Mortgage Loan Originator Activities Flashcards

Front 1

What percentage of a company must an applicant own, in order to request tax returns for verification of income?

Back 1

25% or more

Front 2

What is a Mortgage Fraud Warning Notice?

Back 2

A notice to borrowers that mortgage fraud is investigated by the FBI and is punishable by up to 30 years in federal prison or $1,000,000, or both.

Front 3

What documentation is required for a borrower who has commission income?

Back 3

Copies of income tax returns for the past 2 years & information on current income, if commissions represent 25% or more of an applicant's annual income.

Front 4

When is the Good Faith Estimate required to be provided to the customer?

Back 4

Required by RESPA within 3 business days after the submission of a loan application.

Front 5

What is the purpose of Form 1003?

Back 5

It is the standard application for a mortgage loan. AKA the Uniform Residential Loan Application (URLA)

Front 6

When is the Affiliated Business Arrangement Disclosure required to be provided to the customer?

Back 6

It's required by RESPA at the time of referring a loan applicant to a settlement service provider.

Front 7

What is the difference between a VOE and a VOD?

Back 7

VOE (Verification of Employment) is a document signed by the borrower's employer verifying his/her position & salary.

VOD (Verification of Deposit) is a document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Front 8

When is the Notice of Right to Receive Appraisal Report required to be provided to the customer?

Back 8

It's required by ECOA and due at the time the creditor provides a Notice of Action Taken.

Front 9

What is the key information on the Mortgage Servicing Disclosure Statement?

Back 9

The likelihood (expressed as a %) that the servicing on the mortgage will be sold or transferred to another party.

Front 10

What document is required for a borrower who is self-employed?

Back 10

A self-employed applicant must show through Adjusted Gross Income (AGI) on tax returns, that he/she has maintained an income for 2 years, in order to qualify for a mortgage loan.

Front 11

What is a yield spread premium?

Back 11

A payment that a lender makes to a mortgage broker, when the broker originates a loan, with an interest rate that is higher than what the lender is prepared to offer the borrowers (above par).

Front 12

When is the Mortgage Servicing Disclosure Statement required to be provided to the customer and which regulation mandates it?

Back 12

It's required by RESPA and it's due 3 business days after the completion of a loan application on a purchase money mortgage.

Front 13

When is the Notice of Right to Cancel (Rescind) required to be provided to the customer?

Back 13

It's required by TILA and due at the time of closing.

Front 14

What are the disclosures to alert consumers about the status of a loan application?

Back 14

1. Notice of Action Taken
2. Notice of Adverse Action
3. Notice of Incomplete Application

Front 15

When is the Servicing Transfer Statement required to be provided to the customer, from the lender?

Back 15

It's required by RESPA and it's due 15 days prior to the effective date of transfer.

(There is also a requirement for the new loan servicer to notify the customer 15 days after the transfer.)

Front 16

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

Back 16

The front-end (housing) ratio calculation is the PITI (principal, interest, taxes, and insurance) on the home, taken as a % of gross income.

The back-end (debt ratio or debt-to-income ratio) ratio is the combination of PITI and recurring monthly debt, taken as a % of gross income.

Front 17

Are the front-ent and back-end ratios calculated using gross or net income?

Back 17

Gross Income

Front 18

When is the Notice of Right to Receive Credit Score and to Dispute Its Accuracy required to be provided to the customer and which regulation mandates it?

Back 18

It's required by FACTA and it's due during the loan transaction.

Front 19

A borrower making $18/hour, working a 40 hour work week, has monthly gross income of what amount?

Back 19

$3,120/month

($18/hr)(40 hrs) = $720/wk
($720/wk)(52 wks) = $37,440/yr
($37,440/yr) / 12 mos = $3,120/mo

Front 20

Can overtime income always be used to qualify for a loan?

Back 20

No. The applicant must show a history of receiving overtime for 2 consecutive years and the employer must verify that overtime is likely to continue.

Front 21

A borrower making a $1,350 biweekly salary before taxes, has a monthly gross income of what amount?

