Ethics in Lending
This occurs when a lender refuses to lend in specific areas based on demographics.
What is redlining?
This type of loan requires a large final payment at the end of the term
What is a balloon loan?
his component of an ARM determines how often the interest rate can change.
What is the adjustment period?
FHA loans are insured by this government agency.
What is the Federal Housing Administration?
Regulation Z is part of this act and focuses on disclosure requirements for lenders.
What is the Truth in Lending Act (TILA)?
This fraudulent practice involves using a fake borrower to secure a mortgage.
What is a straw buyer scheme?
A borrower has a $200,000 loan with a 30-year amortization but a 7-year balloon. What happens at year 7?
What is the remaining balance must be paid in full or refinanced?
A borrower has a 5/1 ARM. What does the "5" represent?
What is the number of years the interest rate is fixed before it adjusts?
Conventional loans typically require this minimum down payment for first-time homebuyers.
What is 3%?
This regulation ensures fair lending practices and prohibits discrimination in credit transactions.
What is Regulation B under the Equal Credit Opportunity Act (ECOA)?
This act requires lenders to provide borrowers with clear and accurate information about mortgage costs.
What is the Truth in Lending Act (TILA)?
A balloon mortgage typically has lower this compared to fully amortizing loans.
What is monthly payments?
If an ARM has a margin of 2.5% and an index of 3%, what is the new interest rate?
What is 5.5%?
FHA loans require borrowers to pay this type of insurance for the life of the loan unless refinanced.
What is Mortgage Insurance Premium (MIP)?
The SAFE Act, under HERA, mandates this requirement for mortgage loan originators.
What is licensing and registration through the Nationwide Multistate Licensing System (NMLS)?
What law requires lenders to provide an annual escrow analysis to prevent overages?
What is RESPA?
A borrower has a $150,000 balloon mortgage with a 5-year term and an interest rate of 6%. What is the balance due at the end of the term?
What is approximately $141,300?
A borrower has an ARM with an initial rate of 4%, an annual cap of 2%, and a lifetime cap of 6%. If the index increases by 3% in year two, what is the new rate?
What is 6% due to the annual cap?
The standard debt-to-income (DTI) ratio limit for FHA loans is typically higher than conventional loans. What is the maximum DTI for FHA loans?
What is 57% with compensating factors?
Regulation X is associated with this act and aims to prevent abusive lending practices.
What is the Real Estate Settlement Procedures Act (RESPA)?
The "Ability to Repay" rule falls under this legislation.
What is the Dodd-Frank Act?
Balloon loans are often used in these types of real estate transactions
What are commercial real estate or short-term financing situations?
A borrower has a $250,000 loan on a 7/1 ARM with an initial rate of 3.5%. After the fixed period, the index is 4% and the margin is 2.5%. What is the new rate?
What is 6.5%?
Conventional loans typically have this key advantage over FHA loans when it comes to mortgage insurance.
What is PMI can be removed once the LTV reaches 80%?
The Homeowners Protection Act (HPA) primarily regulates this aspect of home loans.
What is Private Mortgage Insurance (PMI) cancellation?