Real Estate

Front 1

Financing

Back 1

Process through which one purchases property without paying the entire purchase price in cash. Financing usually involves a financial institution that loans the borrower the amount needed to buy the property, minus any down payment. Lenders take risks when lending money to finance real estate.

Front 2

Mortgage

Back 2

Loan secured by voluntary lien on Real Property, where a property owner enters into a contract to borrow money and voluntarily agrees to extinguish the rights and his real property if he fails to pay the debt according to the terms of the loan agreement.

Front 3

Deed of trust

Back 3

Voluntary lien on Real Property, similar to a mortgage. Under a deed of trust, a property owner enters into a contract to borrow money and voluntarily agrees to extinguish the rights in his real property if he fails to pay the debt according to the terms of the loan agreement.

Front 4

Land contract

Back 4

Method of seller financing in which the buyer receives Equitable Title upon closing, and the seller retains legal title until the buyer completes all installment payments. Unlock a mortgage, the buyer who purchases the property under a land contract receives fewer Protections in the event of a default then with a traditional mortgage.

Front 5

Financial institutions

Back 5

intermediary that obtains funds from deposit hers and lens those funds to borrowers in order to return. Common financial institutions include commercial Banks, Savings and Loans, insurance companies, and credit

Front 6

Federal Reserve System

Back 6

Central banking system run by the federal government, which regulates banks in the US, controls the availability of money and Credit in the US, and serves as a lender-of-last-resort to qualified Banks.

Front 7

Primary mortgage Market

Back 7

Network of direct lenders, also known as Prime lenders or Originators, who make mortgage loans directly to borrowers. Some primary lenders retain the mortgages they originate, but most sell loans other investors. By selling loans, they liquidate their investment and receive additional funds to make more loans.

Front 8

Secondary mortgage Market

Back 8

Network of Institutions that purchase and sell existing mortgages. Two different, but complementing, forces led to the creation of the secondary Market business entities with cash reserves and real estate, and financial institutions in the primary Market in need of cash to originate loans. Secondary Market participants receive a return on their investments in primary loans, and primary participants receive cash for additional loans.

Front 9

Loan application procedures

Back 9

To apply for most mortgage loans, the borrower must complete a standard Federal Form. The borrower must provide the following information on employment, salary history, monthly income, assets, and liabilities, authorization for the lender to verify all information, and an affidavit stating whether he intends to live in the property.

Front 10

Collateral

Back 10

Money or property pledged to A lender by a borrower as security for the payment of debt. Mortgage lenders minimize the risk of loaning money by requiring borrowers to pledge collateral. Should the buyer fail to pay the loan, the lender May recoup the loss by exercising its right to force the sale of the pledge to collateral.

Front 11

Qualifying borrowers and collateral

Back 11

Even with collateral, lenders take risks when they loan money, there are legal and Regulatory costs associated with the for sale, and inherent uncertainties in market prices. However, lenders further minimize risk by qualifying Borrowers.

Front 12

Pre-qualification

Back 12

Informal estimate of the amount that I borrower May afford to borrow.

Front 13

Pre-approval

Back 13

Linder's conditional commitment to lend to a specific borrower.

Front 14

Loan-to-value ratio

Back 14

Ratio between a mortgage loan amount in the sales price of Finance property or appraised value of real estate, whichever is lower. Lenders analyze LTV and establish maximum ratios in order to reduce the risk that a borrower will default on his loan. The higher the LTV, the less money down a purchaser pays because the lender is lending a greater amount of the purchase price.

Front 15

Interest

Back 15

The cost of borrowing money. A lender charges a fee to the borrower based on a certain percentage of the unpaid loan balance for the use of borrowed money. The total amount of borrowed money is called the principal. Simple interest is the most common method of calculating interest.

Front 16

Annual percentage rate APR

Back 16

The cost of credit expressed as a yearly percentage rate. The APR of a mortgage includes the interest rate, points, mortgage broker fees, and certain other credit charges.

Front 17

Rate lock

Back 17

A rate lock is a lender's promise to a bar or to hold a specified interest rate for a specified period of time, usually while the lender processes the borrower's loan application at. Also known as lock-in or rate commitment.

Front 18

Usury

Back 18

After charging an interest rate in access to what the law permits. State usury laws establish a maximum interest rate that lenders May charge.

Front 19

Discount points

Back 19

Additional fees charged by lenders to the borrowers in exchange for below Market interest rates. Discount points are paid in a lump sum at the time of closing, and one point is generally 1% of the loan amount. Generally, lenders must charge eight discount points in order to raise an interest rate yield by 1%.

Front 20

Reserve account

Back 20

Financial account used by lenders to hold, or reserve, a borrows money for future payment of items such as real estate taxes, Hazard insurance, and deferred maintenance. Reserve accounts are also known as customer trust funds. Commonly, borrowers must pay a lump sum to the lender at closing in order to establish a reserve account.

Front 21

Piti

Back 21

Abbreviation for principal, interest, taxes, and insurance, the components of a typical mortgage payment. Borrowers pay a monthly portion of the mortgage principal and interest, and also pay in monthly portion of taxes and insurance into a reserve account. Collectively, these components compressor total monthly loan payment.

Front 22

Equity

Back 22

Cash value of property after deducting all debts, including any mortgage indebtedness.

Front 23

Home equity loans

Back 23

Loan that may be either a first, second, or third mortgage with either a fixed or adjustable interest rate, which is secured by equity in real estate. The lender may make a single payment to the borrower or the borrower may draw payments from a line of credit.

Front 24

Reduction certificate

Back 24

Document, also known as an estoppel certificate, which certifies the status of a loan as of a certain date, including the amount of the loan that remains outstanding, the interest rate of the loan, and the date that the loan matures. Mortgagees must generally furnish a reduction certificate to prospective purchasers when they assume payments of a loan or take title subject to an existing loan.

Front 25

Leverage

Back 25

After using borrowed funds to finance an investment. The more borrowed funds use, the more highly leveraged and investor is. The investor hopes to realize a profit over the initial purchase price and the cost of borrowing funds.

Front 26

Hypothecation

Back 26

Common living Arrangement where a borrower retains the right to possess property while it serves as security for a loan. A mortgage is an example of hypothecation. As long as the borrower complies with the terms of the mortgage, she retains exclusive use and enjoyment of the property.

Front 27

Liquid asset

Back 27

An estimated measure of the ease with which one may convert an asset Into Cash. Liquid assets are those assets that can be converted into Cash quickly and easily. Gold as an example of a liquid asset. Real estate on the other hand is traditionally a long-term investment.

Front 28

Intermediation

Back 28

Process by which financial institutions invest deposited funds. That is, Bank customers deposit money into checking and savings accounts, and Banks invest such funds in money markets, mortgages, government securities, and other Investments.

Front 29

Disintermediation

Back 29

Situation where private individuals invest their own money rather than depositing it into a bank. Disintermediation usually occurs when money markets, government securities, and other Investments offer of significantly higher yields than bank accounts. Such direct Investments disrupt the normal flow of money in the financial Marketplace.

Front 30

Principal lending agreements

Back 30

Principal options for calculating interest in making payments.

Front 31

Fixed rate mortgage, basic interest options

Back 31

Interest rate stays the same for the term of the mortgage.

Front 32

Adjustable rate mortgage, basic interest options

Back 32

Mortgage where the interest rate floats up or down according to a specified index. The interest rate is adjusted at certain time intervals, usually having a cap rate or maximum rate of charge per adjustment interval.

Front 33

Basic payment options

Back 33

Amortization describes the degree to which mortgage payments are equally spread over the term of the mortgage, with the final payment resulting in a zero balance.

Front 34

Fully amortized loan

Back 34

Full amortization is a systematic method of repaying a loan by making regular, equal payments so that the loan itself, interest on the loan, is reduced to Zero by the lungs maturity. Although the amount of each payment Remains the Same over the life of the loan, the amount of interest and principal paid each month fluctuates.

Front 35

Partially amortized loan

Back 35

Partial amortization describes a loan with a series of amortized payments, followed by a balloon payment at maturity. The balloon payment is the entire remaining balance. A partially amortized mortgage provides reduce monthly payments at the cost of a balloon payment at the end of the lungs turn. Under a partially amortized mortgage, the final payments larger than any previous payment. The payment amount balloons on the last installment.

Front 36

Negative amortization

Back 36

Lending agreement where the individual loan payments are of unequal amounts and are insufficient to repay all interest charges. Therefore, the loan balance increases rather than decreasing over the life of the loan. Under a negatively amortized loan, payments only cover a portion of the interest and none of the principal. Shortages and interest and / or principal payments are added to the loan balance, causing the balance to increase over time.

Front 37

Special lending agreements

Back 37

Lending agreements involved with market conditions and creativity of lenders.

Front 38

Graduated payment mortgage

Back 38

A graduated payment mortgage is often a fixed rate loan where payments are initially negatively amortized and subsequently on the tized for the remainder of the loan. A graduated payment mortgage a Chiefs low monthly payments early in the life of the loan.

Front 39

Reverse annuity mortgage

Back 39

Mortgage with a lender makes tax-free payments to the homeowner based on accumulated Equity. The balance of a reverse annuity mortgage, which never exceeds the value of the home, becomes due upon a specified occurrence, like the death of the borrower or sale of the home. A reverse annuity mortgage is commonly used by the elderly to supplement or provide income.

Front 40

Interest-only mortgage

Back 40

An interest-only mortgage is a loan with a bar or only pays towards the interest during the life alone. Interest-only mortgages a cheap low monthly payments early in the life of the long.

Front 41

Renegotiable rate mortgage

Back 41

Special adjustable rate mortgage that is a long-term loan with short-term renewal periods were interest rates are renegotiated. Payments are generally armatized at each adjustment. For the life of the loan.

Front 42

Buy down mortgage

Back 42

Financing technique used in times of high interest rates. In a buy-down, the lender is prepaid a portion of the interest rate in order to reduce the buyers monthly payments during the initial use of the loan. And x a very high interest rates, Builder sometimes use a buy-down to offset those High interest rates and qualified buyers for loans. At the end of the buy down time period, the interest rate refers to the original amount.

Front 43

Construction loans

Back 43

Short Term Loan used by Builders, developers, and contractors to finance new construction. Lenders disburse periodic payments at various stages of construction, with interest payments Due based on the amount of money disbursed until construction is complete.

Front 44

Blanket mortgage

Back 44

Loan where in the borrower pledges more than one parcel of real estate as security for the debt. Blanket mortgages usually contain a partial release clause, which allows an individual parcel to be released when a certain amount of the loan has been repaid.

Front 45

Package mortgage

Back 45

Loan in which the borrower pledges personal and real property as collateral for the mortgage. Package mortgages are often used for new construction, including appliances.

Front 46

Shared appreciation mortgage

Back 46

Lending Arrangement where A lender loans Money at rates below current market interest rates in return for a profit share from a future sale of the finance real estate. The specific terms of the shared appreciation of room it must be clearly stated in the mortgage or deed of trust.

Front 47

Purchase money mortgage

Back 47

A purchase money mortgage is a loan by the seller to a buyer who, usually, cannot qualify for an Institutional mortgage at the full purchase amount.

Front 48

Subprime loan

Back 48

A type of non conforming loan that does not comply with Fannie Mae's guidelines. These loans have higher default rates because they are made to borrowers unable to qualify for a traditional loan due to insufficient income and / or poor credit. Subprime loans have special features which make them riskier, including interest-only payments for a set period, teaser rates oh, and pay option loans with adjustable rates, for which borrowers choose their monthly payment.

Front 49

Jumbo loan

Back 49

A loan that exceeds to the loan amount limits set by Freddie Mac and Fannie Mae. Some Jumbo's may also be surprised loans, however, some are not because they have favorable terms and require borrowers to have excellent credit and sufficient income to afford the payments.

Front 50

Junior mortgage

Back 50

Any mortgage that is subordinate and priority to another Mortgage. In the event of a bars default, a first mortgage lender has a superior claim on the collateral to satisfy the outstanding debt. Any Junior mortgage lender may only claim remaining funds after the first mortgage is satisfied. Junior mortgages usually carry a higher interest rate because they entail greater risk due to their position compared to other liens.

Front 51

Wrap-around mortgage

Back 51

Junior mortgage who's balance includes newly borrowed funds along with the balance owed on an older, previously existing mortgage. The older mortgage is not paid off, but the new mortgage wraps around the older one, producing a single payment to satisfy both lines. The new mortgage is Junior to the older one.

Front 52

Home equity loans

Back 52

Learn that may be either a first, second, or third mortgage with either a fixed or adjustable interest rate, which is secured by equity and real estate. The lender may make a single payment to the borrower or the borrower may draw all payments from a line of credit.

Front 53

Open-end mortgage

Back 53

Loan secured by real property in which the lender sets the maximum amount a borrower may borrow, and the borrower may borrow up to the maximum is needed at various times. Under an open-end mortgage, the borrower only pays interest on the actual amount borrowed.

Front 54

Assumable or non assumable mortgage

Back 54

Act of transferring a loan from one bar to another. For example, some lenders May agreed to transfer the sellers old loan to the buyer, which could benefit the buyer where the existing mortgage has an interest rate below the current market interest rates. When a buyer assumes a mortgage, she assumes personal liability for full payment of the debt.

Front 55

Seller financing

Back 55

A seller may Finance the sale of her own property by lending money directly to the buyer.

Front 56

Purchase money mortgage

Back 56

Mortgage between a seller and the buyer, which the buyer May combine with an Institutional mortgage.

Front 57

Land contract

Back 57

Method of seller financing in which the buyer receives Equitable Title upon closing and the seller retains legal title until the buyer completes all installment payments.

Front 58

The primary mortgage Market

Back 58

Network of the recommenders, also known as Prime lenders or Originators, who make mortgage loans directly to Borrowers. Some primary lenders retain the mortgages they originated, but most sell loans two other investors participating in the secondary mortgage Market.

Front 59

Loan origination

Back 59

Primary Market participants provide cash directly to Borrowers.

Front 60

Loan Servicing

Back 60

Many conventional lenders continue to service loans even after they sell them. Servicing a loan includes collecting monthly payments, dispersing funds to pay property taxes and insurance, supervising the loan, and handling delinquencies, early payoffs, and mortgage releases.

Front 61

Conventional loans

Back 61

Loan originated by primary Market lenders without government insurance or guarantees authorized by the Department of Veterans Affairs, but highly influenced by the policies of secondary Market investors.

Front 62

Down payments

Back 62

Amount of the purchase price that a borrower must pay in cash. Most conventional lenders require at least a 20% down payment in order to avoid private mortgage insurance.

