Course Hero Logo

Prior to providing the funding lenders conduct

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 165 - 167 out of 353 pages.

Prior to providing the funding, lenders conduct searches to determine if the property is encumberedby a lien. However, liens on a property may not be recorded for several days or months and thuscannot be immediately verified. Consequently, lenders do not discover that they hold a third, fourth,or fifth lien on a property (rather than the expected second lien) until later. The money obtainedfrom the multiple HELOC totals more than the original property purchase price, exceeding theout-ofpocket expenses incurred to secure the property.HOME EQUITY CONVERSION MORTGAGE (HECM)/REVERSE MORTGAGE SCHEMESA HECM is a reverse mortgage loan product insured by the Federal Housing Administration(FHA). While other reverse mortgage loan products exist, the HECM is the most well known andwidely available. It enables eligible homeowners to access the equity in their homes by providingfunds (in many instances in a lump sum payment) without incurring a monthly payment burdenduring their lifetime in the home. To be eligible for a HECM, borrowers must be 62 years or older,own their own property (or have a small mortgage balance), occupy their property as their primaryresidence, and participate in HECM counseling. There are no income, credit, or employment qual-ifications required of the borrower, and no repayment is required if the property is the borrower’sprimary residence. Closing costs may be financed in the mortgage loan. The homeowner is respon-sible for property taxes, insurance, maintenance, utilities, fuel, and other expenses.
Copyright © 2018 Champions School of Real Estate®164Chapter 7Loan Types,Terms & IssuesMORTGAGE FRAUD RED FLAGSLOAN APPLICATION RED FLAGSSignificant or contradictory changes from handwritten to typed applicationEmployer’s address shown as a post office boxCommute is significantly unrealisticNew house too small to accommodate occupantsBorrower is downgrading to smaller or less expensive homeDown payment in some form other than cashSignificant changes as application process proceedsLack of accumulation of assets compared to incomeAccumulation of assets compared to income appears to be too highPARTICIPATION AGREEMENTSIn a participation loan, two or more lenders own a share or interest of a loan made to a debtor. Thisallows the lenders to share or distribute the risk. Lenders may also make the loan to the debtor as theprimary or lead bank, only to sell to other lenders or investors later who will then become participantsin the loan, thus allowing them to invest funds that might have proven otherwise unproductive.Theprimary bank retains all dealings with the borrower and services the loan; the participating banksdo not have contact with that borrower.Another form of participation loan allows the lenders to share in the profitability of the property,in addition to collecting principal and interest on the loan. If a lender collects principal and interestand shares in the profits when the property is sold, then it is called a Shared Appreciation Mortgage.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 353 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
NoProfessor
Tags
The Land, Mortgage loan, Champions School of Real Estate

Newly uploaded documents

Show More

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture