A Higher-Priced Mortgage Loan (HPML) is best described as a closed-end consumer credit transaction secured by the borrower's principal dwelling with an Annual Percentage Rate (APR) that exceeds the Average Prime Offer Rate (APOR) by a specific threshold.
Higher-Priced Mortgage Loan (HPML) A First Lien Mortgage secured by a Primary Residence that has an annual percentage rate (APR) of 1.5% or more above the average prime offer rate (APOR) for a comparable transaction as of the rate lock date.
Which of the following statements most accurately describes the HPML transactions that are subject to the requirement to establish an escrow account? The answer is escrow accounts are required for all first-lien HPMLs secured by the borrower's principal dwelling.
A purchase-money mortgage is also known as owner financing. The seller extends credit to the buyer to purchase the property. This can be a portion of the sale price or the full price. In other words, the buyer borrows from the seller instead of from a traditional lender.
Private mortgage insurance insures the lender against default by the borrower. Insurance which protects the lender in the event that previously-undetected encumbrances on a property are discovered can best be described as: The answer is: a lender's policy of title insurance.
Private Mortgage Insurance (PMI) Offered by private companies to insure a lender against default on a loan by a borrower where there is loss of collateral value at the time of the default. Private Mortgage Insurance (PMI) Required by Fannie Mae and Freddie Mac loans with less than 20% down.
Private mortgage insurance (PMI) is a type of mortgage insurance you might be required to buy if you take out a conventional loan with a down payment of less than 20 percent of the purchase price. PMI protects the lender—not you—if you stop making payments on your loan.
A purchase money mortgage is one given as part of the transaction of purchase to the vendor of real estate for all or part of the purchase money or to a 3rd person who advances all or part of the purchase money.
A purchase-money mortgage can offer advantages for buyers and sellers, especially when traditional financing isn't an option. Buyers often benefit from more flexible qualification criteria, while sellers may secure the full asking price (or even more) and reduce their tax burden through installment payments.
The characteristic that is not associated with HPML is that it has an APR exceeding Treasury securities by 6.5 percentage points. All other options reflect true characteristics of HPML.
AMORTIZED LOAN: A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity.
Most people who take out a loan to buy a home sign two primary documents: a mortgage (or deed of trust) and a promissory note (technically, a "mortgage note"). By signing a note, you promise to repay the borrowed amount, usually with monthly payments.
Which loans are exempt from HPML requirements?
Higher Priced Mortgage Loans* (HPML) Property Flip Transactions. HPML* New Construction Properties with any title transfer within 180 days prior to the sales contract date, or any title transfer after the sales contract date, including land-only and zero value title transfers, require a Second Full Appraisal.
In general, a first-lien mortgage is “higher-priced” if the APR is 1.5 percentage points or more than the APOR. Jumbo loans: If your mortgage is a first-lien “jumbo” loan, it is generally “higher-priced” if the APR is 2.5 percentage points or more higher than the APOR.
Key takeaways
The 3 C's of credit—character, capacity, and collateral—are a widely-used framework for evaluating potential borrowers' creditworthiness.
Sometimes, a person buying real property gives the seller a mortgage on the property as part of the deal to buy the property. This is called a purchase money mortgage, because this type of mortgage usually replaces part or all of the cash that the buyer would otherwise pay the seller.
Mortgage Types
PMI is generally required for conventional loans when the down payment is less than 20% or the loan-to-value (LTV) ratio is over 80%. However, certain types of government-backed loans, such as FHA and VA loans, have their own mortgage insurance requirements that do not use PMI.