Front 63

Private mortgage insurance

Back 63

Insurance used by lenders to hedge against the risk that a borrower will default on a mortgage. Conventional lenders reduce the risk of default by requiring borrowers to purchase private mortgage insurance under specified circumstances, such as loans with greater than the standard 80% loan-to-value ratio.

Front 64

Optional PMI cancellation

Back 64

Under federal law, borrowers with good payment history is made cancel PMI app on reducing their mortgage balance to 80% of the original purchase price or the initial appraised value.

Front 65

Automatic PMI cancellation

Back 65

Under federal law, lenders must automatically cancel PMI coverage once the borrower reduces his mortgage to 78% of the value, regardless of whether the borrower so requests.

Front 66

Government backed loans

Back 66

Loan originated by primary Market lenders, but backed by government insurance or guarantees.

Front 67

Commercial Banks

Back 67

Thanks would you make lunch for my early to assist Commerce, especially in the areas of business loans, Home Improvement, and short-term construction. Demand deposits are the primary source of funds for commercial Banks. Due to this Focus, commercial Banks must be more liquid than a savings and loan, for example, and their loan portfolios tend to be dominated by short-term / high-yield loans.

Front 68

Savings and Loan associations

Back 68

Financial institution that promotes home ownership and private savings. Savings and Loans often offer higher interest rates on deposits than commercial Banks. All Savings and Loan associations must be chartered by the federal government or by the state in which they are located.

Front 69

Mortgage Bankers

Back 69

Primary lenders that borrow funds from commercial sources to then fun conventional and government backed loans by selling mortgages at a discount to investors on the secondary Market. Mortgage Bankers close loans in their own name, I assume risks and may continue to service loans even after they are sold on the secondary Market.

Front 70

Insurance companies

Back 70

Primary Market lender concerned with risk and long-term stability. Accordingly, insurance companies tend to invest mostly in large real estate projects and commercial property such as multi-use office Parks, apartment complexes, and shopping malls.

Front 71

Secondary mortgage Market

Back 71

Network of Institutions that purchase and sell existing mortgages. Two different, but complimentary, forces led to the creation of the secondary Market business entities with cash reserves in real estate, and primary Market financial institutions in need of cash to originate loans.

Front 72

Fannie Mae

Back 72

The government-sponsored private Corporation, formerly known as the Federal National Mortgage Association, which was originally organized as a federal agency that purchased fha-insured loans. Fannie Mae does not loan money directly, but instead generates funds for its secondary mortgage market operations by buying and selling FHA, VA, and conventional mortgages, and by selling securities, mortgage-backed bonds, and discount notes in the money market.

Front 73

Ginnie Mae

Back 73

Federal government sponsor Corporation, known as the government National Mortgage Association, without Capital stock, which was organized to operate the federal subsidy housing loan programs. During times of financial difficulty, High discount rates, and high interest rates, Ginnie Mae and Fannie Mae work together to provide special Assistance programs for low yield, high-risk loans. This helps to stabilize National real estate financial markets.

Front 74

Freddie Mac

Back 74

Government-sponsored private Corporation, known as the federal Home Loan mortgage Corporation, which operates under the supervision of federal Housing Finance Agency. Freddie Mac was organized to borrow money from pension and trust funds, to purchase mortgages and pull them together, and to sell Bonds on the open market with mortgages at security. However, fhlmc does not guarantee payment of Freddie Mac mortgages.

Front 75

Home Federal program

Back 75

The home program, a federal program passed in 1990, was established to assist low-income home buyers. The home program gives funds to States, cities, and counties to support homebuyer assistance efforts.

Front 76

State programs

Back 76

Many state and local governments provide down payment and other assistance to low-income residents or first time home buyers. Most programs have purchased price limits, income limits, and require mandatory education classes.

Front 77

Government programs

Back 77

Government programs, which either ensure or guarantee mortgage loans, provide an alternative for those who may not qualify for conventional loan.

Front 78

FHA

Back 78

Federal housing Administration, located within the Department of Housing and Urban Development Office, which provides mortgage insurance on loans made by fha-approved lenders throughout the United States and its territories. FHA insures mortgages on single family homes, multi-family homes, manufactured homes, and hospitals. FHA Loans are assumable and there are no prepayment penalties. FHA mortgage insurance reduces a lender's risk of mortgage default.

Front 79

Nature of FHA Loans

Back 79

Primary Market lenders qualify borrowers and property according to FHA standards and enter into various mortgage agreements. The borrower pays FHA mortgage insurance. In the event of a default, the litter makes a claim against the FHA insurance policy for a portion of its loss.

Front 80

Principal advantage of FHA Loans

Back 80

FHA Loans permit borrowers to make lower down payments then typically permitted by conventional loans. Such low down payments are possible because their FHA insurance allows borrowers to finance approximately 97% of the value of their home purchase through their mortgage, and some cases.

Front 81

Premiums, FHA mortgage insurance

Back 81

Borrowers pay an upfront mortgage insurance premium at the time of purchase, as well as monthly premiums which are added to the regular mortgage payment. Foremost homes, and upfront mortgage insurance premium of 1.75% of the loan amount must be paid at closing. This amount maybe Finance. Thereafter, a monthly insurance premium is due along with the monthly mortgage payment.

Front 82

Terminating premiums, FHA mortgage insurance

Back 82

FHA mortgage insurance premiums terminate based on the LTV.

Front 83

Mortgages with an LTV greater than 90%, FHA mortgage insurance

Back 83

For mortgages with loan-to-value ratios greater than 90%, annual premiums will be collected until the end of the loan term.

Front 84

Mortgages with an LTV less than or equal to 90%, FHA mortgage insurance

Back 84

For mortgages with loan-to-value ratios less than or equal to 90%, annual premiums will be collected until the end of the loan term or 11 years, whichever happens first.

Front 85

Qualifying Borrowers, basic FHA standards

Back 85

FHA only interest loans when the home, Linda, and borrow her meet specified criteria. FHA criteria covers items such as building structure, the method of construction, qualified appraisers, determining the credit worthiness of the borrower, and minimum standards for Leonards. It also sets the maximum loan amount that it will guarantee for various regions of the country.

Front 86

Income, basic FHA standards

Back 86

There is no minimum income requirement to obtain an FHA mortgage loan, however, one must prove steady income for at least 2 years. Seasonal pay, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, social security income, alimony, and rent paid by family all qualify as income sources. Part-time pay, overtime, and bonus pay also count as income as long as they are steady.

Front 87

Debt to income ratio, basic FHA standards

Back 87

The FHA Limits Bar is debt to income ratio to 31% for housing costs and 43% for housing expenses and other long-term debt. Conventional loans commonly impose a debt to income ratio of 28% towards housing and 36% towards housing expenses and other debt. In some cases, borrowers may qualify to exceed the FHA debt to income ratio if they meet certain compensation factors. This may include 1 a demonstrated ability to pay more towards housing expenses, 2 a large down payment, 3 A demonstrated conservative attitude, four acceptable credit history, five compensation not reflected in the qualified income calculation, 6 a minimal increase in monthly housing expenses, 7 substantial cash reserves, 8 substantial net worth sufficient to pay the mortgage regardless of income, 9 potential for increased earnings, as indicated by job training or education levels, and / or 10 relocating of the primary wage-earner.

Front 88

Credit score, basic FHA standards

Back 88

FHA criteria are more forgiving than conventional lending criteria on the borrower's credit score.

Front 89

Qualifying collateral, basic FHA standards

Back 89

Lenders must use FHA qualified appraisers to estimate the value and condition of real estate Finance with FHA insurance. FHA appraisers must satisfy minimum professional criteria and follow FHA appraisal standards.