Back 21

$2,925/month

($1,350 bi-wkly)(26 periods) = $35,100
($35,100/yr)/(12 months) = $2,925/mo

Front 22

When can child support and separate maintenance be used as income?

Back 22

If it is court ordered and if the applicant can show a stable history of receiving the payments.

Front 23

What is the difference between a voluntary and an involuntary lien?

Back 23

A voluntary lien is one in which an owner has given consent to having the lien attached to his/her property, such as a mortgage.

An involuntary lien is one that is imposed on the property for the owner's unpaid debt, such as a tax lien.

Front 24

Then Back-end Ratio is known by what other names?

Back 24

Debt Ratio, Debt-to-income Ratio, Bottom Ratio, or Total Ratio

Front 25

What category on the URLA would be check-marked to represent a marital status of "separated"?

Back 25

Separated

Front 26

How is the LTV calculated?

Back 26

By dividing the amount of the mortgage by the appraised value or the purchase price of the home, whichever is less.

Front 27

What is the difference between the LTV (loan-to-value) and CLTV (combined loan-to-value)?

Back 27

The LTV only takes into consideration a first mortgage holder balance.

The CLTV takes into consideration all mortgages on a home.

Front 28

Under what circumstances would the debts of a non-purchasing spouse be included in the applicant's qualifying ratios?

Back 28

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

Front 29

How is the back-end ratio calculated?

Back 29

It compares the monthly housing and recurring debt obligations to gross monthly income.

(PITI + Recurring Debt) / Gross Income

Front 30

As a general rule, what percentage of rental income, stated on the rental or lease agreement, will the underwriter use?

Back 30

75%, unless otherwise documented by 1040s

Front 31

What does the acronym URAR represent?

Back 31

Uniform Residential Appraisal Report

Front 32

Why does an abstracter carry E & O insurance?

Back 32

Errors and Omissions Insurance is carried by an abstracter to protect against mistakes that may occur in the title search.

Front 33

How is the front-end ratio calculated?

Back 33

It compares the total housing costs (PITI) to gross monthly income.

(PITI) / (Gross Monthly Inc)

Front 34

On a professional home appraisal, what is the difference between a sales comparison approach and a cost approach?

Back 34

Sales (market) Comparison Approach: the appraiser analyzes recent sales that are the most comparable to the subject property.

Cost Approach: assumes that a potential purchaser would consider building a substitute residence that has the same utility and use, as the subject property being appraised.

Front 35

What category on the URLA would be check-marked to represent a marital status of "divorced", "widowed", or "never been married"?

Back 35

Unmarried

Front 36

If 4 individuals received a right of rescission for a specific loan, how many of them would be required to return the right of rescission in order to cancel (rescind) the loan?

Back 36

If any 1 of them returns the right of rescission to cancel the loan, it must be cancelled.

Front 37

An appraiser must make a comment on any comparable sale that is more than how many months old?

Back 37

6 months

Front 38

In a community property state, is a non-purchasing spouse's credit history considered in the loan approval?

Back 38

No. However, a credit report is pulled to determine additional obligations that must be considered against the spouse that is applying for credit.

(In a community property state, each spouse is responsible for the debts of the other, even if they did not sign on to the obligation.)

Front 39

The dollar amount of the net adjustments for each comparable sale should not exceed what percentage of the sales price of the comparable?

Back 39

15% (25% gross)

Front 40

The Front-end Ratio is known by what other names?

Back 40

Housing Ratio, Housing Expense Ratio, or Top Ratio

Front 41

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

Back 41

Income Approach

For an investment property, the appraiser must analyze what income the property would bring, as a rental.

Front 42

What is the difference between "title theory" states and "lien theory" states?

Back 42

In title theory states, a Deed of Trust is executed and the borrower gives legal title (actual ownership) to the lender while retaining equitable title (use of property). Theoretically, the lender owns the property until the debt is paid.

In lien theory states, the borrower retains both legal and equitable title. The mortgage serves as a lien against the property.

