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133 Cards in this Set
- Front
- Back
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What does RESPA stand for and what regulation is associated with it? |
Real Estate Settlement Procedures Act
Regulation X |
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Why was RESPA enacted?
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to allow consumers to obtain information on the costs of closing via mandatory disclosures and to protect consumers from excessive costs and fees by establishing a prohibited practice to protect consumers
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Who is responsible for enforcing RESPA and implementing Regulation X?
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The Department of Housing and Urban Development (HUD)
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What are the mandatory disclosures required by RESPA?
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GFE, Special Information Booklet (purchase transactions only), Mortgage Servicing Disclosure Statement, Affiliated Business Arrangement, HUD-1 (one day before the closing)
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What are lending practices prohibited by RESPA?
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giving or accepting referral fees, kickbacks, or "things of value" unless an appropriate amount of work was performed to earn the fee
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What does ECOA stand for and what regulation is associated with it?
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Equal Credit Opportunity Act
Regulation B |
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Why was ECOA enacted?
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to eliminate discriminatory treatment of loan applicants
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Who enforces ECOA and Regulation B?
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those employed by financial institutions are supervised by Federal Banking Agencies.
those that are not (brokers) are supervised by the Federal Trade Commission (FTC). |
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What does ECOA prohibit discrimination against?
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sex, age, marital status, race, color, religion, national origin, receipt of public assistance, exercised rights under the Consumer Credit Protection Act
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What are the disclosures required by ECOA?
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Notice of Action Taken (due within 30 days of application), right to receive appraisal report, notice of incomplete app (due within 30 days of application)
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What does TILA stand for and what regulation is associated with it?
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Truth in Lending Act
Regulation Z |
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What is the purpose of TILA?
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to prevent abuses in consumer credit cost disclosures and to disclose the costs and terms of credit, make sure that advertising for credit is truthful and not misleading, and to provide borrowers with a right to rescind certain loan transcations
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Who enforces TILA and Regulation Z?
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the Board of Governors of the Federal Reserve System, however FTC regulates mortgage brokers, banks, and credit unions
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The TIL Disclosure Statement must be re-disclosed to the borrower before closing if what?
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if the interest rate varies more than 1/8th of a percent or .125%
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What was the Final Rule issued by the Federal Reserve as part of regulation Z in 2011?
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mortgage professionals are no longer allowed to receive compensation via yield spread premium and must instead use the funds as borrower credits towards closing costs
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How long is the rescission period after the loan closes?
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3 days after signing, however if the Notice of Right to Rescind or the TIL were not disclosed, the rescission period is 3 years after signing
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How does TILA and Regulation Z affect advertising requirements?
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it prohibits the promotion of attractive lending terms without disclosing the catch; whenever a "trigger term" is used, such as low monthly payments or no cost, all other less attractive terms must be presented as well so as not to be misleading. most advertisements for closed-end loans must disclose APR
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What does HOEPA stand for and what regulation is associated with it?
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Home Ownership and Equity Protection Act
set forth under Regulation Z and TILA |
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Why was HOEPA enacted?
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to create protections for loans with high interest rates and high fees
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What loans does HOEPA apply to?
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loans with an interest rate that is 8 points above the treasury securities, or with fees that are more than 8% of the loan amount
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Under the Homeowners Protection Act (HPA), when is a borrower allowed to cancel PMI and when is it automatically cancelled?
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the borrower can cancel PMI at 80% LTV or when there is at least 20% of equity in the property, PMI is automatically cancelled at 78% LTV
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What does SAFE stand for and what does the act do?
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Secure and Fair Enforcement
SAFE Act requires mortgage professionals to register and become licensed through NMLS |
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What does HMDA stand for and what regulation is associated with it?
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Home Mortgage Disclosure Act
Regulation C |
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What is the purpose of HMDA?
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HMDA is a reporting law that helps the government identify discriminatory lending practices, among other things. it gathers information about the loan to compare with other loans in order to see if better deals are being given to certain groups of people based on ethnicity or sex.
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What does FCRA stand for and why was it enacted?