Front 90

Maximum loan amounts, basic FHA standards

Back 90

Will HUD does not regulate interest rates, it does set limits on the amount that it will ensure. Maximum loan amount very overtime and buy Place, depending on the cost of living and other factors. Loan amounts are established from the average cost of homes in each Marketplace, usually county-by-county throughout the nation.

Front 91

Closing cost, basic FHA standards

Back 91

The FHA Defiance allowable closing costs that maybe charge the borrower. These costs are determined as reasonable and customary by each local FHA office. All other costs in the transaction are considered non allowable, and are generally paid by the seller when purchasing a new home or by the lender when refinancing your current FHA mortgage.

Front 92

VA guaranteed home loan

Back 92

Loan guaranteed by the Department of Veterans Affairs for eligible veterans at purchase, build, or refinance homes. VA loans are part of a government mortgage assistance program established under the servicemen's Readjustment Act of 1944. Under normal circumstances, the VA does not Linda money. Instead, the VA guarantees loans made by VA approved lenders. However, unlike FHA programs, the VA can lend money through its Direct Loan program. This only happens in extreme cases were local mortgage money is not available to a qualified veteran.

Front 93

Nature of VA loans

Back 93

Primary Market lenders qualify eligible veterans in real estate according to VA standards. Primary lenders than enter into mortgage agreements with qualified veterans. The VA guarantees it will pay for some of the mortgage if the veteran defaults.

Front 94

Principal advantage of VA loans

Back 94

VA loans permit eligible veterans to mortgage property with little or no down payment, and without purchasing mortgage insurance.

Front 95

Basic entitlement, basic VA standards

Back 95

The amount of the loan that the VA guarantees it's called the basic entitlement and is subject to change. The basic entitlement is a maximum amount that is adjusted locally based on the loan amount.

Front 96

Maximum loan amount, basic VA standards

Back 96

The lender determines the maximum amount of money it will loan to the veteran and the interest rate. However the VA limits the amount of a loan it will guarantee, and will not guarantee any portion of a loan that exceeds the reasonable value of the property. While there is no maximum loan amount of stablish by the VA, lenders will generally lend up to four times the amount of the veterans entitlement without requiring a down payment.

Front 97

Qualifying Borrowers, basic VA standards

Back 97

The VA imposes standards to determine which persons qualify for VA guaranteed loans.

Front 98

Active duty, basic VA standards

Back 98

Borrowers must serve a minimum amount of time in the US Armed Forces without a dishonorable discharge.

Front 99

Certificate of Eligibility, basic VA standards

Back 99

The VA sets a limit on the amount of the loan that it will guarantee by issuing a Certificate of Eligibility to an eligible veteran. The Certificate of Eligibility and forms the lender that the borrower is qualified to participate in the VA program, but it does not guarantee that A lender will actually loan the veteran any money.

Front 100

Qualifying collateral, basic VA standards

Back 100

Because the loan amount may not exceed the va's estimate of the value of the property, the first step in securing a VA loan is an appraisal. A certificate of reasonable value States the market value of a subject property based on a VA approved appraisal and establishes the maximum amount that the VA will finance for the appraisal of the property.

Front 101

Closing costs, basic VA standards

Back 101

The VA regulates a veterans closing cost. Although some additional costs are unique to certain localities, authorize closing costs generally include VA appraisal, credit report, survey, title evidence, recording fees, a 1% loan origination fee, and discount points. The closing costs and origination charge cannot be included in the loan, accepting VA refinancing loans. Under a VA guaranteed loan, there are no mortgage insurance premiums. The VA does not require a down payment if the purchase price or cost is no more than the reasonable value of the property, as determined by VA, but lender may require one.

Front 102

Funding fee, basic VA standards

Back 102

The VA charges a first-time funding fee of 2.15 per cent for most veterans. If the veteran has previously obtained a VA loan, the funding fee increases to 3.30% for the loan and for subsequent use thereafter. This is payable at closing or maybe Finance for the purchase price.

Front 103

Assumption, lending restrictions, basic VA standards

Back 103

VA guarantee loans are assumable, even by non-veterans, and maybe prepaid without penalty. Like FHA Loans, interest rates are set by the lender, not the VA.

Front 104

Direct loan, basic VA standards

Back 104

The VA is only authorized to originate loans in extreme circumstances where there is no source of local funding.

Front 105

Rural development and Farm Service Agency

Back 105

Federal agencies, which administer rural development in conservation programs under the US Department of Agriculture. The office of rural development loans funds directly and also guarantees loans by conventional lenders under certain circumstances.

Front 106

Direct Loans, rural development and Farm Service Agency

Back 106

Rural housing Direct Loans are administered by the rural housing service, a sub agency in the office of rural development, in order to directly from loans to low and very low income households for home ownership.

Front 107

Qualified applicants, rural development and Farm Service Agency

Back 107

Applicants for Direct Loans from rhs must have very low or low incomes. Very low income is defined as below 50% of the area median income, low income is between 50% and 80% of Ami, moderate income is no more than $5,500 above the low income limit. The applicant's income must be low or very low income at approval and must not exceed moderate-income at closing.

Front 108

Loan terms, rural development and Farm Service Agency

Back 108

Rural housing Direct Loans have up to a 33 year term. The term is 30 years for manufactured homes. The promissory note interest rate is set by the rhs based on current market rates. However, that interest rate may be modified by payment assistance subsidy.

Front 109

Housing requirements, rural development and Farm Service Agency

Back 109

Houses purchased through rural housing Direct Loans must be modest in size, design, and cost. Modest housing is property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features.

Front 110

Guaranteed loans, rural development and Farm Service Agency

Back 110

Rural housing guaranteed loans are administered by the rural housing service to help low-income individuals or households purchase homes in rural areas. Applicants May obtain a hundred percent financing from approved lenders, and in return, rhs provides a 90% guarantee to lenders in order to reduce the risk of extending such loan.

Front 111

Qualified applicants, rural development and Farm Service Agency

Back 111

Applicants for loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but must be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.

Front 112

Lenders, rural development and Farm Service Agency

Back 112

Approved lenders under the single family housing guaranteed loan program include 1 any State housing agency, 2 lenders approved by Hud for submission of applications for FHA insurance, Ginnie Mae for insurance of gnma mortgage-backed Securities, the Department of Veterans Affairs as a qualified mortgage, Fannie Mae for participation of family mortgage loans, or Freddie Mac for participation in Family Mortgage Loans, 3 any FCS institution with direct lending Authority, and 4 any lender participating in other USDA Rural Development and / or Farm Service Agency guaranteed loan programs.

Front 113

Loan terms, rural development and Farm Service Agency

Back 113

Rural housing guaranteed loans have a 30-year term. The promissory note interest rate is set by the lender. There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment and come to p i t I and to total family debt.

Front 114

Housing requirements, rural development in Farm Service Agency

Back 114

Houses purchased through rural housing guaranteed loans must be modest in size, design, and cost. Houses constructed, purchase, or rehabilitated must meet the voluntary National model building code adopted by the state, as well as the rhs thermal and site standards.

Front 115

Mortgages / Deeds of trust

Back 115

State laws favor either mortgages or deeds of trust for financing real estate. States that favor mortgages are known as lien theory states, law states that favor Deeds of trust are known as title theory states. Virginia is a title theory state.

