Prelim-Quiz-28

Regulation Z cont'd
Advertising-
Regulation Z provides strict regulation of real estate advertisements
that include mortgage financing terms. General phrases like "liberal
terms available" may be used, but if specifics are given they must
comply with this act. The APR must also be stated.
Specific credit terms, known as triggering terms—such as the down
payment, monthly payment, dollar amount of the finance charge, or
term of the loan—may not be advertised unless the following
information is set forth as well: cash price; required down payment;
number, amounts, and due dates of all payments; and APR. The total of
all payments to be made over the term of the mortgage must also be
specified unless the advertised credit refers to a first mortgage to
finance acquisition of a dwelling. The expression "low down payment"
would not be a triggering term.
Penalties-
Regulation Z provides substantial penalties for noncompliance,
ranging from a fine of $5,000 to $10,000 for each day the misleading
advertising continues to a year's imprisonment. Licensees are
cautioned and advised not to violate any of the provisions of
Regulation Z.

Federal Equal Credit Opportunity Act

The federal Equal Credit Opportunity Act (ECOA) prohibits lenders and
others who grant or arrange credit to consumers from discriminating
against credit applicants. Lenders must inform all rejected credit
applicants in writing of the principal reasons why credit was denied
or terminated.
The National Affordable Housing Act requires that borrowers be
presented with a statement of their rights if their loan servicing
(the process by which a mortgage bank or subservicing firm collects
the installment payment of interest and principal due from the
borrower) is transferred. The borrower must be notified at least 15
days before the date of transfer and provided with a toll-free or
collect-call telephone number of the new servicer. Servicers are also
required to acknowledge borrowers' inquiries within 20 days, and act
on them within 60 days.

The Real Estate Settlement Procedures Act (RESPA) requires that

lenders inform both buyers and sellers in advance of all fees for the
settlement of a residential mortgage loan.

Lender's Criteria For Granting A Loan

All mortgage lenders require that prospective borrowers file an
application for credit that provides the lender with basic
information. A prospective borrower must submit personal information
including age, family status, employment, earnings, assets, and
financial obligations. Details of the real estate that will be the
security for the loan also must be provided, including legal
description, improvements, and taxes. For loans on income property or
those made to corporations, additional information is required, such
as financial and operating statements, schedules of leases and
tenants, and balance sheets. Self-employed applicants will be asked
to show two years' income tax returns. Anyone employed by a family
member will be asked to show a current pay stub and the most recent
tax return.
- Criteria is based on the property and the borrower:

...
Evaluating the Property-
- The value of the property is an important element of the lender's
underwriting process. The amount of the loan is based on the sales
price of the property or appraised value, whichever is less. The
lender then applies its LTV ratio to this figure. For example,
suppose the property's sales price is $150,000, its appraised value
is $152,000, and the buyer is applying for a 90 percent loan (which
means he or she is making a 10 percent down payment). To determine
the maximum loan amount, the lender would multiply $150,000 (the
lesser of the sales price and appraised value) by 90 percent. The
maximum loan amount would be $135,000. (The borrower would have to
make a $15,000 down payment.)
To determine the appraised value of the property, the lender will
order that an appraisal be performed. When valuing the property, the
appraiser will take into consideration such elements as the
property's location, its size and square footage, the number of
bedrooms and bathrooms, the size of the lot, and the condition of the
property. If the property is a condominium or cooperative unit, the
appraiser also will look at the project as a whole and examine the
condominium declarations and bylaws filed with the attorney general
or the cooperative's proprietary lease and bylaws.
- It's important to get an appraiser that is familiar with the area
or is from the area so as not to get a too low/high appraisal value

Factors that Influence housing affordability

-how long a person wants to live in a particular area
-a persons financial situation
-housing affordability
- tax consequences of owning versus renting property
-what might happen to home prices and tax laws in the future.

PITI
owners must pay real estate taxes, buy property insurance and repay
(with interest) the mortgage loan used to purchase the property what
lenders call PITI (principal, interest, taxes, and insurance).
-lender consider an prospective borrowers (loan applicant) credit
report and score.