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Fair Credit Reporting Act
to ensure the accuracy, fairness, and privacy of consumers, personal information that is assembled and used by CRAs |
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What does GLB stand for and why was it enacted?
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Gramm-Leach Bliley Act
to ensure that financial institutions protect the personal information of consumers. financial institutions are required to disclose privacy notices if they plan to share their personal information with 3rd party companies |
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What is the Safeguards Rule?
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a law requiring all financial institutions to have a security program that meets the Safeguards Rule requirements in order to protect personal information
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What does FACTA stand for and why was it enacted?
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Fair and Accurate Credit Transactions Act
creates additional obligations required by CRAs and mortgage professionals to prevent identity theft and improve the accuracy of consumer reports |
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What is the FTC Red Flags Rule and how is it different from the Safeguards Rule?
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the Red Flags Rule was enacted to prevent release of personal financial information. the difference between this and the Safeguards Rule is that the Safeguards Rule focuses on securing personal information, while Red Flags Rule focuses on detecting a security breach
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How far should comparable properties be in the appraisal market approach?
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within one mile
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What is loan suitability?
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a term that refers to the matching of loan programs with the current financial circumstance of the borrower
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What is APR?
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Annual Percentage Rate
tells the borrower the total cost of financing a loan in percentage terms, as a relationship of the total finance charges to the total amount financed. it includes not just the interest rate on the note, but the total cost of the loan, including all other finance charges spread out over the life of the loan. |
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When must an applicant receive an adverse action notice if they do not qualify for a loan?
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within 30 days
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What is an aggregate escrow analysis used for?
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to make sure there are no escrow overages; to ensure that borrowers are not being forced to maintain any surplus over the allowed two month cushion
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What does Section 8 of RESPA state?
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it is prohibited for a mortgage professional to give or accept any sort of referral or kickback fee
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What agency is responsible for creating the regulations for TILA?
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The Federal Reserve
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What does LIBOR stand for and what is it's relation to mortgages?
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London Interbank Offered Rate
it is one of the main methods of determining ARM adjustments |
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What is a re-conveyance clause?
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it removes the lien on a property once the loan is paid off in full
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What is another term for a junior lien?
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subordinate lien, anything behind something else
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What sort of information is included in the market conditions addendum?
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an inventory of homes in the neighborhood, existence of foreclosures in the neighborhood, market conditions
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In order to meet fair lending requirements, what test must a credit scoring system be based on?
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validity test
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What is the amount of MIP for FHA loans based on?
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the LTV (mortgage insurance)
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What is redlining?
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refusing to originate loans in areas that are perceived to have a lack of creditworthiness
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Describe a "discount point"
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a discount point is 1% of the loan amount
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What does COFI stand for?
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Cost of Funds Index
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What does easement mean?
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a right to cross or otherwise use someone else's land for a specified purpose
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Describe subprime lending
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subprime lending is making riskier loans to people who may have difficulty paying them back. usually have higher interest rates and less favorable terms.
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What is a buy down loan?
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a fixed rate loan where you can reduce the interest rate and monthly payment amount for a specific period of time by paying a fee up front
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What is loan flipping?
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no benefit to refinancing or there are hidden fees or balloon payments involved
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What is SRP?
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Service Release Premium
SRP is the payment received by the bank or lending institution when selling a closed loan in the secondary market. such as Fannie Mae or Freddie Mac. |
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What is YSP?
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Yield Spread Premium
also known as "borrower credit" or "lender credit" the money paid to a mortgage broker for giving a borrower a higher interest rate on a loan that is applied towards the borrower's closing costs |
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What does HECM stand for, what is it, and what is the minimum age limit?
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Home Equity Conversion Mortgage
it's a reverse mortgage, meaning the borrower is no longer required to make a mortgage payment and the monthly interest is instead tacked onto the principal balance of the loan. minimum age for reverse mortgages is 62. |
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If a loan had prepayment penalties, which documents would disclose them?
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the TILA disclosure and the promissory note
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When is a residual income test used?