Front 116

Nature of mortgages and deeds of trust

Back 116

Mortgages and deeds of trust are both real estate financing instruments that create a voluntary lien on real property until or unless the borrower repays a loan.

Front 117

Mortgage, nature of mortgages and deeds of trust

Back 117

The typical mortgage is a contract between two parties the borrower and the lender consisting of a promissory note and a mortgage contract.

Front 118

Promissory note, nature of mortgages and deeds of trust

Back 118

A promissory note is a written promise signed by the borrower to repay the lender, which specifies the amount of the debt the interest rate and the time and method of repayment. A promissory note is signed by a maker, who promises to repay the bear.

Front 119

Mortgage contract, nature of mortgages and deeds of trust

Back 119

The mortgage contract is a security instrument, which establishes that real property is collateral for repayment of a debt. A promissory note without a mortgage contract is merely a personal obligation. Mortgage contract should be recorded because they create liens on real property.

Front 120

Deed of trust, nature of mortgages and deeds of trust

Back 120

The typical. Is a contract between three parties at the borrower, the lender, and a neutral third person. Just like mortgages, dot are accompanied by a promissory note.

Front 121

Mortgage, status of title, nature of mortgages and deeds of trust

Back 121

Under the typical mortgage, the borrower retains title to the mortgage property while the lender takes a lien on the mortgage property, which may be enforced in the event that the borrower defaults.

Front 122

Deed of trust, status of title, nature of mortgages and deeds of trust

Back 122

Under the typical Dot, a neutral third person holds title to the financed property until, or less, the borrower repays the loan in full. The neutral third party holds title to finance property until the loan is paid in full. If the loan is paid in full, the neutral third-party transfers the title to the borrower. If the loan is not paid in full, the neutral third party has the power to sell the property on behalf of the lender.

Front 123

Foreclosure, nature mortgages and deeds of trust

Back 123

Situation where a borrower defaults on a loan in the lender seeks to auction the collateral that secures the loan in order to satisfy the outstanding debt. The foreclosure process is governed by state law.

Front 124

Mortgage, foreclosure, nature of mortgages and deeds

Back 124

A defaulting borrower can be subject to either a Judicial or a strict foreclosure and states that follow the lien Theory. Judicial foreclosures are more common. Only a handful of states allow strict foreclosures.

Front 125

Judicial foreclosure, mortgage, foreclosure, nature of mortgages and deeds of trust

Back 125

Procedure and lien theory states that lenders must follow in order to force the sale of real estate Finance by a mortgage when the buyer defaults. Under a Judicial foreclosure, the lender must usually file a lawsuit which names the defendant's, identifies the debt and the mortgage securing the debt, and presents evidence that the loan is in default. The borrower has an opportunity to rebut the lenders evidence and present his own evidence that he is not in default as alleged by the lender.

Front 126

Lis pendens, judicial foreclosure, mortgage, foreclosure, nature mortgages and deeds of trust

Back 126

Latin phrase meaning action pending, which describes the concept of providing recorded public notice of a possible future lien. A lis pendens provides constructive notice that an action affecting particular real estate has been filed and that the real estate is, or is about to become, involved in a lawsuit. If the suit is successful, the priority of the lien dates back to the date the lis pendens was filed.

Front 127

Sheriff's deed, judicial foreclosure, mortgage, foreclosure, nature of mortgages and deeds of trust

Back 127

Deep, similar to a deed in foreclosure, which is presented by a court to a buyer after property is sold to satisfy a judgement. When anyone, other than the delinquent borrower, buys property at a public auction, they receive a sheriff's deed. A sheriff's deed functions to eliminate all unpaid Junior liens against the property so the purchaser may receive marketable title. However, if the original borrower buys the property at auction, Junior liens remain in place.

Front 128

Rights of redemption, mortgage, foreclosure, nature of mortgages and deeds of trust

Back 128

Rights commonly recognized and States following the lien theory of mortgage, which set a limited period of time following a Judicial sale for an owner to pay his outstanding debt and reclaim the title to his property. This period may run from one month to more than a year. During this period, the high bidder receives a certificate of sale that entitles him to a deed if the original owner fails to redeem the property within the statutory time period.

Front 129

Strict foreclosure, mortgage, foreclosure, nature of mortgages and deeds of trust

Back 129

Strict foreclosures are only recognizing a small number of states. A strict foreclosure requires that notice be properly serve to the borrower and that specify paperwork be filed with a court. The court then establishes a deadline for the borrower to repay the delinquent debt. At the bar or fails to meet this deadline, the court Awards full title for the property to the lender. And a strict foreclosure, the borrower loses his Equity of redemption in any statutory Redemption rights.

Front 130

Deed of trust, foreclosure, nature mortgages and deeds of trust

Back 130

Foreclosures and most title theory states are quicker and cheaper than judicial foreclosures. If a borrower defaults on a deed of trust in a title theory state, the lender presents conclusive evidence to the trustee that the borrower has defaulted on the terms of the note, and instructs the trustee to sell the property. The resulting cell is known as a trustee sale. A notice of default is recorded on the public record. Prescribed waiting period, the property is advertising a public newspaper and in public places for a prescribed period of time. After the prescribed waiting period, the property is then sold at public auction, which is generally held in the county where the property is located.

Front 131

No right of redemption, deed of trust, foreclosure, nature of mortgages and deeds of trust

Back 131

Unlikely theory states, there are generally no rights of redemption in a title theory state.

Front 132

Trustee's deed, deed of trust, foreclosure, nature of mortgages and deeds of trust

Back 132

Deed granted to a purchaser of property at a trustee's sale.

Front 133

Excess funds, both mortgages and dots, foreclosure, nature of mortgages and deeds

Back 133

Delinquent Borrowers receive any proceeds from a foreclosure or trustee sale that exceed the unpaid claims against their foreclosed property.

Front 134

Deficiency judgment, both mortgages and Dots, foreclosure, nature of mortgages and deeds of trust

Back 134

Personal judgement against a delinquent borrower and / or any other responsible party when a foreclosure or trustee sale fails to produce sufficient funds to satisfy all claims against the property.

Front 135

Deed in lieu of foreclosure, both mortgages and Dots, foreclosure, nature of mortgages and deeds of trust

Back 135

Deed which voluntarily transfers property from a delinquent borrower to the lender that has encumbered his property with a mortgage. Both of delinquent borrower and the lender must agree to transfer property by a deed-in-lieu of foreclosure. A borrower may agree to a deed-in-lieu of foreclosure in order to avoid the expense and publicity of a foreclosure proceeding, as well as the possibility of a deficiency judgment. In return for the deed, the borrower receives a cancellation of the entire debt.

Front 136

Satisfaction of mortgage, nature of mortgages and deeds of trust

Back 136

When a borrower pays a mortgage note in full, the lender Returns the canceled note to the borrower along with a satisfaction of mortgage document. The borrower should immediately record the satisfaction of mortgage document.

Front 137

Dot release deed, nature of mortgages and deeds of trust

Back 137

When a borrower pays a deed of trust in full, the lender sends the note, marked paid, to the trustee along with a request for non conveyance of the title. Upon receiving the note from the lender, a trustee then issues a release deed to the borrower, which Reconveys full title to the borrower. The borrower records the release on the public record in order to cancel the lean and clear the title.

Front 138

Covenant to pay indebtedness, covenants and Clauses in mortgages in dots

Back 138

Borrowers promise to repay the loan according to the terms of the note.

