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109 Cards in this Set

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