Term
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Definition
| This is a lender (bank, savings bank, credit union or mortgage lender) that interacts directly with the borrower and actually makes the loan. |
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Term
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Definition
| A retail lender that holds, rather than sells, its loans. |
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Term
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Definition
| Generally a smaller lender that takes applications and underwrites and funds loans either with its own money or from a line of credit with a larger lender & immediately upon closing, sells the loans to wholesale lenders under previously agreed-upon terms. |
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Term
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Definition
| A mortgage investor that prices and funds loans applied for through mortgage brokers. After a mortgage broker processes an application, the wholesale lender has it underwritten and funded. After the loan is made, the wholesale lender will either service it or sell or assign servicing to another entity. |
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Term
| The Conference of State Bank Supervisors (CSBS) & the American Association of Residential Mortgage Regulators (AARMR) establishes & maintains a Nationwide Mortgage Licensing System & Registry (NMLS or NMLSR). Why? |
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Definition
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Term
| What are the minimum standards for licensing of state licensed MLOs? |
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Definition
| 20 hours of pre license education, testing, background check and bonding. |
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Term
| The SAFE Act was amended by the Dodd-Frank Wall Street Reform & Consumer Protection Act effective 7/21/11. Who now is responsible for interpreting, implementing and maintaining compliance with the SAFE Act? |
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Definition
| Consumer Financial Protection Bureau (CFPB) |
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Term
| What is a Mortgage Lender or Mortgage Banker? |
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Definition
| They make mortgage loans with their own funds, through mortgage brokers, mortgage loan originators and loan processors who obtain and process applications from borrowers. |
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Term
| What is a Mortgage Broker? |
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Definition
| An individual or firm, for or in expectation of compensation or gain, obtains application information from a prospective borrower and attempts to match the borrower with a lender who is willing to make a loan based on the borrower's qualifications. |
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Term
| Does a Mortgage Broker fund loans? |
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Definition
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Term
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Definition
| An arrangement where a mortgage broker originates, processes and closes a loan underwritten and funded by a secondary lender in his own name, but then assigns the loan to the lender at the closing table. |
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Term
| Does a Mortgage Broker typically service the loans they originate? |
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Definition
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Term
| Do loan originators employed by depository institutions (banks, credit unions) have to be licensed or registered? |
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Definition
| They must be registered with the NMLS |
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Term
| What does a Mortgage Loan Originator do? |
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Definition
| They take and/or receive mortgage applications, assemble information, and prepare the paperwork & documentation necessary for obtaining a mortgage loan. They may interview the borrower, counsel & prequalify the borrower; communicate with loan processors, underwriters, title, escrow and lenders throughout the process. |
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Term
| What is the secondary mortgage market? |
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Definition
| The market where mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities and sold on the equity market. It is comprised of investors and lenders that buy & sell real estate mortgages from primary market lenders. |
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Term
| Who are the major participants in the secondary mortgage market? |
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Definition
| Federal National Mortgage Association Fannie Mae (FNMA) created in 1938. Federal Home Loan Mortgage Corporation Freddie Mac (FHLMC) created in 1970 Government National Mortgage Association Ginnie Mae (GNMA) created in 1968 |
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Term
| Do the major participants in the secondary market make loans directly to homebuyers or have direct contact with the public? |
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Definition
| No. Their function is to provide a source of funds for lenders in the primary mortgage market by buying and selling mortgage loans and offering securities backed by these loans. The issuance of these securities is termed securitization. |
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Term
| What kind of loans do Freddie Mac and Fannie Mae buy? |
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Definition
| Both will buy conforming conventional loans, FHA insured loans, VA guaranteed loans and USDA guaranteed loans. Fannie Mae also buys commercial loans (apartment buildings) |
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Term
| What are some of the benefits of Fannie Mae and Freddie Mac for lenders? |
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Definition
| Reduced the need to hold substantial funds for mortgage loans. Simplified & expedited the mortgage loan process by developing standardized forms. Developed loan and borrower qualification criteria that make mortgage loans available to a greater number of prime credit borrowers. |
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Term
| On a conforming loan (one eligible for purchase by Fannie Mae or Freddie Mac) what are the seller contribution limits towards the buyer's closing costs? |
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Definition
| Up to 9% if LTV is no more than 75% 6% if LTV is above 75% & less than 90% 3% if the LTV is 90% or higher. Max of 2% is the property is non-owner occupied |
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Term
| Until the middle of 2008, when they were taken over by the government, what were Fannie Mae and Freddie Mac considered? |
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Definition
| GSEs or Government-sponsored enterprises. They were created by Congress and received government assistance, but were only quasi-govermental entities prior to 2008. |
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Term
| What is the LLPA fee (loan level price adjustment) for? |
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Definition
| It is a fee charged to lenders to compensate for certain loan features that increase risk (purpose of loan, occupancy, # of units etc.) The fee is passed on to borrowers in the form of an additional finance charge. A borrower with a lower down payment or lower credit score or one not occupying the property or wanting a cash-out refi, would have to pay a LLPA fee, as a percentage of the loan, at closing. Each feature adding risk increases the LLPA fee. |
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Term
| What is the Government National Mortgage Association? |
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Definition
| Ginnie Mae (GNMA) is a government corporation within HUD whos purpose is to increase the supply of credit available for housing by directing funds from the securities market into the mortgage market. It does this by guaranteeing mortgage backed securities composed of mortgage loans insured by the FHA or guranteed by the VA or the USDA that are issued by private lenders. |
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Term
| What affects interest rates on long-term debt instruments such as residential mortgages? |
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Definition
The GDP-Gross Domestic Product, which measures the amount of goods & services produced in the US.
The CPI-Consumer Price Index, which measures the average change in prices of consumer goods & services.
Actions taken by the Federal Reserve, such as raising its asset reserve requirements to curb inflation; raising its federal funds rate at which members borrow from each other; raise the discount rate it charges members to borrow money from the Federal Reserve Bank; sell government securities through open market operations.
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Term
| Does the Federal Reserve directly influence interest rates lenders charge borrowers? |
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Definition
| No. Each lender sets their own prime rate (the lowest rate it charges its best customers) as well as rates for loans to other customers based on their costs and desired profit margin. |
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Term
| A retail lender that holds, rather than sells, its loans, is called a ________ lender. |
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Definition
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Term
| The ______ _______ market is where mortgages may be sold individually or bundled with other mortgages with similar features into mortgage-backed securities and sold on the equity market. |
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Definition
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Term
| Freddie Mac and Fannie Mae were considered ________ __________ ________, as they were created by Congress and receive government assistance. |
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Definition
| government sponsored enterprises |
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