Front 139

Covenant to pay insurance, cabinets and closets in mortgages and dots

Back 139

Borrowers promise to maintain insurance coverage against damage or destruction of Finance property in an amount specified by the lender, with the lender named as the beneficiary.

Front 140

Covenant to pay taxes, covenants and Clauses in mortgages and dots

Back 140

Borrowers promise to pay real estate taxes and other assessments levied against property. This is particularly important to the lender because unpaid real estate taxes become a lien on the finance property which is superior to the lenders position. In other words, in the event of foreclosure, taxes are paid from the proceeds of the property sale before the principal.

Front 141

Covenant of good repair, covenants and closes and mortgages and dots

Back 141

Promise that obligates the borrower to maintain the mortgage property and keep it in good repair. The borrower also promises not to remove or demolish any buildings or other improvements without first obtaining the lenders consent.

Front 142

Acceleration Clause, covenants and Clauses in mortgages and dots

Back 142

Specifies that if the borrower violates the covenants of the mortgage or dot, the entire load balance becomes due and payable upon demand. In other words, the life of the loan is shortened or accelerated to its end.

Front 143

Alienation clause, covenants and clause in mortgages and dots

Back 143

Clause which provides that the lender May demands the balance of debt upon the transfer of ownership, title, or interest in the property by the borrower. In the fact, this Clause makes the loan not assumable by a new buyer without the lender's approval. Some states do not allow due on sale Clause is, unless the lender actually demonstrates that such a transfer would endanger it's security, because they believe that it is an unreasonable restraint on alienation.

Front 144

Defeasance clause, covenants and Clauses in mortgages and dots

Back 144

Clause which provides for the defeat of the mortgage or deed of trust when the borrower has repaid the entire debt. Under such circumstances, the loan is canceled and the borrower restored to his full rights of ownership. Despite a defeasance clause, the borrower must still record a satisfaction of mortgage or deed of release in order to clear the lien from the public record.

Front 145

Prepayment Clause, cabinets and closets in mortgages and dots

Back 145

Specifies whether the borrower must pay a penalty if he replaced the entire loan amount prior to the maturity date. FHA and VA mortgages prohibits such penalties.

Front 146

Subordination clause, covenants and clause in mortgages and dots

Back 146

Cause usually found in a junior mortgage, which provides that listing first mortgage is paid or renegotiated, the junior mortgage will remain subordinate, it will not become a first mortgage. Junior mortgage holders usually receive higher interest rates in exchange for their support that position since, as a result of their lower position, there could be insufficient funds to satisfy the debt in the event of a default. Do not confuse a subordination clause with a subordination agreement. A subordination agreement is an agreement whereby a superior mortgage, such as a first mortgage, agrees to take a subordinate or Junior position with respect to a new or future lien.

Front 147

Power of sale Clause, covenants and Clauses in mortgages and dots

Back 147

Authorization, usually found in a deed of trust, which authorizes a trustee to sell financed property if the buyer defaults on his loan. Title theory states often allow lenders to directly sell a defaulting buyers property at public auction without a court order.

Front 148

Exculpatory clause, covenants and Clauses in mortgages and dots

Back 148

Clause which states that the lender waives any right to a deficiency judgement.

Front 149

Substituting Borrowers, substituting parties in mortgages and dots

Back 149

Process by which the buyer finances real estate under an existing loan.

Front 150

Assumption, substituting parties in mortgages and dots

Back 150

Buyer takes property and assumes personal responsibility for the existing mortgage or Dot. For example, some lenders may agree to transfer the sellers old loan to the buyer, which could benefit the buyer where the existing mortgage has an interest rate below current market interest rates.

Front 151

Lender approval, assumption, substituting parties in mortgages and dots

Back 151

An assumption generally requires the lender's approval consistent the agreement, which may specifically prohibit assumption.

Front 152

Original buyer remains liable, assumption, substituting parties in mortgages and dots

Back 152

In the event of a default by the assuming buyer, the original borrower remains jointly and severally liable for the debt.

Front 153

Subject to, substituting parties in mortgages and dots

Back 153

A buyer purchases a home with an existing mortgage. Unlike assumption, taking property subject to an existing mortgage means that the new buyer is not personally liable for payment of the debt. In the event that the loan is not repaid and the property is put through foreclosure, the subject to buyer may lose the property, but will not personally be liable to satisfy any remaining debt.

Front 154

Substituting lenders, substituting parties in mortgages and dots

Back 154

Lenders May transfer or extinguish their interest in a lending agreement through assignment or Novation.

Front 155

Usury laws

Back 155

State laws that prohibit excessive interest rates.

Front 156

Tila and Regulation Z

Back 156

Federal law with the primary purpose to promote the meaningful disclosure of consumer credit and Lease terms in order to facilitate Choice. The truth in Lending Act was passed in 1968 as part of the consumer credit protection act, and is implemented under the Federal Reserve board regulation Z.

Front 157

Nature of Tila

Back 157

Tila / Regulation Z enable standard comparisons of different loans to better understand the total cost of borrowing money.

Front 158

T i l a application

Back 158

Tila / Regulation Z applies when a consumer applies for, or a lender advertises, Consumer loans, loan secured by real property, and personal property leases.

Front 159

Consumer Credit, Tila application

Back 159

Consumer credit under Tila maybe either closed end or open end credit. Regardless, consumer credit is credit that is extended primarily for personal, family, or household purposes. The term Consumer Credit excludes transactions such as business, Commercial, and agricultural loans, and Loans not secured by real or personal property which exceeded given threshold amount. Consumer Credit must also be extended by a creditor.

Front 160

Consumer lease, Tila and Regulation Z

Back 160

A consumer lease is a lease a personal property to a private individual. The least must be for personal, family, or household purposes and must be for a term of more than 4 months, thus, renting a car for a weekend is not a consumer lease. The term excludes leases is where the customer was paid total which exceeds a given threshold amount. However, the term does include leases though which the customer has an option to buy at the end of the lease term.

Front 161

Tila disclosures, Tila and Regulation Z

Back 161

R e s p a n t i l a state that lenders must provide a loan estimate of settlement service charges that the borrower will likely have to pay. Actual charges may vary. Lenders must provide borrowers with a closing disclosure at least 3 days before settlement, which contains an itemized list of the actual fees charged. After delivery, changing certain terms of the loan May trigger a new 3-day waiting period. The settlement agent must also provide the seller with a closing disclosure on or before the settlement date.

Front 162

Homeownership counseling, Tila and Regulation Z

Back 162

Lenders must ensure that Borrowers understand what they are agreeing to before taking on the loan. And therefore, Tila requires lenders to confirm that a first-time borrower has taken homeownership counseling before originating on loan with negative amortization.

Front 163

Mortgage /DOT Arms, Tila and Regulation Z

Back 163

Lenders who make covered variable rate mortgages /dots four terms longer than one year must provide a consumer handbook to the borrower about adjustable rate mortgages, a loan program disclosure for each variable rate program in which the consumer expresses and interest, and subsequent disclosure for each month that an interest rate adjustment takes place. A credit plan with an annual percentage rate that may fluctuate is a variable rate transaction.

Front 164

Right of rescission, Tila and Regulation Z

Back 164

Consumers taking a mortgage on a principal residence have a right to rescind that the transaction within 3 business days of closing, delivery of the notice, or delivery of all material disclosures.

Front 165

Mortgage /DOT advertising, Tila and Regulation Z

Back 165

Those who make specified statements and real estate loan advertisements must include specified disclosures.

