SAFE Exam Study Guide (Vocab) With 100% Complete Solution

SAFE Exam Study Guide (Vocab) With 100% Complete Solution Traditional Mortgage - Correct Answer-30 year fixed rate (mortgage) Balloon Payment - Correct Answer-A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized. Federal Deposit Insurance Corporation - Correct Answer-Created to protect borrowers deposits Federal Housing Administration - Correct Answer-Created to reassure lenders in cases of borrower defaults Mortgage Backed Securities (MBS) - Correct Answer-a type of asset-backed security (investment) that is secured by a mortgage or collection of mortgages Sub-prime Mortgages - Correct Answer-mortgages sold to high-risk property buyers with a low income for a higher fee + interest rate Dodd-Frank Wall Street Reform and Consumer Act of 2010 - Correct Answer-Following the mortgage meltdown, restructure and rules were set into place to aid the financial market. This added licensing and educating standards for mortgage professionals and limited availability of riskier products in the marketplace while also improving regulation of consumer protection laws. UDAAP - Correct Answer-Unfair- Cause financial harm Deceptive- Deceiving Abusive- Confusing Client Acts or Practices within mortgage sales Loan Originator (MLO) - Correct Answer-Takes (residential mortgage) application + offers/negotiates rates/terms for the loan. Non-Depository institutions - Correct Answer-do not handle deposits, but they do act as an intermediary between individual loan originators + borrowers Mortgage Broker - Correct Answer-A private entity who connects the borrower with the loan originator for a small fee. Serves as the 'Middle Man' Processor - Correct Answer-or (Clerk): Works for MLO to provide clerical functions such as: Verification of income and tax info to verify what the borrower shared with the LO. Underwriter - Correct Answer-A person who evaluates and classifies risks to accept or reject borrower Appraiser - Correct Answer-An independent person hired to provide an unbiased estimate of value by physical visits or comparing to similar homes within the same market. Appraisal paid for by borrower in their closing cost. Title agent - Correct Answer-Hired by the borrower to research the ownership (title) of the given property and look for any encumbrances. Works out of county record building. Title Insurance - Correct Answer-Protects the lender and borrower with claims against title (ex. faulty title etc) The Four C's - Correct Answer-The main foundational criteria that MLO use to determine if the borrower is qualified for the loan. (each C is a different qualification) Ecumbrance - Correct Answer-A claim or liability against real estate (ex. liens, outstanding claim) Credit - Correct Answer-Financial Character. The borrower's credit score + history. A summary of current debt and a full report of the history of payments. Capacity - Correct Answer-Front end debt to determine the borrower's GMI versus their monthly obligations (noncancellable bills) Cash - Correct Answer-Liquid assets the borrower has available to cover shortfalls, usually in the form of reserves Collateral - Correct Answer-The property pledged as security for the loan itself. The loan amount compared to value Amortization - Correct Answer-the reduction of a loan balance through a period of pre-determined payments made over a period of time Principal - Correct Answer-The amount of the loan. This does NOT include the cost for the loan (interest) or any other taxes on the loan. Escrow - Correct Answer-Account where client monies are held for future payout of regular expenses, such as taxes and insurance premiums/payments Closing Disclosure - Correct Answer-A form that must be provided to the borrower at least three business days before closing- goes into detail about loan and information about the escrow account Closing Agent - Correct Answer-(An attorney or Notary) A third party who prepares the paperwork and coordinates/conducts the closing or settlement.. (** they have no knowledge to inform borrower about loan or terms of loan, MLO must prepare them for this) Acts as a witness to the signatures and take care of filing Negative Amortization - Correct Answer-This occurs when the loan payment is not sufficient to cover the interest cost and results in the unpaid interest being added to the principal (original balance), causing the loan amount to increase. Reverse Mortgage - Correct Answer-Homeowners 62+ can borrow money from the value of their property (if enough equity) to receive a stipend of monthly payments/line of credit. This is paid back with interest when the home is sold or the homeowner dies. Fully Amortized Loan - Correct Answer-A loan to be completely repaid, principal and interest, by a series of regular equal installment payments State Model - Correct Answer-A regulation used that direct states on what codes and regulations should be put into place. As an incentive to adopt the state model, they're given perks and special access to government centers.NOT A LAW. State Authority - Correct Answer-A regulatory authority in a given state who oversees the Safe Act. Names of this person will vary by state. Consumer Financial Protection Bureau (CFPB) - Correct Answer-A government agency within the federal reserves that works to regulate financial products such as: EMPOWERING CONSUMERS (Educate + inform so customers can make better financial decisions), EDUCATE MLO's (ensure loan originators are educated and prepared to make wise financial decisions) and ENFORCE LAWS (ensures no foul play or abusive transactions are occurring) regarding transactions made within the financial industry The jurisdiction in all 50 states but no jurisdiction to revoke or suspend MLO status. Department of Housing and Urban Development (HUD) - Correct Answer-Federal Agency that works to create sustainable, affordable and quality affordable housing for all Americans to equally access - no discrimination. (in rural areas)