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when qualifying a borrower for a VA loan
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What clause changes lien priority?
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subordination clause
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What does title insurance protect?
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lender from loss by encumbrances or defective title
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What is the acceleration clause?
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clause in a mortgage that allows a lender to foreclose if a borrower defaults
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Re-conveyance deed is recorded to clear what?
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trust deed lien
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FRB administers what?
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ECOA, HMDA, TILA
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When a loan has a greater risk, a lender may charge what?
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Loan Level Price Adjustment (LLPA)
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What is Schedule E?
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supplemental income and loss, income from rental property, income from partnership or limited liability comp.
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Calls can be made when according to the FTC-No Call Registry?
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18 months after business transaction has been completed or 3 months after they have made an inquiry
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What is a bridge mortgage?
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occurs between the termination of one mortgage and the beginning of the next
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What is FNMA?
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Federal National Mortgage Association aka FANNIE MAE
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What is FHLMC?
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Federal Home Loan Mortgage Corporation aka FREDDIE MAC
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What is GNMA?
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Government National Mortgage Association aka Ginnie Mae
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How far should comparable properties be in the appraisal market approach?
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within 1 mile
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What is loan suitability?
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A term that refers to the matching of loan programs with the current financial circumstance of the borrower.
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When must an applicant receive an adverse action notice if they do not qualify for a loan?
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Within 30 days
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What is an aggregate escrow analysis used for?
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To make sure there are no escrow overages; to ensure that borrowers are not being forced to maintain any surplus over the allowed 2 month cushion
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What does section 8 of RESPA state?
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It is prohibited for a mortgage professional to give or accept any sort of referal or kickback fee
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What agency is responsible for creating the regulations for TILA?
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The Federal Reserve
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What does LIBOR stand for and what is it's relation to mortgages?
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London Interbank Offered Rate. It is one of the main methods of determining ARM adjustments.
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What is a reconveyance clause?
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It removes the lien on a property once the loan is paid off in full.
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What is another term for a Junior Lien?
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Subordinate lien
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What sort of information is included in the Market Conditions Addendum?
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An inventory of homes in the neighborhood, Existence of foreclosures in the neighborhood, market conditions.
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In order to meet fair lending requirements, what test must a credit scoring system be based on?
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Validity Test
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What is the amount of MIP for FHA loans based on?
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The LTV
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What is redlining?
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Refusing to originate loans in areas that are perceived to have a lack of creditworthiness
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How does TILA describe a creditor?
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One who regularly extends credit
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Describe a 'discount point'.
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A discount point is 1% of the loan amount
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What does COFI stand for?
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Cost Of Funds Index
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What does “Easement” mean?
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A right to cross or otherwise use someone else's land for a specified purpose
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Describe Subprime lending.
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Subprime Lending is making riskier loans to people who may have difficulty paying them back. Usually have higher interest rates and less favorable terms.
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What is a buy down loan?
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A fixed rate loan where you can reduce the interest rate and monthly payment amount for a specific period of time by paying a fee up front
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Describe “loan flipping.”
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Loan Flipping is a type of predatory lending in which the lender convinces you to refinance your home(sometimes several times) when there is either no benefit in it for you, or there is something hidden in the fine print such as a balloon payment.
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What is SRP(Service Release Premium)?
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SRP is the payment received by the bank or lending institution when selling a closed loan in the secondary market. Such as Fannie Mae or Freddie Mac.
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What is YSP(Yield Spread Premium)?
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Also known as “Borrower Credit” or “Lender Credit.” The money paid to a mortgage broker for giving a borrower a higher interest rate on a loan that is applied towards the borrower’s closing costs.
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What does HECM stand for, what is it, and what is the minimum age limit?
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Home Equity Conversion Mortgage. It’s a reverse mortgage, meaning the borrower is no longer required to make a mortgage payment, and the monthly interest is instead tacked onto the principle balance of the loan. Minimum age for a reverse mortgage is 62.
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On a particular loan a seller’s concession can be up to 6%. Is it 6% of the purchase price or the loan amount?