Front 166

Trigger terms, Tila and Regulation Z

Back 166

Lenders who use the following terms must make Tila disclosures the amount of down payment, the amount of any payment, the number of payments, and the amount of any finance charge. However some statements about credit terms are two general to trigger additional disclosures.

Front 167

Disclosures, mortgage /DOT advertising, Tila and Regulation Z

Back 167

If an advertisement contains any of the above trigger terms it must also disclose the following the amount of the down payment, the terms of repayment, and the annual percentage rate.

Front 168

Enforcement, Tila and Regulation Z

Back 168

Advertisers of Consumer Credit in consumer leases under the FTC jurisdiction are subject to enforcement actions that could result in remedies such as injunctions and civil penalties of up to $41,484 for each day of violation. In addition, anyone actually harmed by a non compliant consumer lease advertisement May sue for actual damages, 25% of the total amount of monthly payments under the lease, court cost, and reasonable attorneys

Front 169

Equal Credit Opportunity Act

Back 169

Federal law, which prohibits lenders and others who Grant or arrange credit to Consumers from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or dependence on a public assistance. Lenders must inform credit applicants of the reasons for denial or termination of credit in writing within 30 days of habitation. The ecoa protects consumers when they deal with any creditor who regularly extends Credit Karma including Banks, small loan and finance companies, retail and department stores, credit card companies, and Credit Unions. Anyone involved in granting credit like a real estate broker. Business is applying for credit are also protected by the law.

Front 170

Applying for credit, Equal Credit Opportunity Act

Back 170

When a consumer applies for credit, a covered litter cannot ask bars to disclose certain information or engage in certain prohibited conduct. A lender must not discourage a borrower from applying for credit because of their sex, marital status, age, race, national origin, or because they receive Public Assistance income. A lender must not ask a borrower to reveal they are sex, race, national origin, or religion. However, they may ask a person to voluntarily disclose this information if applying for a real estate loan since this information helps federal agencies enforce anti-discrimination laws. Borrowers maybe asked about their residence for immigration status.

Front 171

Borrowers rights, Equal Credit Opportunity Act

Back 171

Borrowers have the certain rights regarding their credit. A borrower they have credit in their birth name, their first and their spouses last name, or their first name and a combined last name. A borrower make it credit without a co-signer if they meet that the Creditor standards. A borrower they also have a cosigner other than their husband or wife, if one is necessary. A borrower may keep their own accounts after they change their name, Merrell status, reach a certain age, or retire, unless the Creditor has evidence that the borrower is not willing or able to pay.

Front 172

Rejection, Equal Credit Opportunity Act

Back 172

A borrower has the right to know whether their application was accepted or rejected within 30 days of filing a complete application. Borrowers have the right to know why their application was rejected. The Creditor must provide notice that informs the borrower of either the specific reasons for their rejection or the Borrowers write to learn the reasons if they ask within 60 days. Acceptable reasons for a rejection include your income was low, or you haven't been employed long enough. Unacceptable reasons for rejection are you didn't meet our minimum standards, or you didn't receive enough points on our credit scoring system. And definite and vague reasons are illegal the Creditor must be specific. A borrower has the right to find out why they were offered less favorable terms than they applied for, unless they accept the terms. A borrower also has the right to find out why their account was closed or why the terms of the account were made less favorable, unless the account was inactive or delinquent.

Front 173

Evaluating borrower income, Equal Credit Opportunity Act

Back 173

Lenders are prohibited from engaging in certain acts when evaluating a borrower's income. Lenders cannot refuse to consider Public Assistance income in the same way as other income when evaluating a borrower's income. Lenders cannot discount income because of a Borrowers sex or marital status when evaluating income.

Front 174

Nature of respa, real estate settlement procedures Act

Back 174

Federal law administered and enforced by the Consumer Financial Protection Bureau, which regulates closing procedures to ensure that lenders fully informed buyers and sellers of all settlement costs and that lenders do not engage in unfair practices. Respa does not set prices for Settlement Services. Instead, respa limits who may conduct a real estate closing and imposes obligations on settlement agents that are intended to alleviate fire confusion over the real estate closing process and Associated costs.

Front 175

Covered loans, real estate settlement procedures Act

Back 175

Resp a covers loan secured with a mortgage place on a one to four-family residential property, including must purchase loans, assumptions, refinances, property Improvement loans, and equity lines of credit.

Front 176

Exclusions, real estate settlement procedures Act

Back 176

Respa does not apply to business purpose loans, temporary financing, loans to purchase vacant land, lone conversions, secondary Market transfers, transactions financed solely by the seller, and assumption thatdoes not require lender approval, a residential property consisting of more than poor family units, or cash sales. Respa requires that Borrowers receive disclosures at various times and identify certain prohibited Acts.

Front 177

Principal disclosures, real estate settlement procedures Act

Back 177

Covered real estate loans must include full and standardized disclosures.

Front 178

Disclosures due after application, real estate settlement procedures Act

Back 178

Within 3 business days of receiving a loan application, mortgage brokers and / or lenders must provide the following disclosures to the borrower special information booklet, homeownership counseling references, loan estimate, and mortgage servicing statement. If the lender rejects a loan within 3 business days of receiving the loan application, then the lender is not required to provide these documents to the borrower at all.

Front 179

Special information booklet, principal disclosures, real estate settlement procedures Act

Back 179

The special information booklet is also called the settlement cost booklet. It contains a guide on how to get the best possible mortgage, information about closing costs and procedures, and general advice about home ownership. The special information booklet must be provided to the borrower within 3 business days from the date they apply for a loan.

Front 180

Homeownership counseling, real estate settlement procedures Act

Back 180

Lenders must ensure that Borrowers understand what they are green tea before taking on the loan. Therefore, respa requires that lenders provide the borrower with a list of federally approved homeownership counseling organizations within 3 days of application. Reverse mortgages and timeshare loans are exempt from this disclosure requirement. Note that promotes transactions, it is still the borrowers choice on whether or not to actually take the counseling.

Front 181

Loan estimate, principal disclosures, real estate settlement procedures Act

Back 181

R e s p a n t i l a require the lender or mortgage broker to provide a loan estimate of settlement service charges that the borrower will likely have to pay. If the borrower does not receive the loan estimate upon application, the lender or mortgage broker must mail or deliver it within the next 3 business days. The amounts listed in the loan estimate are only estimates, actual cost may vary. In addition, changing market conditions can affect prices.

Front 182

Mortgage servicing statement, principal disclosures, real estate settlement procedures Act

Back 182

Respa requires the lender or mortgage broker to inform borrowers in writing, when they apply for a loan or within the next 3 business days, whether it expect someone else to service the loan. This information is now included at the end of the loan estimate form.

Front 183

Affiliated business disclosure, principal disclosures, real estate settlement procedures Act

Back 183

Sometimes, several businesses that offer Settlement Services are owned or controlled by a common corporate parent. These businesses are known as Affiliates. When A lender, real estate broker, or other participant in settlement refers bars to an affiliate for settlement service, respa requires the referring party to provide borrowers with an Affiliated business Arrangement disclosure. This form reminds of Borrowers that they are generally not required, with certain exceptions to use the affiliate and are free to shop other providers.

Front 184

Closing disclosure, principal disclosures, real estate settlement procedures Act

Back 184

R e s p a n t i l a require the lender or mortgage broker to provide a closing disclosure at least 3 days before settlement. This is closure itemizes the services provided and the actual fees charged. Plus, changing the basic terms of a loan after delivery May trigger a new 3-day waiting period. Note that lenders may agree for the settlement agent to deliver the closing disclosure to the borrower on their behalf. Lenders may also allow the settlement agreement to fill out some or all of the information required on the form. The settlement agent must also provide the seller with a closing disclosure on or before the settlement date. This requirement may be satisfied by providing a copy of the buyer's closing disclosure, or a separate disclosure which only includes the seller specific information.

