Secondary Market & Loan Servicing Flashcards

Under RESPA, when servicing is transferred, how far in advance of the effective date must the transferor servicer generally notify the borrower?

Answer: At least 15 days

Regulation X requires the transferor to give notice at least 15 days before the effective date of transfer.

During the 60-day period after a servicing transfer, what happens if a borrower mistakenly sends a timely payment to the prior servicer?

Answer: The payment may not be treated as late and no late fee may be imposed

RESPA protects borrowers for 60 days after the transfer from late fees on timely payments sent to the old servicer.

What is the maximum escrow cushion a servicer may generally hold under Regulation X?

Answer: One-sixth of estimated annual disbursements

The cushion cannot exceed one-sixth of estimated total annual escrow disbursements, roughly two months.

An annual escrow analysis reveals a surplus of $75 on a current loan. What must the servicer generally do?

Answer: Refund it to the borrower within 30 days of the analysis

Surpluses of $50 or more on current loans must be refunded within 30 days of the escrow analysis.

Which entity guarantees timely payment of principal and interest on MBS backed by FHA, VA, and USDA loans, with the full faith and credit of the U.S. government?

Answer: Ginnie Mae

Ginnie Mae is a government corporation whose guaranty carries the full faith and credit of the United States.

A lender commits to deliver loans to an investor on a mandatory basis but delivers fewer loans than committed. What is the lender typically charged?

Answer: A pair-off fee

Under mandatory delivery, shortfalls are settled through a pair-off fee reflecting market movement.

Why does the value of a mortgage servicing right (MSR) typically decline when interest rates fall?

Answer: Prepayments accelerate, shortening the expected servicing fee stream

Lower rates spur refinancing, so loans pay off sooner and the servicer collects fewer future fees.