SAFE MLO TEST - STUDY GUIDE GLOSSARY
DEFINITIONS
Acceleration Clause
(SG Glossary Definition) - Answer -A portion of a lending agreement that forces the
borrower to repay the entire loan loan upon the first instance of borrower default.
(SG Glossary Definition)
Adjustable-rate mortgage (ARM) - Answer -A type of mortgage instrument in which the
interest rate periodically adjusts up or down according to a specific index and pre-
determined margin. ARM transactions require the creditor to provide borrowers with a
special ARM disclosure as well as a CHARM booklet
Adjustment Period - Answer -The amount of time during which a new interest rate will
be in effect for an adjustable-rate mortgage. New adjustments periods might occur after
several months, every year or every few years.
Administrative and Clerical Tasks - Answer -The receipt, collection and distribution of
information that is common in the processing or underwriting of a loan in the mortgage
business. The term is also used to describe communication that is designed to obtain
common information from a consumer. In general, an individual who only performs
administrative or clerical tasks and doesn't negotiate with or give advice to borrowers
doesn't need a loan originator license.
Adverse Action - Answer -An unfavorable credit decision rendered against a consumer
made on the basis of information contained on the credit application. If a lender takes
adverse action against an applicant, the lender must notify the applicant in writing. If the
adverse action is taken as a result of information contained on the credit report, the
notice must also provide the name, address and toll-free phone number of the credit
bureau that supplied the information.
Affiliated Business Arrangement Disclosure (AfBA) - Answer -A document that informs
mortgage applicants of any service providers that may be used in the loan transaction
that are affiliated with the lender. It must be provided to the borrower no later than the
time the referral to the affiliated business is made and is required when there is greater
than a 1% common ownership in the affiliated business settlement service business. If
the lender requires the use of an affiliated provider (such as for a flood certification),
then the disclosure must be given at application.
Alienation Clause - Answer -A portion of a lending agreement that prohibits the
borrower from transferring title to the mortgaged property without the consent of the
lender.
, Alt-A Loans - Answer -Loans in which the borrower represents too much risk to meet
underwriting standards for a conforming loan but is not risky enough to be considered
"subprime"
American Association of Residential Mortgage Regulators (AARMR) - Answer -A
national association of individuals who are charged with administrating and regulating
various aspects of residential mortgage lending. It played a major role in the formation
of the NMLS-R and in the drafting of the model licensing law.
Annual Percentage Rate (APR) - Answer -A measurement of the total cost of credit,
expressed as an annual rate. The APR includes specific costs of financing, both those
paid at the time of closing and those paid over the term of the loan. It includes all items
that are part of the finance charge, such as interest, discount points, mortgage
insurance premiums and administrative fees.
Application - Answer -A request for a residential mortgage loan and includes the
borrower-related information that lenders commonly use when considering the request.
Someone who takes an application from a consumer is generally considered to to be
acting as a loan originator even when gathering application information over the phone
or Internet.
ARM Disclosure - Answer -A disclosure required to be presented to the applicant within
three business days of application on any ARM loan. This disclosure provides the
applicant with the information about the specific ARM product for which they are
applying, such as a historical index value.
Assumable - Answer -A term used to describe a loan in which a new borrower can take
over the payments of an existing borrower.
Balloon Mortgage - Answer -A type of fixed-rate mortgage loan with monthly payments
based on a 30-year amortization schedule, setting a maturity date for a shorter period of
time - usually five, seven, 10 or 15 years. This allows the borrower to make lower
monthly payments for that shorter period of time, with a large payment of the full
remaining principal balance and interest due at the maturity date.
Bank Secrecy Act (BSA) - Answer -A federal law requiring that financial institutions take
steps to prevent and report cases of money laundering.
Bridge Loan - Answer -A short-term balloon loan that is paid back either through the
sale of the current property or through a subsequent mortgage loan. It is commonly
used when borrowers are buying a new home but still haven't sold their current
residence.
