Champions real estate finance Exam Questions with Verified Answers

mortgage Broker - Answer- Functions as a middleman between the borrower and the lender, negotiating, selling or arranging loans to be delivered to large investors Mortgage Banker - Answer- Provide their own funds for the purpose of providing mortgage financing Correspondent Lender - Answer- Smaller in scale then mortgage bankers or brokers, these lenders typically extended loans with their own funds at their own risk Origination - Answer- The process of creating a new mortgage loan Underwriting - Answer- Detailed process of evaluating a borrowers loan application to determine the risk involved for the lender Closing/Settlement - Answer- Consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then distributed by the lender Funding - Answer- The process of transferring funds into a title or escrow company for disbursement Housing and Economic Recovery Act of 2008 (HERA) - Answer- Designed to assist with recovery and revitalization of America's residential housing market SAFE Act (Secure & Fair Enforement of Mortgage Licensing Act) - Answer- Sets a minimum standard for licensing and registering mortgage loan originators. M1 - Answer- Sum of currency held by the public and transaction deposits at depository institutions M2 - Answer- M1 plus savings accounts, certificates of deposit, and other liquid assets monetary policy - Answer- Maintenance of a stable money supply that provides for growth in the economy while keeping inflation in check. Federal reserve is responsible for monetary policy fiscal policy - Answer- Federal government spending. The Federal Reserve - Answer- The central banking system of the United States Monetary inflation - Answer- Excess of money supply in the market discount rate - Answer- Interest rate a Reserve Bank charges eligible financial institutions to borrow funds on a short term basis. federal funds rate - Answer- Is the rate that the federal reserve charges banks for unsecured loans most of which are for a very short term (sometimes overnight) banks use these to meet their liquidity requirements when withdrawals threaten to exceed cash on hand US Treasury - Answer- Primarily responsible for raising funds to finance the operations of the US government. Management of fiscal policy Office of the Comptroller of the Currency (OCC) - Answer- charters and regulates national banks US Mint - Answer- Make US coins Department of housing and urban development (HUD 1965) - Answer- Create strong sustainable inclusive communities and quality affordable homes. The Federal Housing Administration (FHA) - Answer- Provides mortgage loans made by FHA approved lenders through the United States and its territories Community Development Block Grant (CDBG) - Answer- Help communities with economic development, Job opportunities and housing rehabilitation Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 - Answer- Promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "to big to fail" to protect the American taxpayer by ending bailouts to protect consumers from abusive financial services practices and other purposes Consumer Financial Protection Bureau (CFPB) - Answer- Examine and enforce consumer protection regulations for all mortgage related business. Established under Dodd-Frank Community Reinvestment Act - Answer- A law requiring lenders to meet the needs of the community in which they are charted to do business. Redlining - Answer- a practice in which banks refuse to make loans to people living in certain geographic locations Equal Credit Opportunity Act (ECOA) 1974 - Answer- Ensures all consumers are given an equal chance to obtain credit Secondary mortgages - Answer- Second dairy Lien or junior liens home equity loan - Answer- using your home as collateral to borrow money home improvement loan - Answer- Can hold 1st or 2nd lien position devoted to home repairs and renovations Property tax lien lenders - Answer- Used to pay delinquent taxes on real property Texas veterans land loan - Answer- Borrow up to $125,000 5% down secondary market - Answer- For the purchase and sale of existing mortgages investors Fannie Mae - Answer- A private institution in the secondary mortgage market that buys and sells mortgages. 1968 Freddie Mac - Answer- Federal Home Loan Mortgage Corporation 1970 Ginnie Mae - Answer- Government-backed securities program designed to facilitate the flow of capital into the housing industry 1968 Farmer Mac 1 - Answer- Purchases qualified agricultural or rural housing loans Farmer mac 2 - Answer- Purchases portions of qualified loans Farm Credit Administration (FCA) - Answer- Oversight of farmer Mac Farmer Mac - Answer- An agency that operates similarly to Fannie Mae and Freddie, but for agricultural loans. front ratio - Answer- Is used to qualify a borrower for a loan based upon the proposed house payment and their gross monthly income. back ratio - Answer- The ratio of the borrower's total recurring monthly debts Conventional Loan - Answer- Loan made with real estate as security and does not involve government participation in the form of insuring or guaranteeing the loan Portfolio loan - Answer- Loan not intended for resale on the secondary market Primary Mortgage Market - Answer- where lenders and borrowers come together and negotiate loan terms Savings and loans - Answer- Locally owned & privately managed State or federally chartered Receives individuals savings and uses these funds to make long term amortized loans to home purchasers credit unions - Answer- not-for-profit banks set up by organizations for their customers to use and return surplus income to their members in the form of dividends Real Estate Investment Trust (REIT) - Answer- Created 1960 with the goal to make it possible for small investors to invest in larger commercial properties by purchasing shares in the organizations that owns real estate encumbrance - Answer- A claim, lien, charge, or liability attached to and binding real property. Place limitations on propert owners Liens - Answer- Right given by law to certain creditors to have debits pains out of the property of a defaulting debtor usually by means of a court of sale Mortgagor - Answer- Borrower Mortgagee - Answer- Lender promissory note/ real-estate lien note - Answer- Borrowers unconditional promise to repay Mortgage - Answer- Document that pledges the property as security for repayment of the note recorded I. The county in which the property is located Foreclosure - Answer- Legal procedure whereby the secured property maybe sold to satisfy unpaid promissory note Real Estate Owned (REO) - Answer- Property acquired by a lending institution through foreclosure and held in inventory. Lifting clause - Answer- A clause which gives the borrower the ability to replace the primary instrument with another without affecting the subordinate instrument position Cross defaulting clause - Answer- A clause which states that in the event of a borrower defaults on the primary instrument the secondary instrument is automatically defaulted Lock in clause - Answer- Condition of a mortgage loan which prohibits pre-payment of the loan prior to a certain date Alienation Clause - Answer- Due on sale clause states balance is due if sold w/o mortgagee's approval Release Clause -Defeasance clause - Answer- may require lender to execute a satisfaction of mortgage if portion of loan is paid Subordination Clause - Answer- Is a calls in which a holder of a mortgage permits a subsequent mortgage to take priority exculpatory clause - Answer- Is used to limit the bar is personal liability in the event of a default on a loan Nonrecourse clause - Answer- Protect the seller of the security from liability in the event of a default by the borrower Acceleration Clause - Answer- in the state of default whole amt of principal is due Escalation Clause - Answer- allows lender to raise existing interest rate Assumption clause - Answer- Allows the new borrower to take over the payments on an existing loan underspecified terms and conditions Interest - Answer- Is money paid at a particular rate for the use of money loan to a person for entity it is the cost of borrowing money Interim Interest/ per diem - Answer- buyer pays from and including day of closing to the end of closing month on Part A Points - Answer- 1 point = 1% of loan amount Discount points - Answer- pre-paid interest on a loan amortizing loan - Answer- The monthly payment includes an amount that is applied first 2 inches that is due with the remainder of the loan payment being applied to the outstanding loan balance Index - Answer- Is what the wind or uses as an instrument for measuring changes in interest rates Margin - Answer- The percent added to the index in order to calculate the payment interest-rate Fully indexed rate - Answer- Equal to the margin plus the index and is usually to the nearest 1/8 of a percent Lifetime cap - Answer- Limits the interest rate increases over the life of the loan Advantages of arm loans - Answer- Lower interest rate higher loans falling right Disadvantage of arm - Answer- Early refinancing unpredictable home mortgage payments long time cost Hybrid ARM - Answer- Offer the consumer and interest-rate that is fix for initial period of time then read just over the remainder of the life of the loan Interest only arms - Answer- Allows a buyer to pay only the entries for a specified number of years typically 3 to 10 Collateral dependent loans - Answer- A hard money loan is a specific type of asset based financing it was a borrower receives find secured by the value of a parcel of real estate Blanket Mortgage - Answer- Covers more then one piece of property Package Mortgage - Answer- The borrower pledges both real and personal property as security for a loan. Budget Mortgage - Answer- A mortgage that includes property taxes and insurance; along with principal and interest Wraparound Mortgage - Answer- Is a method of financing would preserve the low existing interest rate on the original note the wrap around his seller financing and with a new loan takes a secondary lien position and the original mortgage is not repaid open end mortgage - Answer- Permits additional borrowing on the same note and mortgage Closed end mortgage - Answer- Specific dollar amount and does not allow for additional borrowing on the same note and mortgage Reverse mortgage - Answer- Homeowners who are at least 62 years of age can borrow against the equity in their property using the reverse mortgage loan becomes due upon the sale of the property or the death of the owner Refinance - Answer- Is the pay off of the existing loan with the proceeds of a new loan to the same borrower Cash out refinancing - Answer- A borrower pays off an existing loan with the proceeds of the new mortgage on the same property but draws equity out of the property which could pay closing cost points pay off of other dates or additional cash for any purpose Loan To Value Ratio (LTV) - Answer- Is the percentage of the lesser of the appraised value or sales price that the lender will lend Ballon payments - Answer- Arrange so that after making a certain number of regular payments the borrower must pay off the remaining loan balance and it's entirety Negative Amortization - Answer- Payments do not cover interest annual premium - Answer- Insurance cost based on the loan-to-value ratio Tenure - Answer- Equal monthly payments as long as at least one borrow lives and continues to occupy the property as a principal residence Term - Answer- Equal monthly payments for a fixed period of months Selected Line of credit - Answer- Unscheduled payments or installation at times and in an amount of your choosing into the line of credit is exhausted Modified tenure - Answer- Combination of line of credit and scheduled monthly payments for as long as you remain in the home Modified term - Answer- Combination of line of credit plus monthly payments for a fixed period of months so I could buy the borrower VA qualification - Answer- Is based upon two separate valuations residual income and debt to income ratio you both are considered to be a guide to underwriting and will resident income is the primary consideration it must be considered along with other credit factors Residual income - Answer- Is the amount of money that is left over each month after all the borrowers major expenses are paid debt to income ratio - Answer- Is a racial of total monthly debt payments to gross monthly income Credit scoring - Answer- Is a systematic process that uses the test call methods to