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STATEMENTS OF IMPORTANCE
- A natural person employed by a Mortgage lender or Correspondent Lender (loan originator), when acting within the scope of employment with that licensee, is exempt from licenser as a mortgage broker
- The Truth-In-Lending Act requires that if advertising includes any “triggering term” (anything that is a number such as 9% interest, $1000 down payment, 30-year term), the interest rate, APR, down payment and payment amount must be disclosed.
- Under the Truth-In-Lending Act, a borrower has a Right of Rescission which is the ability to cancel certain transactions within 3 business days.
- The Real Estate Procedure Act (Regulation X) requires Mortgage Brokers and Mortgage Lenders to provide a Good Faith Estimate of all borrower’s closing costs within 3 business days of application or credit report, whichever comes first.
- Interest rate caps represent the maximum increase per adjustment period (usually annually) and over the life of the loan (aggregate).
- A start rate is an initial interest rate that is lower than the sum of the index plus the margin.
- At the time of the first adjustment, the sum of the index plus the margin cannot exceed the start rate plus the annual cap.
- A home equity line of credit is a revolving line of credit against a percentage of the equity in a borrower’s home.
- Taxes and insurance are known as escrow impounds.
- Self-employed borrowers should provide business tax returns for the previous two years in addition to a business Balance Sheet and Profit and loss Statement.
- All information in the credit report must be obtained from and verified by sources other than the applicant
- When revolving accounts with outstanding balances do not have stated minimum required payments, the payments should be calculated at the greater of 5% of the outstanding balance of $10 per month per account.
- Fair Isaac 7 Company (FICO) developed a method of determining the likelihood that credit users will pay their obligations. A FICO credit score condenses a borrower’s credit history into a single number that has been proven to indicate future credit performance.
- A mortgage is a voluntary lien.
- Florida is a lien theory state.
- The security instrument used in a lien theory state is a mortgage.
- A deed transfers ownership of real property.
- An appraisal is ordered by the lender or the mortgage broker.
- A hazard insurance policy must include a loss payable endorsement to ensure that insurance proceedswill be used to repair the property.
- A borrower should be prepared to bring to the loan interview residence addresses and employment history for the previous two years, identification of creditors with account information, schedule of assets, and information from financial institutions.
- A pay-off letter (Estoppel Certificate) will indicate the principal balance and daily interest to be charged through the day of closing.
- Income must be verified for the previous two full tax years.
- The borrower must explain any employment gaps extending beyond one month.
- Commission income requires the lender to develop an average of the last two years.
- Overtime, bonus, part-time and second job income may be used to qualify if verified for the previous two years and there is an indication the income will in all probability continue.
- Interest and dividend income may be used to qualify the applicant if verified for the past two years. For qualifying purposes, the lender must develop an average of this income for the last two years (24 months).
- Rental income from investment property may be used for qualifying purposes.
- Rent from boarders in the borrower’s primary residence or second home is not acceptable for qualifying purposes.
- Books, Accounts, and Records must be maintained for 3 years.
- Mortgagee is the Lender, Mortgagor is the Borrower.
- A Good Faith Estimate is the projected itemized loan cost to the borrower.
- Truth in Lending requires “APR” Disclosure, all finance charges, as well as, the right of rescission (3 day cooling off period between closing and funding) under Reg. “Z”.
- LTV is calculated on sales price or appraised value, whichever is Lower.
- Equity = Fair market value minus current indebtedness.
- Kickbacks are prohibited under RESPA
- One issue that is covered under RESPA is a Federal Law that limits the amount in escrow to pay for taxes and insurance.
- Negative Amortization is when the loan balance increases over time.
- Recording documents on the public records is known as constructive notice.
- An Independent Contractor working for a lender or correspondent lender must have a mortgage broker license (associate)
- Profit and Loss Statement shows the income and expenses of a business during a specified period of time.
- A Loan Originator must be an Employee of a Mortgage Lender or Correspondent Lender.
- An applicant must provide evidence of receipt of alimony or child support for a minimum period of 6 months.
- A borrower does not have to include payment of alimony or child support in his total obligations if the payments do not continue for more than 10 months.
- For loans originated on or alter January 1,2001, the annual MIP must be cancelled when the loan-to value ratio is reduced to 78%.
- When PMI is cancelled the insurance terminates for the lender; when MIP is cancelled the insurance protection for the lender remains in force for the term of the loan.
- The legal instrument that transfers ownership of real property is a Deed.
- The legal instrument that transfers ownership of the mortgage is an Assignment of the Mortgage.
