Non-Traditional Loan Products

The Costs of Funds Index (COFI) may be used on all the following type loans except: Fixed Rate Mortgages Fed COFI related ARM loans 11th district related ARM loans 2/28 sub-prime loans

Fixed Rate Mortgages

The key difference between a Home Improvement Loan and a HELOC is: Home Equity Loan is a lump sum, HELOC is open ended Home Equity Loan is a first mortgage, HELOC is a second Home Equity Loans are variable rate, HELOCs are fixed Home Equity Loans are lite-doc, HELOCs are full-doc

Home Equity Loan is a lump sum, HELOC is open ended

In an adjustable rate mortgage, what part of the loan adjusts? Index Margin Term APR

Index

What is a margin? It is the lender's percentage of adjustment, which is added to the index to compute the adjusted rate It is a margin calling the loan due and payable The difference between the start rate and note rate The difference between the T-Bill rate and the APR

It is the lender's percentage of adjustment, which is added to the index to compute the adjusted rate

Which of the following is not a closed-end loan? a Home Equity Loan a Home Equity Line of Credit a 30 year fixed rate conventional a 5/1 Arm

a Home Equity Line of Credit

Which type of non-traditional loan product can adjust monthly, offers the borrower a choice of multiple payments and can result in negative amortization? a Home Equity Line of Credit with a payment cap a Payment Option Adjustable Rate Mortgage an Interest Only Option ARM with a payment cap an Alternative Documentation Loan product

a Payment Option Adjustable Rate Mortgage

A HECM is all of the following, except: a RAM for seniors only a reverse mortgage a Home Equity Conversion Mortgage a home improvement loan

a home improvement loan

In a 2/28 Adjustable Rate Mortgage (ARM) the Libor Index is trading at 4.5%, the qualifying margin is 6.5% and the introductory rate is 7.5%. What is the Fully Indexed Rate on this loan? 12% 11% 14% 7.50%

11%

The maximum origination fee allowable on a HECM loan is: 1% 2% 3% 4%

2%

In a 5/1 conventional ARM loan what do the 5 and the 1 represent? 5 is the start rate and 1 is the adjustment rate 5 is the number of adjustments, 1 is the adjustment cap 5 is the fixed period, 1 is the adjustment period thereafter 5 is the adjustment period, 1 is the adjustment cap

5 is the fixed period, 1 is the adjustment period thereafter

How old must a consumer be to obtain a HECM mortgage? Over 18 years of age 62 years old 65 years old 70 years old

62 years old

If the ARM loan has a margin of 5%, the index is 3%, the lifetime cap is 7% and the start rate is 6%, what is the "fully indexed rate" on this loan? 6% 10% 8% 12%

8%

A loan in which the borrower receives a line of credit secured by their residence, is able to make one or more draws against that line, may be used as part of a purchase transaction, and the interest rate is open ended, is called: An Adjustable Rate Mortgage A Construction Loan A HELOC A HECM

A HELOC

The one loan that does not require any income, credit or even loan repayment is? Home Equity Line of Credit (HELOC) No Income, No Asset Loan (NINA) A Home Equity Conversion Mortgage (HECM) A Payment Option ARM (POA)

A Home Equity Conversion Mortgage (HECM)

Loans made to high credit score borrowers with reduced documentation are called: Sub-prime ALT-A Conforming Non-conforming

ALT-A

A loan that has a fixed rate for a predetermined time and then adjusts according to current interest rates. Balloon FHA VA ARM

ARM

A HELOC is a: Home Equality Law of Closing Complicated loan only available to government employees Form that must be completed by the borrower with in 3 days of application An open-ended line of credit secured by a lien on a home

An open-ended line of credit secured by a lien on a home

The booklet, "What You Should Know About Home Equity Lines of Credit" is required to be given when? Before application Before closing At closing At the time of the application or within three days of a HELOC being discussed

At the time of the application or within three days of a HELOC being discussed

A discounted mortgage that has a Call provision is: ARM HELOC Balloon Reverse

Balloon

A loan that is amortized over 30 years, but matures much sooner. ARM FHA VA Balloon

Balloon

All Adjustable Rate Mortgages (ARMs) are tied to a specific index. What does LIBOR represent? Lifetime Interest Before Origination Rate London Interstate Bank Offered Rate London InterBank Offered Rate London Interpol Bank Offered Rate