Business Day - Answer -Depending on the law in question, either any date on which
the creditor is open to the public for carrying on substantially all of the creditor's
business functions (when providing the Loan Estimate and any disclosures required
DEFINITIONS
Acceleration Clause
(SG Glossary Definition) - Answer -A portion of a lending agreement that forces the
borrower to repay the entire loan loan upon the first instance of borrower default.
(SG Glossary Definition)
Adjustable-rate mortgage (ARM) - Answer -A type of mortgage instrument in which the
interest rate periodically adjusts up or down according to a specific index and pre-
determined margin. ARM transactions require the creditor to provide borrowers with a
special ARM disclosure as well as a CHARM booklet
Adjustment Period - Answer -The amount of time during which a new interest rate will
be in effect for an adjustable-rate mortgage. New adjustments periods might occur after
several months, every year or every few years.
Administrative and Clerical Tasks - Answer -The receipt, collection and distribution of
information that is common in the processing or underwriting of a loan in the mortgage
business. The term is also used to describe communication that is designed to obtain
common information from a consumer. In general, an individual who only performs
administrative or clerical tasks and doesn't negotiate with or give advice to borrowers
doesn't need a loan originator license.
Adverse Action - Answer -An unfavorable credit decision rendered against a consumer
made on the basis of information contained on the credit application. If a lender takes
adverse action against an applicant, the lender must notify the applicant in writing. If the
adverse action is taken as a result of information contained on the credit report, the
notice must also provide the name, address and toll-free phone number of the credit
bureau that supplied the information.
Affiliated Business Arrangement Disclosure (AfBA) - Answer -A document that informs
mortgage applicants of any service providers that may be used in the loan transaction
that are affiliated with the lender. It must be provided to the borrower no later than the
time the referral to the affiliated business is made and is required when there is greater
than a 1% common ownership in the affiliated business settlement service business. If
the lender requires the use of an affiliated provider (such as for a flood certification),
then the disclosure must be given at application.
Alienation Clause - Answer -A portion of a lending agreement that prohibits the
borrower from transferring title to the mortgaged property without the consent of the
lender.
, Alt-A Loans - Answer -Loans in which the borrower represents too much risk to meet
underwriting standards for a conforming loan but is not risky enough to be considered
"subprime"
American Association of Residential Mortgage Regulators (AARMR) - Answer -A
national association of individuals who are charged with administrating and regulating
various aspects of residential mortgage lending. It played a major role in the formation
of the NMLS-R and in the drafting of the model licensing law.
Annual Percentage Rate (APR) - Answer -A measurement of the total cost of credit,
expressed as an annual rate. The APR includes specific costs of financing, both those
paid at the time of closing and those paid over the term of the loan. It includes all items
that are part of the finance charge, such as interest, discount points, mortgage
insurance premiums and administrative fees.
Application - Answer -A request for a residential mortgage loan and includes the
borrower-related information that lenders commonly use when considering the request.
Someone who takes an application from a consumer is generally considered to to be
acting as a loan originator even when gathering application information over the phone
or Internet.
ARM Disclosure - Answer -A disclosure required to be presented to the applicant within
three business days of application on any ARM loan. This disclosure provides the
applicant with the information about the specific ARM product for which they are
applying, such as a historical index value.
Assumable - Answer -A term used to describe a loan in which a new borrower can take
over the payments of an existing borrower.
Balloon Mortgage - Answer -A type of fixed-rate mortgage loan with monthly payments
based on a 30-year amortization schedule, setting a maturity date for a shorter period of
time - usually five, seven, 10 or 15 years. This allows the borrower to make lower
monthly payments for that shorter period of time, with a large payment of the full
remaining principal balance and interest due at the maturity date.
Bank Secrecy Act (BSA) - Answer -A federal law requiring that financial institutions take
steps to prevent and report cases of money laundering.
Bridge Loan - Answer -A short-term balloon loan that is paid back either through the
sale of the current property or through a subsequent mortgage loan. It is commonly
used when borrowers are buying a new home but still haven't sold their current
residence.
Business Day - Answer -Depending on the law in question, either any date on which
the creditor is open to the public for carrying on substantially all of the creditor's
business functions (when providing the Loan Estimate and any disclosures required