Front 43

Homeowners who are required to carry homeowner's flood insurance can obtain it through what federal program?

Back 43

Federal Emergency Management Agency's (FEMA) National Flood Insurance Program

Front 44

What are the front-end and back-end ratio %s used by FHA?

Back 44

31 / 43

Front 45

What is the Chain Title on a property?

Back 45

A record of all transfers of ownership of a subject property.

Front 46

When is the Notice of Action Taken, Notice of Adverse Action, or the Notice of Incomplete Application form required to be provided to the customer?

Back 46

Required by the ECOA and due 30 days after the receipt of a loan application.

Front 47

Can a mortgage loan come out of rescission on a Saturday?

Back 47

Yes

Front 48

What are the front-end and back-end ratio %s used by the VA?

Back 48

Lenders are only required to consider back-end ratio, which is 41%.

Front 49

What does rescission mean?

Back 49

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

Front 50

Who is required to be given a right to rescind by the lender?

Back 50

Any person signed on the note or who has an ownership interest in the property being used to secure the loan.

Front 51

In calculating the time limitations for the right to rescind, what days are not considered "business" days?

Back 51

Sundays and federal public holidays

Front 52

Fannie mae and Freddie Mac utilize what front-end and back-end ratios for housing?

Back 52

28 / 36

Front 53

For both closed-end and open-end credit, how long is the rescission period if the creditor fails to provide a rescission notice that meets the TILA requirements for notification, or fails to disclose all the terms of the lending transaction as required by TILA?

Back 53

3 years

Front 54

Generally, account information, including late payments and other adverse information, is kept on a credit report for no longer than how many years?

Back 54

7 years

Front 55

What is table funding?

Back 55

A type of wholesale lending arrangement where the mortgage brokers are permitted to originate, close, and fund a loan, using a warehouse line of credit.

This loan is then assigned to another entity, immediately.

Front 56

What agencies gather and sell information regarding an applicant's credit in the form of credit reports?

Back 56

Consumer Reporting Agencies (CRAs)

The 3 major credit reporting agencies are: Equifax, Experian, an Trans Union

Front 57

If a loan servicer transfers, sells, or assigns the loan, the servicer must notify the borrower (good bye letter) at least how many days before the effective date of the loan transfer?

Back 57

15 days

(The new loan servicer must also notify the borrower (hello letter) at least 15 days after the effective date of transfer).

Front 58

How is Ginnie mae (GNMA) different than Fannie mae and Freddie mac?

Back 58

Ginnie mae (GNMA) is a government agency, whereas Fannie and Freddie are not.

GNMA insures government mortgages (FHA, VA, USDA). Fannie and Freddie insure conventional mortgages.

Front 59

Generally, how long do unpaid tax liens remain on credit reports?

Back 59

Indefinitely. However, some jurisdictions have different requirements.

Front 60

How long does bankruptcy information remain on a credit report?

Back 60

Chapter 7 - 10 years

Chapter 13 (Reorganization) - 7 years

Front 61

What is 2/1 temporary buy down?

Back 61

The rate at which the payment is calculated for the loan is 2 points below the Note rate for the first year and 1 point below the Note rate the second year.

A 3/2/1 temporary buy down means the rate at which the payment is calculated drops 3 points from the Note rate the first year, 2 points the second year, and one point the third year.

*Important*
These changes only affect the calculation of the payment, and only during the specified temporary period. The Note rate never changes.

Front 62

What type of mortgage does not require the borrower to pay back the loan as long as he/she continue to live in the home?

Back 62

Reverse Mortgage

Front 63

Reverse mortgages require income and credit documentation for approval.

True or False?

Back 63

False. Neither income nor credit documentation is needed on a Reverse Mortgage since the home's equity is the basis for the loan.

Front 64

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

Back 64

Payment Option Arms allow the borrower to choose each month from one of three payment options:

1. The full principle and interest payment
2. The interest only payment
3. The minimum allowable payment, which often does not cover the full interest payment due, which can cause negative amortization on the loan.