

the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Default:

the inability to make timely monthly mortgage payments or otherwise comply with mortgage terms. A loan is considered in default when payment has not been paid after 60 to 90 days. Once in default the lender can exercise legal rights defined in the contract to begin foreclosure proceedings.

Mortgage Insurance Deduction:

the interest cost of a mortgage, which is a tax-deductible expense. The interest reduces the taxable income of taxpayers.

Note Rate:

the interest rate stated on a mortgage note.

Easements:

the legal rights that give someone other than the owner access to use the property for a specific purpose. Easements may affect property values and are sometimes a part of the deed.

Mortgagee:

the lender in a mortgage agreement

Credit Grantor:

the lender that provides a loan or credit.

Creditor:

the lending institution providing a loan or credit.

Lock-In Period:

the length of time that the lender has guaranteed a specific interest rate to a borrower.

Index:

the measure of interest rate changes that the ledner uses to decide how much the interest rate of an ARM will change over time. No one can be sure when an index rate will go up or down. If a lender bases interest rate adjustments on the average value of an index over time, your interest rate would not be as volatile. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.

Assessments:

the method of placing value on an asset for taxation purposes.

First Mortgage:

the mortgage with first priority if the loan is not paid.

Inflation:

the number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.

Margin:

the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Down Payment:

the portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. This amount varies based on the loan type, but is determined by taking the difference of the sale price and the actual mortgage loan amount. Mortgage insurance is required when a down payment less than 20% is made.

Charge-Off:

the portion of principal and interest due on a loan that is written off when deemed to be uncollectible.

Median Price:

the price of the house that falls in the middle of the total number of homes for sale in that area.

Origination:

the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Capital Gain:

the profit received based on the difference of the original purchase price and the total sale price.

Notional Principal Amount:

the proposed amount which interest rate swap payments are based but generally not paid or received by either party.

Adjustment Index:

the published market index used to calculate the interest rate of an ARM at the time of origination of adjustment.

As-is Condition:

the purchase or sale of a property in its existing condition without repairs.

Credit Loss Ratio:

the ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation.

Disclosures:

the release of relevant information about a property that may influence the final sale, especially if it represents defects or problems. "Full disclosure" usually refers to the responsibility of the seller to voluntarily provide all known information about the property. Some disclosures may be required by law, such as the federal requirement to warn of potential lead-based paint hazards in pre-1978 housing. A seller found to have knowingly lied about a defect may face legal penalties.

HECM (Reverse Mortgage):

the reverse mortgage is used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. A lending institution such as a mortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, commonly known as HECM.

Acceleration:

the right of the lender to demand payment on the outstanding balance of a loan.

Buy Down:

the seller pays an amount to the lender so the lender provides a lower rate and lower payments many times for an ARM. The seller may increase the sales price to cover the cost of the buy down.

Adjustment Interval:

the time between the interest rate change and the monthly payment for an ARM. The interval is usually every one, three or five years depending on the index.

Original Principal Balance:

the total principal owed on a mortgage prior to any payments being made.

Assessed Value:

the value that a public official has placed on any asset (used to determine taxes).

Creditworthiness:

the way a lender measures the ability of a person to qualify and repay a loan.

Acceptance:

the written approval of the buyer's offer by the seller.

203(k)

this FHA mortgage insurance program enables homebuyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan.

Chapter 13 Bankruptcy:

this type of bankruptcy sets a payment plan between the borrower and the creditor monitored by the court. The homeowner can keep the property, but must make payments according to the court's terms within a 3 to 5 year period.

Deed-in-Lieu:

to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process does not allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Indemnification:

to secure against any loss or damage, compensate or give security for reimbursement for loss or damage incurred. A homeowner should negotiate for inclusion of an indemnification provision in a contract with a general contractor.

Joint Tenancy (with Rights of Survivorship):

two or more owners share equal ownership and rights to the property. If a joint owner dies, his or her share of the property passes to the other owners, without probate. In joint tenancy, ownership of the property cannot be willed to someone who is not a joint owner.

Predictive Variables:

variables that are part of the formula comprising elements of a credit-scoring model. These variables are used to predict a borrower's future credit performance.

Cash-Out Refinance:

when a borrower refinances a mortgage at a higher principal amount to get additional money. Usually this occurs when the property has appreciated in value. For example, if a home has a current value of $100,000 and an outstanding mortgage of $60,000, the owner could refinance $80,000 and have additional $20,000 in cash.

Eminent Domain:

when a government takes private property for public use. The owner receives payment for its fair market value. The property can then proceed to condemnation proceedings.

Assumable Mortgage:

when a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. An assumable mortgage can help you attract buyers if you sell your home.

Annual Mortgage Statement:

yearly statement to borrowers detailing the remaining principal and amounts paid for taxes and interest.

Net Income:

your take-home pay, the amount of money that you receive in your paycheck after taxes and deductions.

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Chapter 21

4.07 Slavery

Evolve: Comprehensive Exam 2

Leap year