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109 Cards in this Set
- Front
- Back
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Properties that society has branded as undesireable because of events that occured there:
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Stigmatized properties.
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Most common violation of Reality of Consent?
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Fraud & Misrepresentation
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An additional condition that must be satisfied
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Contingency
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Hidden structural defect that would not be discovered by ordinary inspection:
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Latent defect
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When a party agrees to an offer (or counteroffer), the offer is accepted. Acceptance means:
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A contract is formed.
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Protect's the buyer's earnest money until a lender commits mortgage loan funds.
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Mortgage contingency
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A shorter document that states the essential terms of a buyer offer and once accepted is evidence of agreement
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Binder
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Deposit when making an offer
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Earnest money
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People must be able to act prudently, knowledgeably & without undue influence
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Reality of Consent
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Fundamentals to a legally binding contract
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Offer & acceptance - Consideration - Legally competant parties - legality of object - reality of consent
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Adjustable Rate Mortgage (ARM)
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Originates at one rate then fluctuates during loan term
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A change the seller makes to terms proposed by buyer
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Counter offer
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Who is responsible for a contract containing ambiguities?
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Courts generally find against the person (writer) who prepares an ambiguous document.
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Where does earnest money go?
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Put in escrow by agent of seller. Need an interest bearing account if held for more than 6 mos.
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Other names for Agreement of Sale
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Offer to purchase, a contract of purchase and sale, a purchase agreement
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Unilateral Contract by which an owner gives prospective purchaser the right to buy or lease property at fixed price within stated period
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Option
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Optionor
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generally owner
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Optionee
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prospective purchaser or lessee
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Seller (vendor) retains legal title and buyer (vendee) takes possession and acquires equitable title. Buyer agrees to give seller(vendor) downpayment and pay monthly installments.
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Installment Contract
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Exagerated or superlative comments about a property:
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Puffing
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Lender's expense of generating the loan
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Loan origination fee (usually 1%)
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FHA debt to income ratios
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29% (w/o other debt)
40% (all debt included) |
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Agreement contingent on the buyer's obtaining certain inspections of property
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Inspection Contingency
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Prepaid interest charged at closing
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Discount points
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At what point should legal representation be secured if wanted or needed?
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Before signing an Agreement! (afterwards is usually too late)
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Estimate or opinion of value based on supportable evidence
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Appraisal
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Law requiring condo buyers to receive rules & regs, bylaws and resale certicificates within 5 days
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Uniform Condominium Act & Uniform Planned Community Act
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One discount point equals
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1 percent of loan
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Typical loan application used:
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Fannie Mae/Freddie Mac Uniform Loan Application
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Detailed agreement between buyer & seller which establishes legal rights and obligations:
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Agreement of Sale
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Loan that includes real estate and all PERSONAL property and appliances installed on the premises
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Package Loan (not permitted in PA)
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Tells the prospective buyer how much he or she can borrow
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Prequalification
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Limit amount interest rate can change
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Rate Cap
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Law that made it cheaper for consumers to look at their own credit files and forces correction.
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Credit Reporting Reform Act of 1994`
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Two questions which determine a licensee's potential liability?
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Did agent intentionally try to harm consumer & was licensee negligent?
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CLO
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Computerized Loan Origination system. Handles loan apps through computers
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Automated underwriting system used by Freddie Mac
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Loan Prospector
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Loan that covers more than one parcel or lot
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Blanket Loan (usually includes "Partial release" clause)
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Automated underwriting system used by Fannie Mae.
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Desktop underwriter
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At what point can an offer or counter offer be withdrawn?
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Any time before it has been accepted.
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Lender's acceptance of loan app
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Loan Commitment
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Licensees are required to provide buyers & sellers written estimated statements of closing costs when?
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BEFORE parties sign Agreement of Sale
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Four acts regulating the lending practices of mortgage lenders
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1. Truth in lending Act
2. Equal credit opportunity act 3. Real estate settlement procedures Act 4. Community Reinvestment Act |
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Agency which helps families purchase or operate farms
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Farm Service Agency (FSA)
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This requires credit institutions to inform borrowers of the true cost of obtaining credit
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Regulation Z
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Borrowing on the equity built up in their home
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Home Equity Loan - typically junior to the 1st lien & can be fixed amount or line of credit
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Regulation Z does not apply to business, commercial or agricultural loans of more than
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$25,000.
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Preapproval
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Buyer already has loan approved
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Unintentional misstatement or ommission:
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Misrepresentation
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Any security instrument orginating at the time of sale:
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Purchase Money Mortgage
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True or False? Costs for title fees, legal fees, appraisal fees, credit reports, survey fees & closing expenses are considered part of Regulation Z disclosures
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False
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FHA points are paid by:
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Buyer and/or seller
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How often rate may be changed:
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Adjustment period
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Borrower with existing loan obtains additional financing from a second lender w/o paying off the first loan
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Wrap-Around Loan - Borrower makes payment to new lender on larger loan who then makes payments on original loan out of borrower's payment
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Credit terms (i.e. downpayment, monthly payments, $ amounts of finance charge or term of loan) are known as:
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trigger terms (and their advertising is strictly regulated)
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Buyers must read and acknowledge what before signing an agreement of sale?