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6% of the purchase price
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What is the Red Flags Rule and what is its main purpose?
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The Red Flags Rule is a measure in FACTA to address identity theft. Its main purpose is to identify patterns and detect irregularities that may indicate identity theft
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If a loan had prepayment penalties, which documents would disclose them?
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The TILA disclosure and the promissory note
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36% back-end ratio, an applicant for an 80% conventional loan, gross monthly income of $4,600 and monthly fixed debts of $500 would be eligible for a loan with monthly payments to PITI of?
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($1156) 4600*.36=1656
1656-500=1156 |
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When is a residual income test used?
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When qualifying a borrower for a VA loan.
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What clause changes lien priority?
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Subordination Clause
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The permanent financing used to replace the construction loan is?
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Take-Out Loan.
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PFC
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Prepaid Finance Charge
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Sole-proprietorship is which "Schedule"?
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C
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What does title insurance protect?
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Lender from loss by encumbrances or defective title.
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Close-Ended loan is?
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Fixed amount of $ repayable or a fixed period.
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What Act is safegaurds rule?
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Gram-Leach Bliley (GLB)
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What does the Safeguard Rule protect?
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Protects consumer information from unauthorized access.
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Clause in a mortgage that allows a lender to foreclose if a borrower defaults?
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Acceleration clause.
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Promise to pay a monetary obligation is contained where?
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The NOTE
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Reconveyance deed is recorded to clear what?
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Trust deed lien
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Which Act facilitates responsible behavior in the subprime market?
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SAFE ACT
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FRB Administers what?
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ECOA, HMDA. TILA
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Loan Origination Fee for HECM is?
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$6,000
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What will provide the seller to buy back the loan under certain conditions?
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Buyback Agreement.
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Relieves the seller of obligation/buyer has all of the burden or trying to collect from the borrower.
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Non-Recourse
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When a loan has a greater risk a lender may charge what?
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Loan Level Price Adjustment (LLPA)
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LLPA
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Loan Level Price Adjustment- One time fee charged to compensate for the borrower.
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Prior to being taken over by the government, Fannie Mae and Freddie Mac were known as?
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GSE's-Government Sponsored Enterprises
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Margin/Index-Which fluctuates and which stays the same?
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Margin-Stays Index Fluctuates
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Act: Information sharing and privacy to consumers?
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GLB
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Who's purpse to assure creditors provide accurate and truthful information ro consumers relating to the cost and terms and credit being offered?
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TILA
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Whats covers the lenders risk?
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PMI and MIP
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Act: Gives the consumer access to his credit report: Both with a written request and free once a year.
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FCRA
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Not being able to secure financing for the entire purchase price of the property?
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Seller wrap of an exsisting loan.
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ARM Disclosures
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Interest rate ceiling
CHARM booklet 15 year historical example worst case scenario |
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Can you charge a fee for the preparation of the HUD-1?
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Nope
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Adverse Action
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Denial or revocation of credit
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Are you allowed per ECOA to ask single, widowed, or divorced?
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Naw, Dawg!
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PMI/MIP's benefit to the borrower?
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Loan obtained with a lower down payment.
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APR is usually higher than what?
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Nominal rate.
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What enables the borrower to compare percentage costs of different loans?
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APR
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It represents the relationship of the total finance charge to the total amount financed, as a yearly rate.
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APR
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Sole Proprietors
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Schedule C
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Supplemental income and loss.
-Income from rental prop. -Income from partnership or limited liability comp. |
Schedule E
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Loss Payee Clause (Mortgage Clause)
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Hazard Ins. allows payments to be made jointly to both the lender and homeowner if subject property is damaged.
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FTC No-Call Registry....Calls can be made when?
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18 Months after business trans has been completed or 3 months after they have made an inquiry.
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BKT:
13= 7= |
13-Plans to repay debt.
7-payoff without repayment. |
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Contract Kiting
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Seller agrees to create a second falsified sales agreement with an inflated purchase price in order to influence the appraiser to make a higher appraisal and the lender to grant a higher loan.
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