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MLO - CHAPTER 9
Non-Traditional Mortgage Products
| Question | Answer |
|---|---|
| What year was FHA established? | 1934 |
| Why was FHA established? | to improve the construction and financing of housing |
| Major loan reforms spearheaded by FHA included: | 1. Insurance to assure lender 2. fully amortized loans 3. 30-year loan terms 4. low down payment loans 5. low interest rates 6. collection of T/I in Escrow Account 7. standards for qualifying borrower |
| What is the lowest downpayment with FHA? | 3.5% |
| What did FHA create to collect taxes and insurance? | Escrow Account |
| What is an FHA direct lender? | lender authorized to approve loans for FHA Insurance without prior submission to FHA (HUD) |
| FHA is NOT a _______. They ___________ the loan | lender insure |
| With FHA, the lenders bear less risk because | FHA will pay a claim to the lender in the event of a homeowner's default |
| What is the upfront mortgage insurance premium (in BPS) that FHA charges for all amortization terms? | 175bps -- purchase money mortgages and refis 1bp -- streamline refinances on or before May 31, 2009 |
| For all mortgages, regardless of their amortization terms, any mortgage involving an original principal obligation (excluding UFMIP) less than or equal to 90 percent LTV, the annual MIP will be | assessed until the end of the mortgage term or for the first 11 years |
| For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until | the end of the mortgage term or for the first 30 years of the term, |
| FHA sets limits on the max amount of funds available to a borrower relative to the _____ ______ in a given area | housing costs |
| What does "the floor" apply to (in the FHA loan limit) | those areas where 115 percent of the median home price is less than 65 percent of the national conforming loan limit. |
| Any area where the loan limit exceeds the "floor" is a _________ | high cost area |
| The max FHA national loan limit "ceiling" is at _____ percent of the _________________ | 150 percent national conforming loan limit |
| 203b loan program stands for | Basic Home Mortgage Loan 10-30 year term "b is for basic" |
| 203k loan program stands for | rehabilitation mortgage "k stands for kitchen" |
| 203h loan program stands for | Disaster Victims "h stands for hurricane" |
| Condo documentation requirements: | - HUD Review and Approval Process (HRAP) - Direct Endorsement lender review and approval process (DELRAP) |
| defined as principal residences, secondary residences, or units that have been sold to purchasers who intend to occupy them as a primary or secondary residence. | Owner Occupied Units |
| The MDCS and LTV Ratios for FHA insured single family mortgages: | 1. min credit score 580 or above are eligible for max financing 2. min credit score from 500 to 579 are limited to 90 percent LTV 3. min credit score less than 500 not eligible |
| Manually underwritten loans include: | - loans involving borrowers without a credit score not scored against FHA total scorecard - receive a Refer - loans receiving an Accept but downgraded to a Refer |
| When a loan receiving an Accept is downgraded to a Refer, the loan must be | underwritten in accordance with all provisions of Mortgagee Letter |
| the max mortgage amount that FHA will insure is calculated by multiplying the appropriate LTV factor by the lesser of the property's: | -salesprice - appraised value |
| a payment by the seller and/or interested third party or combination of parties toward the borrower's costs to close | third-party contribution |
| The seller and/or third party may contribute up to __________________ or the _____________ towards the buyers closing costs, prepaids, discount points, or other concessions | 6% of the lesser of the property's sales price or appraised value |
| the 6% third party contribution limit includes: | -third party payment for perm and temp interest rate buydowns - payments of mortgage interest for fixed rate mortgages - mortgage payment protection insurance - payment of UFMIP |
| With FHA, when there are two or more borrowers, but one will not occupy the property as their principal residence, the max mortgage limit is _____ LTV (but max amount is available for borrowers related by blood/marriage/law) | 75% |
| The following borrower types are eligible: | - US citizens residing within the US - permanent resident aliens - non permanent resident aliens |
| In an FHA loan, the debts of the non-purchasing spouse must be _________________________ if the borrower resides in a community property state | included in the borrower's qualifying ratios |
| A borrower may be eligible to obtain another FHA mortgage IF the borrower is: | - relocating - increasing in family size (75% LTV or less) - vacating a jointly owned property - non-occupying co-borrower |
| a least one borrower must occupy the property within ____ days of signing the security instrument and intend to continue occupancy for at least one year | 60 |
| refers to the purchase and subsequent resale of a property in a short period of time | property flipping |
| The eligibility of a Property for a Mortgage insured by FHA is determined by | the time that has elapsed between the date the seller has acquired title to the Property and the date of execution of the sales contract that will result in the FHA-insured Mortgage |
| seller's date of acquisition of a property is defined as | the date the seller acquired legal ownership of that property |
| a property that is being resold __________ following the seller's date of acquisition is not eligible for an FHA mortgage | 90 days or fewer |
| a Mortgagee must obtain a second appraisal by another Appraiser if: | - resale date of property is between 91 and 180 days following acquisition - resale price is 100 percent or more over the price paid by the seller |