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Seller's property disclosure statement.
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Days after closing, borrower has right to negate transaction simply by notification to lender
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3 Day Right of Rescision - Does NOT apply to 1st mortgages-owner-occupied residential. DOES apply to refi's
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Penalty for violation of administrative order enforcing Regulation Z
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$10,000 for each day violation continues
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Fine for engaging in unfair or deceptive practice
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Up to $10,000
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Additional penalty creditor may be liable to consumer
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2x's the finance charges ($100 min./$1,000 max)
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Willful violation of Regulation Z
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Misdemeanor punishable by fine of $5,000, 1 yr. imprisonment or both
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VA Assumption rules:
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Before 3/1/88 - fully assumable (1/2% fee)
AFter 3/88 - VA must approve buyer & original borrower remains liable unless "release of liability" approved |
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Intentional misrepresentation of a material fact
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Fraud
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ECOA
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Equal Credit Opportunity Act
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Temporary or permanent lowering of interest rate on a mortgage.
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Buydown (Paid to lender @ closing)
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Agreement of sale contingent on sale of buyer's current home.
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Property Sale Contingency (aka backout clause)
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Change of provision of original agreement
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Amendment
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Prohibits lenders and others from granting credit from discrimination on basis of race, color, religion, national origin, sex, marital status, age, dependance on public assistance
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Equal Credit Opportunity Act (ECOA)
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You "revoke" what or "rescind" what?
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You Revoke an offer - You rescind a contract.
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Rejected credit applicant must be informed within:
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30 days
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FHA 203k
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Loan program for investors
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Payments made by LENDER to borrower:
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Reverse Annuity Mortgage (RAM)
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Laws that require financial institutions meet the deposit and credit needs of their communities
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Community Reinvestment Act (CRA) of 1977
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Permits borrower to convert from adjustable to fixed rate loans
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Conversion option
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Federal Act that protects consumers from unreasonable expenses for settlement (for residential only)
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Real Estate Settlement Procedures Act (RESPA)
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Index rate plus premium is called
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Margin
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Ratio of debt to value of property
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Loan to Value rate(LTV)
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Most secure loans with lowest loan to Value ratios (LTV)
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Conventional Loans
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Provision added to an existing contract without altering the content of the original agreement
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Addenda (addendum - singular)
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Lender purchases insurance from mortgage insurance company as additional security against borrowers default
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PMI (Private Mortgage Insurance) needed for over 80% LTV
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What percentage of equity automatically terminates PMI insurance?
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22%
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MIP
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Mortgage Insurance Premium on FHA Loans
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FHA Loan
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A private lender makes loan - the FHA provides insurance
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An offer is not considered accepted until the person making the offer has been:
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notified of the other party's acceptance
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3 types of Loans
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Conventional, FHA & VA
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Four Disclosure requirements before buyer & seller negotiate to form a contract
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Consumer Notice, Disclosure of Agency Relationship, Seller's property disclosure, estimated statement of cost and return.
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FHA qualifying ratios (debt to income) are:
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higher than other types
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Financing arrangements for large commercial or industrial properties:
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Sale and Leaseback
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T or F? Borrower pays a premium for the FHA insurance
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True - Usually a percentage of the loan
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Type of residences available to FHA Loans:
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1-4 family residences & condo units
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Fixed interest rate but principal payments are increased according to index or schedule:
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Growing Equity Mortgage (GEM) or rapid payoff mortgage
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Prepayment penalties for FHA insured loans
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None - 30 days notice required
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Periodic payments are not large enough to fully amortize the loan, what is due at end?
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Balloon payment
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Other name for Regulation Z
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Truth in Lending Act
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Loan assisting veterans to finance the purchase of homes with little or no down payment
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VA Loan
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FHA 203b
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Only for owner-occupied
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What does the term VA loan refer to:
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Loan made by VA-approved lender and guaranteed by the Veteran's Administration Agency.
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Who bears the risk of any damage or destruction of property before the deed is delivered?
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The seller (needs insurance)
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APR
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Annual percentage rate
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Max VA loan terms
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30 years (40 for farms)
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VA borrowers pay as closing costs:
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Reasonable costs plus no more than ONE PERCENT loan origination fee and VA funding fee
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To determine eligibility and amount of loan, Vet must apply for:
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Certificate of eligibility
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Borrower of Construction Loans are usually expected to arrange for a more permanent loan known as:
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End Loan or Take Out Loan
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VA's appraisal of property's current market value is given a....
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Certificate of Reasonable Value (CRV)
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FHA Loan - Insured or guaranteed?
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FHA is insured. VA is guaranteed
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Finance the construction of improvements on real estate
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Construction Loan - (Usually high rates)
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Maximum amount for payment
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Payment Cap
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After buyer & seller have executed an agreement of sale, buyer's interest in the property is called:
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Equitable title
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Note executed by borrower that secures future advances of funds.
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Open-End Loan - Less costly. Borrower can increase debt of original loan
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