- A Basis Point is 1/100 of 1%. 100 basis points = 1%, 75 basis points = 3/4%, 50 basis points = 1/2%, 25 basis points = 1/4%.
- The Housing Expense Ratio is Principal, Interest, Taxes and Insurance divided by gross (monthly) income.
- Principal and Interest are Debt Service; Taxes and Insurance are Escrow Impounds.
- 51. An independent appraiser is paid on a Fee Basis.
- The purpose of a WDO Inspection is to determine if there is visible, active Infestation (which must be treated Prior to closing).
- A WDO Clearance Letter states that the property is free and clear of any visible active infestation.
- A Lender Will Not close a loan without a WDO Clearance Letter.
- A Commitment will indicate the time for acceptance by the borrower, the mortgage amount, the interest rate, and terms, NOT the APR.
- HUD-1 Settlement Statement must be made available to the borrower 24 hours (1 business day) prior to closing upon request.
- FS 494 prohibits the use of a name that would indicate a government affiliation such as “Federal”, “National”, or “United States”.
- HUD-1 is the Settlement Statement that shows how closing costs are allocated between the buyer and the seller and is required on all but Home Equity Lines of Credit.
- Gifts from relative may be used as funds for closing; a gift letter must state that no repayment is expected.
- Cash on Hand and Sweat Equity are Not acceptable sources of funds for the down payment or closing costs.
- LIS Pendens is a pending legal action; a notice of intent to file foreclosure or place a lien on property.
- Alimony, Child Support, And Income received from promissory notes must continue for 3 years.
- The Truth in Lending Act is regulated by the Federal Reserve Board.
- A Payoff Letter indicates the principal balance and a daily interest to be charged through the day of closing.
- A Buydown Mortgage is a financing technique in which points are paid to the lender that lowers the effective interest rate paid by the buyer, thus reducing the amount of the monthly payment for a set period of time.
- The DBF may authorize maintenance of all books, accounts and records at a place other than the principal place of business upon PRIOR written request by the Mortgage Brokerage business.
- Books, accounts and records maintained at a place OTHER than the principal place of business must be in Building of Stationary Construction under conditions which will not lead to damage or destruction.
- The clause in a mortgage which prohibits the lender from foreclosing as long as the borrower complies with the terms of the agreement is known as the Defeasance Clause.
- Regulation “Z” requires mortgage lenders to disclose to borrowers in certain transactions that they have three business days in which to rescind the loan transaction on a primary residence.
- The Right of Rescission does Not apply to a first mortgage to acquire a property.
- The most common appraisal method used for residential loans and vacant land is the Sales Comparison Approach.
- Loan-to-Value is the relationship between the amount of the mortgage loan and the lower of the appraised value or selling price of the property, expressed as a percent.
- A borrower may choose to “FLOAT” which means the interest rate is not locked in and may float up or down with the market.
- Equity is the difference between fair market value and current indebtedness.
- Race/National Origin and Sex are optional for the borrower to provide on the loan application; required for the loan interviewer.
- The conveyance of an interest in real property given as security for the payment of a debt is a Mortgage.
- The Index used for establishing interest rates for ARM’s must be beyond the control of individual lenders and must be easily verifiable by the borrower.
- The Most Common Index is the One Year T-BILL.
- Delinquent Real Estate Taxes are an unacceptable encumbrance.
- Substantial fault of the borrower means that he/she failed to provide information required by the lender within 7 days after receipt of the request, provided significantly inaccurate information materially affecting his/her eligibility, failed to produce documentation required for closing, or failed to be ready, willing and able to close the loan no later than the date specified.
- Lender makes monthly payments to a borrower who owns mortgage-free property in a Reverse Mortgage.
- Usury is charging more interest for the use of money than the legal limit permits.
- A debt instrument stating the loan amount, interest rate, the term and method of repayment as well as the Promise to Pay is the Note.
- The Note is the Legal Evidence of the Debt.
- Lenders may accept three “in file” credit reports instead of obtaining a Residential Mortgage Credit Report.
- A Lock-In is effective when signed by the Lender and can be rescinded until signed by the Lender and mailed to the Mortgage Brokerage Business.
- AD Valorem means According to the Value.
- A Simultaneous Issue is when the Title Insurance Policies of both the owner AND the mortgagee are issued at the same time.
- An Associate is a person required to be licensed as a mortgage broker who is employed by or acting as an independent contractor for a Mortgage Brokerage Business OR an a person acting as an independent contractor for a Mortgage Lender or Correspondent Lender.
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