| UW and eligibility requirements for cash-out refinances include: | - subordinate liens and combined Loan-to-Value (CLTV) - Length of ownership - delinquent borrowers ineligible - non-occupant co-borrowers/co-signers - fees charged by non-approved broker -existing mortgage not required |
| If new subordinate financing is being offered by the mortgagee or other permitted entity, the CLTV is limited to 85 percent (the FHA-insured first mortgage and any new junior liens when added together). | New Subordinate Financing |
| Existing subordinate financing may remain in place but subordinate to the FHA-insured first mortgage, regardless of the total indebtedness or combined loan-to-value ratio, provided the borrower qualifies for making scheduled payments on all liens | Re-Subordinate Financing |
| FHA understands that many subordinate lien holders have been requesting modifications to the terms of the lien (typically a reduction in the amount of the lien) in exchange for remaining in a subordinate position | Modified Subordinate Lien |
| acronym for Credit Alert Interactive Voice Response System | CAIVRS |
| CAIVRS is used to determine | if a potential borrower has a Federal debt that is currently in default or foreclosure or has had a claim paid by the reporting agency within the last three years. |
| The Mortgage must be downgraded to a Refer and manually underwritten if any mortgage trade line, including mortgage line-of-credit payments, during the most recent 12 months reflects: | - three or more late payments greater than 30 days - one or more late payment of 60 days plus one or more 30 day late payments; or one payment greater than 90 days |
| Chapter 7 bankruptcy should be discharged for at least _______ | 2 years |
| Chapter 7 bankruptcies less than 2 years but greater than 12 months are allowed provided | the borrower can prove the bankruptcy was caused by extenuating circumstances beyond the borrowers control and not likely to reoccur |
| Chapter 13 bankruptcy is permitted if | one year of the payout has occurred and all payments made on time |
| ______________________________ is permitted as long as the borrower has been making payments timely for a min of 12 months | Consumer Credit Counseling |
| Foreclosures must be greater than ___ years to be eligible for FHA financing | 3 years |
| refer to the sales of real estate that generate proceeds that are less than the amount owed on the Property, and the lien holders agree to release their liens and forgive the deficiency balance on the real estate | pre-foreclosure sales or "short sales" |
| FHA requires a capacity analysis of _________ accounts with aggregate balance equal to or greater than ________ | collection $2,000 |
| FHA requires ______ to be paid off before the mortgage loan but borrowers are not allowed to prepay scheduled payments in order to meet the required minimum of _____________ | judgements 3 months of payments |
| refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance | Deferred Obligations |
| If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or ____ percent of the outstanding balance to establish the monthly payment | 5% |
| for a student loan, if the actual monthly payment is zero or not available, lender must utilize ___ percent of the outstanding balance | 1% |
| Gift funds may be provided by: | - family member - employer - close friend with clearly defined interest - charitable organization - governmental agency or public entity through a program |
| _____ reserves are NOT required on owner-occupied, 1-2 unit properties. Only at the UW's discretion | Cash |
| 3-4 unit properties require ________ in reserve | 3 months PITI |
| FHA escrows are _______ regardless of ______ | required LTV |
| allows seniors to convert the equity in their home to cash | Home Equity Conversion Mortgages (HECM) |
| The amount that may be borrowed in a Home Equity Conversion Mortgage is based on | - appraised value - age of borrower (must be 62 years old) |
| Home Equity Conversion borrower requirements: | - 62 or older - own the property outright or paid considerable amount - principal residence - no delinquency on federal debt - have financial resources to make payment of ongoing property charges - participate in consumer info session |
| Home Equity Conversion property requirements: | - single family or 2-4 unit home with one unit occupied - manufactured home that meets FHA requirements |
| Five Payment Plans: | - tenure - term - line of credit - modified tenure -modified term |
| equal monthly payments as long as at least one borrower lives and continues to occupy as principal residence Payment plan | tenure |
| equal monthly payment for fixed period of months payment plan | term |
| unscheduled payments or in installments, at times in an amount of your choosing payment plan | line of credit |
| combination of line of credit and scheduled monthly payments for as long as you remain in the home payment plan | modified tenure |
| combination of line of credit plus monthly payments for a fixed period of months payment plan | modified term |
| Home Equity Conversion mortgage amount is based on: | - age of youngest borrower - current interest rate - lesser or appraised value or HECM FHA limit or sales price -initial mortgage insurance premium |
| ____________________ is available for adjustable and fixed interest rate HECMs. This payment option will be limited to a single disbursement at loan closing | The Single Disbursement Lump Sum payment option is |
| Single Disbursement Lump Sum payment option cannot exceed: | - 60% of the Principal Limit - on mandatory obligations plus 10% of the principal limit |
| mandatory obligations for traditional and refinance transactions include: | - initial MIP - loan origination fee - HECM counseling |