Front 185

Escrow account statement, principal disclosures, real estate settlement procedures

Back 185

At settlement or within the next 45 days, the person servicing the loan must provide the borrower with an initial escrow account statement. This form will show all of the payments that are expected to be deposited into the escrow account and all of the disbursements which are expected to be made from the escrow account during the year ahead. Each year, lenders must review the escrow account and sending the borrower a disclosure, showing the prior years activity and any necessary payment adjustments that the borrower will need to make in the forthcoming year.

Front 186

Disclosure due before settlement, principle disclosures, real estate settlement procedures Act

Back 186

After the loan application, but at least 3 days prior to settlement, lenders must provide the borrower with a closing disclosure. After delivery, changing certain terms of the loan my trigger a new 3-day waiting period. Lenders must also provide the borrower with an Affiliated business disclosure at or before referral of any affiliate services.

Front 187

Disclosures due at settlement, principle disclosures, real estate settlement procedures Act

Back 187

My settlement date, a settlement agent must produce a closing disclosure for the seller. This may be a copy of the buyer's closing disclosure, or a separate form which only includes the information that is relevant to the seller.

Front 188

Disclosure exceptions, real estate settlement procedures Act

Back 188

The full list of disclosure requirements is not applicable to home equity lines of credit, reverse mortgages, mortgages for mobile homes or dwellings not attached to land, and Loans made by persons that is not a creditor. And such as relations, a good faith estimate must be provided in place of the loan estimate form, and a uniform settlement statement must be provided in place of the closing disclosure form.

Front 189

Good faith estimate, disclosure exceptions, real estate settlement procedures Act

Back 189

Respa requires the lender or mortgage broker to provide a good faith estimate of settlement service charges that the borrower will likely have to pay. If the borrower does not receive a good faith estimate upon application, the lender or mortgage broker must mail or deliver it within the next 3 business days. The amounts listed on the good faith estimate are only estimates. Actual cost may vary. Changing market conditions can affect prices. Some of the fees included in a good faith estimate include loan fees, fees to be paid in advance, reserves, title charges, government charges, and any other additional fees.

Front 190

Uniform settlement statement, disclosure exceptions, real estate settlement procedures Act

Back 190

One business day before the settlement, borrowers have the right to inspect the uniform settlement statement or HUD-1. This statement itemizes the services provided and the fees charged. This form is filled out by the settlement agent who will conduct the settlement. The completed HUD-1 settlement statement must generally be delivered or mailed to the bar or at or before the settlement. In cases where there is no settlement meeting, the escrow agent will mail the HUD-1 after settlement, and the bar has no right to inspect it before settlement. Settlement costs are itemized in section L of the HUD-1 settlement statement. Adjustments between the borrower and seller are shown in sections J&K of the HUD-1 settlement statement.

Front 191

Principal prohibited Acts, real estate settlement procedures Act

Back 191

In addition to mandatory disclosures, respa prohibit certain practices that increase the cost of Settlement Services.

Front 192

Kickback / unearned fees, principal prohibited Acts, real estate settlement procedures Act

Back 192

Section 8 of respa prohibits anyone from giving or accepting a fee, kick back, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, respa prohibits fee-splitting and receiving unearned fees for services not actually performed. Violations of Section 8 anti-kickback, referral fee, and unearned fee Provisions are subject to criminal and civil penalties. In a criminal case, a person who violates Section 8 may be fine up to $10,000 and a present up to one year. In a private lawsuit, a person who violates Section 8 may be liable for an amount equal to 3 times what the client paid for that service. However, respa does not prevent title companies, Mortgage Settlement closing agents, and others who actually perform a service in connection with a mortgage loan or the settlement, from being paid for the reasonable value of their work.

Front 193

Excessive Reserve funds, principal prohibited acts, real estate settlement procedures Act

Back 193

Section 10 of respa sets limits on the amount that A lender may require a borrower to put into an escrow account for the purposes of paying taxes, Hazard insurance, and other charges related to the property. Respa does not require lenders to impose an escrow account on Borrowers, however certain government loan programs or lenders may require escrow account as a condition for the loan. If the lender collect escrow payments, respa prohibits A lender from charging excessive escrow amounts. Lenders who collect escrow payments cannot collect more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account.

Front 194

Predatory lending laws

Back 194

In addition to State usury laws, there are federal and state law regulations regarding the practice of predatory lending. Predatory lending describes unfair, deceptive, or fraudulent lending practices including loan flipping, imposing excessive fees and packing other products into the loan, lending without regard for the Borrowers ability to repay, fraud by inflation of property values or borrower income through a doctor loan applications/ settlement documents, and conspiracy between appraisers and Brokers to inflate prices above Market rates. Nearly all predatory lending occurs in the subprime market, where loans are sold to people with poor credit or those that like a clear understanding of credit in mortgage terms.

Front 195

Federal law / h o e p a, predatory lending

Back 195

The home ownership and Equity protection act was enacted in 1994 as part of the truth in Lending Act. Ho EPA regulates loan secured by a principal dwelling for most closed-end home Equity mortgages, home equity lines of credit, purchase-money mortgages, and refinances. Under hoepa, additional consumer protections are imposed if it covered transaction is classified as high cost.

Front 196

Exemptions, federal laws / h o e p a, predatory lending laws

Back 196

Transactions exempt from the ACT include reverse mortgages, most construction loans, loans originated in finance by a Housing Finance Agency, and Loans originated under the Rural Housing Services Direct Loan program.

Front 197

Disclosures, federal law / hoepa, predatory lending laws

Back 197

Lenders must provide the borrower with written disclosures at least three business days before consummation or opening of the account. This must include a shortened Tila disclosure and a statement that the borrower is not obligated to complete the loan by signing an application or receiving disclosures, obtaining a loan will place a mortgage on the home, and the borrower could lose the home if he fails to make the required mortgage payments. For variable rate loans, the lender must inform the borrower of the maximum monthly payment based on the terms of the loan.

Front 198

Prohibited Acts, federal law / h o e p a, predatory lending laws

Back 198

Lenders are banned from imposing balloon loans, except in limited circumstances, negatively amortizing loans, non amortizing payment schedules, higher interest rates of Honda fault, prepayment penalties after 3 years or higher than 2% of the amount prepaid, do on demand features, except in limited circumstances, and less than favorable refunds of interest if a loan is accelerated after a default.

Front 199

State law, predatory lending laws

Back 199

Many states / localities have passed laws which mirror or expand the coverage of hoepa through the following actions including home purchase and equity lines of credit, limiting or prohibiting prepayment penalties, limiting or prohibiting balloon payments, and limiting or prohibiting the packing of credit life or other insurance premiums into the mortgage. Many states also require that borrowers participate in loan counseling.

Front 200

Appropriate cautions to clients seeking financing

Back 200

Licensees should not hold themselves out as experts in lending or attempt to influence lenders into making a loan. Agent should encourage their buyer clients to consult a reputable lender, to become informed about the terms and the risks associated with the loans they are considering, and to recognize the signs of predatory lending. Those signs include High interest rates and fees, large future costs, overvalue property, barriers to refinancing, no down payment loans, and unethical document management.