Erin's Safe Test Flash Cards 07/23 4/5

Front 1

What is a MortgageFraud Warning Notice?

Back 1

Notice from the FBI that fraud is investigatedby the FBI and is punishable by up to 30 years in federal prison and $1,000,000or both.

Front 2

What documentation isrequired for a borrower who has commission income?

Back 2

Copies of income taxreturns for the past two years and info on current income of commissionsrepresents 25% or more of the annual income.

Front 3

When is the loanestimate required to be provided to the customer?

Back 3

RESPA requires within three business days after theapplication.

Front 4

What is the purposeof Form 1003 - Uniform Residential Loan Application (URLA)?

Back 4

It is the standard application for a mortgage loan.

Front 5

When is the ABAdisclosure required to be provided to the customer?

Back 5

At time of referral.

Front 6

What is the differencebetween the VOE and the VOD?

Back 6

VOE verifies employment and year to dateincome and the VOD verifies the status and balance of financial accounts

Front 7

What is the keyinformation on the Mortgage Servicing Disclosure Statement?

Back 7

The likelihood(expressed as a percent) that the servicing on the mortgage will be sold ortransferred to another party.

Front 8

What documentation isrequired for a borrower who is self-employed?

Back 8

A self-employedapplicant must show through adjusted gross income on tax returns that they havemaintained an income for two years in order to qualify for a mortgage loan.

Front 9

When is the MortgageServicing Disclosure Statement required to be provided to the customer andwhich regulation mandates it?

Back 9

RESPA - Reg. X(x-ray) states that it must be provided within 3 business days afterapplication on purchase transactions.

Front 10

When is the ServicingTransfer Statement required to be provided to the customer from the lender whois selling the loan?

Back 10

RESPA requires a 15 day notice prior to theeffective dates of transfer...new servicer(s) is to also provide notice 15 daysafter the transfer.

Front 11

What is thedifference in the calculation of front-end and back-end ratio?

Back 11

FRONT is the housingpayment (PITI) calculated from the gross monthly income and the BACK-END is thehouse payment plus the consumer debt as compared to the monthly gross income.

Front 12

Are the front-end andback-end ratios calculated using Gross or Net income?

Back 12

Gross Monthly Income.

Front 13

A borrower makes $18per hour, working a 40 hour work week, what is his gross monthly income?

Back 13

$3,120 per month - breaks down as $18 X 40 X 52 divided by12 months.

Front 14

Can overtime alwaysbe used to qualify for a loan?

Back 14

As long as theborrower has been receiving overtime for two years and their employer canverify that it will continue.

Front 15

A borrower earns$1,350 biweekly income before taxes, what is his gross monthly income?

Back 15

$2,925: $1,350 X 26weeks divided by 12 months gives monthly average.

Front 16

When can childsupport and separate maintenance be used as income?

Back 16

If court ordered and shows a stable history of receivingpayments. (Must show proof and 3 years continuance).

Front 17

What is thedifference between a voluntary and involuntary lien?

Back 17

Voluntary is one that the owner gives consentto the lien, such as a mortgage. Involuntary is one such as a tax lien, orother unpaid debt.

Front 18

The back-end ratio isknown by what other names?

Back 18

Debt ratio, debt to income ratio (DTI) bottom ratio or totalratio.

Front 19

What category on theURLA would be check-marked to represent a marital status of “single”?

Back 19

Unmarried.

Front 20

How is LTVcalculated?

Back 20

Loan amount requestedor principal balance divided by the appraised value or purchase price,whichever is less.

Front 21

What is thedifference between LTV and CLTV?

Back 21

LTV takes intoconsideration only the first mortgage balance and the CLTV considers both thefirst and all other mortgages on the home.

Front 22

Under whatcircumstances would the debt of a non-purchasing spouse be included in theapplicant’s qualify ratios?

Back 22

When the applicant resides in, or if theproperty is located in, a community property state.

Front 23

How is the back-endratio calculated?

Back 23

It considers the house payment and all other consumer debt(recurring debt) and divided by the gross monthly income (PITI + recurring debt/ gross monthly income = back-end ratio).