| The initial MIP rate is | two percent of the Maximum Claim Amount (MCA) |
| the annual MIP rate is changed to | one-half percent of the outstanding mortgage balance |
| Which Act provides for a real estate loan that is partially guaranteed by the Department of Veterans Affairs (VA)? | GI Bill of Rights |
| who signed the GI Bills of rights into law and when? | President Roosevelt on June 22,1944 |
| VA lenders are classified by the following: | - supervised lender - non-supervised lender - non-supervised automatic lender - agent |
| subject to periodic examination and supervision by a federal agency, can close VA loans without prior approval | supervised lender |
| cannot close loans without prior approval UW by VA | non-supervised lender |
| has applied to VA for authority to close loans on an automatic basis | non-supervised automatic lender |
| person that performs any portion of the work involved in originating and closing a VA guaranteed loan on behalf of a sponsoring lender | agent |
| should a veteran default on their payments, the VA will compensate the lender for any loses incurred by a foreclosure up to the | guaranty limit |
| the portion of the veteran's loan the VA will guarantee is called | entitlement |
| What Act amended the max amount that VA may guarantee on a home loan | Blue Water Act |
| for veterans with full entitlement, the max amount of guaranty for a loan above $144,000 is | 25 percent of the loan amount |
| for partial entitlement, the veteran is guaranteed: | 25 percent of the loan limit reduced by the amount of entitlement previously used (not restored) by the Veteran |
| the veteran must complete a total of ____ years in the Selected Reserves or National guard with an honorable discharge | 6 years |
| ____ allows lenders to input data about their potential veteran-borrower and obtain an eligibility determination on most cases in a matter of seconds. | ACE (Automated Certificate of Eligibility) |
| To qualify for restoration of entitlement, one of the following requirements must be met: | - property has been sold and loan paid in full - veteran has agreed to assume the outstanding balance on VA loan and substitute the amount |
| A veteran who obtained a VA loan may refinance it with a VA guaranteed loan at a lesser interest rate without using additional entitlement. This is called: | IRRRL (Interest Rate Reduction Refinancing Loans) |
| one of the major underwriting guidelines required to qualify for a VA mortgage, calculated by determining the gross monthly income of the veteran and spouse | VA residual income |
| Any seller concession or combination of concessions that exceed ____ percent of the established reasonable value of the property is considered excessive and unacceptable for VA-guaranteed loans. | 4% army, navy, airforce, marines -- 4 |
| reduces the loan’s cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance | funding fee |
| The period between rate changes in an ARM | adjustment period |
| in an ARM your interest rate and monthly payment change every: | -month -3 months -6 months - 1 year -3 years -5 years -7 years |
| what does the lender use as an instrument for measuring changes in interest rates? | indez |
| Most common ARM indexes: | - 1 year constant maturity treasury rate (CMT) - 11th district cost of funds index (COFI) - London Interbank Offer Rate (LIBOR) |
| average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board | 1 year constant maturity treasury rate (CMT) |
| It is a monthly weighted average of the interest rates paid on checking and savings accounts offered by financial institutions operating in Arizona, California, and Nevada. | 11th district cost of funds (COFI) |
| the percent added to the index in order to calculate the payment interest rate | margin |
| what is another word for margin? | profit |
| _____________is equal to the margin plus the index and is usually rounded up to the nearest one-eighth of a percent. | fully indexed rate |
| rate at which an ARM program begins | Initial rate |
| if the initial rate is less than the fully indexed rate it is called | a discounted initial rate (Teaser Rate) |
| places a limit on the amount the interest rate can increase or decrease at each adjustment date | interest rate cap |
| maximum interest rate adjustment allowed during a particular period of an adjustable-rate loan or mortgage | periodic interest rate cap |
| limits the amount the interest rate may increase or decrease over the life of the loan. | lifetime interest rate cap |
| offer the consumer an interest rate that is fixed for an initial period of time then readjusts over the remainder of the life of the loan. These loans are a mix of a fixed-rate period and an adjustable-rate period. | hybrid ARMs |
| VA uses two methods to qualify borrowers: debt-to-income and _______. | residual income |
| The Veterans Administration allows sellers to provide concessions up to _____ percent of the sales price | 4 |
| FHA allows sellers to provide concessions up to _________ percent of the sales price | 6 |
| The _______ is what the lender uses as an instrument for measuring changes in interest rates | index |
| FHA requires at least one borrower to occupy the property within 60 days of signing the _______ and intend to continue occupancy for at least one year | security instrument |
| If the initial rate on an ARM is less than the fully indexed rate, it is called a __________. | teaser rate |
| In addition to the “itemized fees and charges,” the lender may charge the veteran a flat charge not to exceed ____. | 1% |
| In order for FHA to insure the maximum loan amount, the borrower must make a required investment of at least ____ of the lesser of the appraised value of the property or the sales price. | 3.5% |
Created by:
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