London InterBank Offered Rate

All of the following caps are associated with Adjustable Rate Mortgages except? Adjustment Caps Payment Caps Rate Caps Lifetime Caps

Rate Caps

Most ARM loans come with caps which place limits on when and how much the loan can adjust, such as: interim caps and monthly caps adjustment caps and lifetime caps lifetime caps and margin caps payment caps and indexed caps

adjustment caps and lifetime caps

Balloon Mortgages are loans that carry a discounted interest rate in exchange for a shorter maturity term. These loans normally: amortize for 15 years and balloon in a shorter period of time amortize for 20 years and are called due and payable in full in the 30th year amortize for 30 years but mature, or are called due, or balloon, in a shorter period of time adjust annually, carry a pre-payment penalty and balloon in 7 years

amortize for 30 years but mature, or are called due, or balloon, in a shorter period of time

A Hybrid ARM is: a piggyback: fixed on 1st mortgage with a variable rate 2nd a home equity line of credit that is fixed after the draw period an ARM with an initial fixed period that then adjusts thereafter a fixed rate mortgage where the escrow amounts can change

an ARM with an initial fixed period that then adjusts thereafter

Alternative-A, known as ALT-A, are loans designed: to circumvent the sub-prime restrictions to compete with Fannie Mae investors for "A" quality borrowers that offer documentation alternatives for non-married couples with alternative lifestyles

for "A" quality borrowers that offer documentation alternatives

Advantages of an Interest Only or Payment Option ARM loans include all of the following, except: lower monthly housing payments better control over cash flow when earning inconsistent streams of income saved monthly payments can go toward other investments interest can be deferred and put on the end of the loan

interest can be deferred and put on the end of the loan

Payment Caps are designed to: limit the rate adjustment to ease payment shock limit the amount the payment can adjust to cap the payment in the fixed period but not offer adjustment ensure the affordability of the mortgage note

limit the amount the payment can adjust to

In an ARM loan transaction, the note rate or what can be referred to as the computed rate, is figured by adding the: margin to the cap index to the principal adjustment cap to the index margin to the index

margin to the index

Which is not a characteristic of a Payment Option ARM? the borrower can choose to pay interest only an ARM loan that allows the consumer to choose from several payment options the minimum payment can result in negative amortization may not be paid as a fully amortized loan

may not be paid as a fully amortized loan

When applying for a Reverse Mortgage the borrower must meet all the following conditions except? meet the qualifying debt ratio minimums attend reverse mortgage counseling before applying be a minimum of 62 years of age live in the home as a primary residence

meet the qualifying debt ratio minimums

What is a margin? the difference between the index and the note rate the spread between the start rate and the contract rate the difference between the index and the start rate the cost of the loan subtracted from the retail rate

the difference between the index and the note rate

In any ARM loan, what determines the interest rate? the interim adjustment cap the margin the index plus the margin the index

the index plus the margin

A 5-year balloon means: the loan adjusts every 5 years the loan is fixed for 5 years then adjusts annually the loan payment is fixed for 5 years and the loan is then due in full the loan is amortized over 60 months

the loan payment is fixed for 5 years and the loan is then due in full

The difference between an ARM and a balloon is best described as? the lender discounts the rate because the borrower assumes some defined risk the note will become due before the full amortization period is realized a balloon loan payment is typically based upon a 30 year amortization a balloon is by definition a nontraditional product

the note will become due before the full amortization period is realized

The adjustment period on an ARM loan is: the period of time between adjustments the period of time between the first and last adjustment the period of time before the first and after the last adjustments the time it takes a borrower to become accustomed to the monthly payment amount

the period of time between adjustments

Every ARM has an adjustment period, also know as the adjustment interval, and is: the period of time, spelled out in the ARM contract, between rate adjustments subject to periodic adjustments as determined by the contract's margin the interval of time between the first adjustment and the last allowable adjustment. the time between the closing and the first payment

the period of time, spelled out in the ARM contract, between rate adjustments

In an ARM loan, the margin is fixed, never changes, and is the: yield or spread, charged by the creditor that, when added to the index, makes up the note rate yield spread premium earned by the broker and split with the loan originator maximum cap the loan can adjust up to the APOR plus 1.5%

yield or spread, charged by the creditor that, when added to the index, makes up the note rate