General Mortgage Knowledge Flashcards

Absent a subordination agreement, which lien generally has priority in a foreclosure?

Answer: The lien recorded first

Priority is generally determined by recording date, so first-recorded is first in line.

One discount point on a mortgage equals what amount?

Answer: 1% of the loan amount

A discount point is prepaid interest equal to 1% of the loan amount.

Which entity sets the annual conforming loan limits?

Answer: FHFA

The Federal Housing Finance Agency sets conforming limits for Fannie Mae and Freddie Mac.

Private mortgage insurance on a conventional loan is generally required when the LTV exceeds what level?

Answer: 80%

Lenders typically require PMI when the down payment is under 20%, meaning LTV above 80%.

Under the Homeowners Protection Act, PMI must automatically terminate when the loan balance is scheduled to reach what percentage of the original property value?

Answer: 78%

HPA requires automatic termination at 78% LTV based on the original amortization schedule, if the borrower is current.

What happens to the loan balance in a negatively amortizing loan?

Answer: It increases because payments don't cover all interest due

Unpaid interest is added to principal, so the balance grows.

Which document discloses the final loan terms and closing costs at least three business days before consummation?

Answer: Closing Disclosure

TRID requires the Closing Disclosure be received at least three business days before closing.