Front 24

As a general rule, whatpercentage of rental income stated on the rental agreement will be used to helpqualify the borrower?

Back 24

Vacancy factor is25%, so 75% will be used unless otherwise noted on the 1040 Schedule E - RealEstate.

Front 25

What does the acronymURAR represent?

Back 25

Uniform ResidentialAppraisal Report.

Front 26

On a professionalhome appraisal, what is the difference between a sales comparison approach anda cost approach?

Back 26

Sales approach looksat recent sales in the area that have similar characteristics to the subjecthome and the COST approach assumes uses a cost to construct a substituteresidence that has the same utility and use as the subject property beingappraised.

Front 27

What category on theURLA would be check-marked to represent a marital status of “divorced”,“widowed”, “never been married”?

Back 27

“Unmarried”.

Front 28

If four borrowersreceived a right of rescission for a specific loan, how many of them would berequired to return the right of rescission in order to cancel the loan?

Back 28

Only one person would need to execute therescission notice.

Front 29

In a communityproperty state, is a non-purchasing spouse’s credit history considered in theloan approval?

Back 29

No, however theirdebt will be considered into the debt to income ratio (in community propertystates, each spouse is responsible for the others’ debt even if they didn'tsign onto the obligation).

Front 30

The dollar amount ofthe Net adjustment for each comparable sale should not exceed what percentageof the sales price of the comparable?

Back 30

Net is 15% (single line adjustments is 10% and grossadjustment is 25%).

Front 31

The front-end ratiois known by what other names?

Back 31

Housing ratio, housing expense ratio to topratio.

Front 32

What type of approachis used by an appraiser to determine the value of an investment property?

Back 32

Income approach.

Front 33

What is thedifference between “title theory” states and “lien theory” states?

Back 33

With Title Theory, a Deed of Trust is executed and borrowergives legal title (ownership) to the lender while retaining use of the homeuntil the debt is paid off. With Lien Theory, however, borrower retains bothlegal and equitable title. The mortgage serves as a lien against the property.

Front 34

Homeowners who arerequired to carry homeowner’s flood insurance can obtain it through?

Back 34

Private InsuranceCarriers.

Front 35

What are the frontand back-end ratio percentages used by FHA?

Back 35

31/43.

Front 36

What is a Chain ofTitle on a property?

Back 36

A record of alltransfers of ownership of a subject property.

Front 37

When is the Notice ofAction Taken, Notice of Adverse Action, or the Notice of Incomplete Applicationrequired to be provided to the customer?

Back 37

ECOA - 30 days fromapplication.

Front 38

Can a mortgage loancome out of rescission on a Saturday?

Back 38

Yes, a loan becomes eligiblefor funding three business days after closing. Those days are any day otherthan Sunday and a legal public holiday.

Front 39

What are the frontand back-end ratio percentages used by the VA?

Back 39

NA/41%. There is nofront end ratio for VA loans.

Front 40

What does rescissionmean?

Back 40

A legal remedy to void a contract between 2parties, restoring each to the position held prior to the transaction.

Front 41

Who is required to begiven a right to rescind by the lender?

Back 41

Any person signed onthe note or who has an ownership interest in the property being used to securethe loan must be given 2 (two) copies.

Front 42

In calculating thetime limitations for the right to rescind, what days are not considered“business” days?

Back 42

Sundays and federal public holidays (if thefed’s don’t work, they don’t enforce).

Front 43

Fannie Mae andFreddie Mac utilize what front and back-end ratio for housing?

Back 43

28/36.

Front 44

For both closed oropen-end credit, how long is the rescission period if the creditor fails toprovide a rescission notice that meets the requirements for notification, orfails to disclose all the terms of the lending transaction as required underTILA?

Back 44

3 years.

Front 45

Generally, accountinformation, including late payments and other adverse info, is kept on acredit report for lo longer than how many years?

Back 45

7 years.

Front 46

What is tablefunding?

Back 46

A type of wholesale lending arrangement wheremortgage brokers are permitted to originate, and close a loan in their name fora wholesaler who has made the credit decision and funded the loan with animmediate assignment by the broker after closing.

Front 47

What agencies gatherand sell info regarding an applicant’s credit in the form of credit reports?

Back 47

Consumer ReportingAgencies (CRAs). Equifax, Transunion, Experian.

Front 48

If a loan servicertransfers, sells, or assigns the loan, the servicer must notify the borrower atleast _____ days before the effective date of transfer?

Back 48

15 days from theseller of the loan and 15 after the loan has been transferred, the new serviceris required to also send a notice.

Front 49

How is GNMA (GinnieMae) different than FNMA and FHLMC?

Back 49

GNMA is a gov’tagency, the others are not. GNMA insures FHA, VA, USDA and HECM loans. FNMA andFHLMC purchase conventional mortgage loans.

Front 50

Generally, how longto unpaid tax liens remain on credit reports?

Back 50

Indefinitely, however, some jurisdictions havedifferent requirements with greater consumer protections.

Front 51

How long does abankruptcy remain on a credit report?

Back 51

Chapter 7: ten years; Chapter 13: seven yearsfrom discharge. Chapter 11 is not reported.

Front 52

What is a 2/1temporary buy down?

Back 52

A loan that startswith a payment based on a rate 2% lower than the actual rate for the firstyear, 1% for the second year and at the actual rate year three and beyond. Itis a fixed rate product.

Front 53

What type of mortgageDOES NOT require the borrower to pay back the loan as long as he continues tolive in the home?

Back 53

HECM or ReverseMortgages.

Front 54

Reverse Mortgagesrequire income and credit approval. TRUE OR FALSE?

Back 54

False.

Front 55

Which type of ARMallows the borrower to choose from a variety of payment options each month?

Back 55

Payment Options Arms: allows a borrower tochoose from 4 options to make their payment each month...30 year payment, 15year payment, Interest only payment or a minimum payment resulting in negativeamortization.

Front 56

Is a VA Loanassumable?

Back 56

Yes, as long as the buyer qualifies and thefunding fee is .5% for the VA assumption.

Front 57

What is used todetermine the value of a home when doing a VA loan?

Back 57

Notice of Value(NOV).

Front 58

In a VA loan, what isthe upfront funding fee on the loan?

Back 58

2.15 for active duty(first time users) and 2.4 for reserve or guard.

Front 59

What is the fee for a2nd and 3rd time use of VA loans?

Back 59

3.3%

Front 60

Can a VA funding feebe waived?

Back 60

Yes, in case of aservice-connected disability or surviving spouse of a veteran who had aservice-connected disability.

Front 61

Is there a refund ofthe VA funding fee in the refinance or sale of a VA loan?

Back 61

Funding fees are returned if miscalculated orif the veteran would have been exempt.

Front 62

What does FHA standfor?

Back 62

Federal HousingAdministration.

Front 63

Which type of loanhas no monthly mortgage insurance?

Back 63

VA loans.

Front 64

Under FNMAguidelines, how long does a borrower have to move into a property once theyclose on an owner occupied loan?

Back 64

60 days.

Front 65

A Certificate ofEligibility (COE) is required for what type of loan?

Back 65

VA Loans.

Front 66

What best describesan FHA loan?

Back 66

A loan backed by thefederal gov’t.

Front 67

What does SRP standfor?

Back 67

Service ReleasePremium; this is the amount a lender would receive over and above the currentoutstanding balance as a premium on sale of the loan in the secondary market.

Front 68

30/15 and 180/360represent what type of loan?

Back 68

Balloon Mortgage; 30year amortization with a 15 year balloon.

Front 69

If a borrower takes a2/1 buydown with a start rate of 4.5, what is his note rate?

Back 69

6.5%

Front 70

If a borrower takes a2/1 buydown with a start rate of 4.5, what is his rate during the second year?

Back 70

5.5%

Front 71

What is the maximumLTV for FHA loans?

Back 71

96.5%

Front 72

What is the minimumdown payment of an FHA loan?

Back 72

3.5%

Front 73

What is the front andback-end DTI ratio for an FHA loan?

Back 73

31%/43%

Front 74

What is the maximumLTV for VA loans?

Back 74

100%

Front 75

What is loanentitlement?

Back 75

4 times the amount on the COE.