MBA CMB flashcards
MBA CMB · Build recall with a focused review session.
33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Ability-to-Repay rule
- CFPB requirement that lenders consider eight underwriting factors, including income, assets, employment, monthly payment, other debt, and DTI, before originating a residential mortgage.
- Qualified Mortgage
- A loan meeting CFPB product-feature and pricing limits that provides a safe harbor or rebuttable presumption of ATR compliance, reducing legal risk for the lender.
- Debt-to-income ratio
- Total monthly debt obligations divided by gross monthly qualifying income. Back-end DTI includes housing plus all recurring debts; front-end covers housing expense only.
- PITI
- Principal, interest, property taxes, and hazard insurance - the core monthly housing payment. Mortgage insurance, flood insurance, and HOA dues are often added.
- Loan-to-value ratio
- Loan amount divided by the lesser of purchase price or appraised value. Higher LTV generally requires mortgage insurance and signals greater credit risk.
- Combined LTV
- The sum of all lien balances divided by property value. HCLTV includes undrawn HELOC limits, giving a fuller view of total leverage.
- PMI automatic termination
- Servicer must terminate mortgage insurance when the loan balance reaches 78% of original value based on the amortization schedule, if payments are current.
- PMI borrower cancellation
- Borrower may request cancellation at 80% of original value with good payment history and current status, subject to servicer valuation requirements.
- Loan Estimate timing
- Under TRID, the Loan Estimate must be delivered or placed in the mail within three business days of receiving the loan application.
- Closing Disclosure timing
- Borrower must receive the Closing Disclosure at least three business days before consummation, allowing time to review final terms and costs.
- Escrow requirement HPML
- Higher-priced mortgage loans generally require an escrow account for taxes and insurance for at least five years, subject to limited exemptions.
- Automated underwriting system
- DU or LPA evaluates credit, capacity, collateral, and capital to issue an eligibility recommendation. Findings may require manual review or compensating factors.
- Reserves requirement
- Liquid assets remaining after closing, measured in months of PITI. Reserves offset risk from high LTV, investment properties, or self-employment income.
- Appraisal independence
- Rules bar loan production staff from selecting or influencing appraisers, protecting collateral valuation integrity and reducing coercion risk.
- Rate lock
- A commitment fixing the interest rate for a set period. Longer locks cost more and increase pipeline hedging and fallout exposure.
- Compensating factors
- Strengths such as low LTV, reserves, or stable income that offset higher DTI or credit risk in manual underwriting decisions.
- Gain-on-sale accounting
- Gain equals sale proceeds minus net carrying value minus direct costs. Proceeds include the loan sale price plus any retained or released servicing value.
- Mortgage servicing rights
- The contractual right to collect servicing fees and escrow float. MSR fair value depends on prepayment speed, discount rate, and servicing cost.
- Servicing-released premium
- A percentage of unpaid principal balance paid to the seller when servicing transfers to the buyer. It is a key component of loan sale execution.
- Servicing-retained execution
- Selling the loan while keeping servicing creates an MSR asset. Total economics combine the sale price and the modeled MSR value.
- Pipeline hedging
- Using TBA MBS, Treasury futures, or forward commitments to offset price and fallout risk on locked loans awaiting funding and sale.
- Pull-through rate
- The estimated share of locked pipeline that will actually fund. It rises with strong credit, near-expiration locks, and low rate incentive to shop.
- Hedge ratio
- Hedged UPB divided by total pipeline UPB, adjusted for pull-through. It measures how much of the pipeline's price risk is offset.
- Cost of carry
- The net cost of funding a loan on a warehouse line before sale, reflecting note rate, advance rate, funding cost, and servicing value.
- Warehouse advance rate
- The percentage of eligible loan balance a warehouse lender will fund, commonly 95–98% for conforming product, with the remainder as equity.
- Production margin
- Loan sale price plus servicing value and fees minus acquisition price and origination cost. It measures profitability per loan or channel.
- Prepayment speed
- The rate at which borrowers refinance or pay off loans, often modeled as CPR. Faster prepayments shorten MSR cash flows and lower MSR value.
- MSR fair value
- The present value of expected net servicing cash flows, modeled with prepayment assumptions, discount rates, escrow float, and default costs.
- TBA MBS
- A forward contract to buy or sell mortgage-backed securities with stated coupon, issuer, and maturity but unspecified pools, commonly used to hedge pipeline risk.
- Fallout risk
- The risk that locked loans fail to close, leaving hedges over-positioned. Accurate pull-through modeling is essential to manage it.
- Channel economics
- Comparison of retail, wholesale, and correspondent channels by margin, cost to originate, and control over pricing and servicing value.
- Interest-rate risk MSR
- Falling rates raise prepayments and reduce MSR value. Executives manage this exposure through hedging and portfolio diversification.
- Origination cost per loan
- Total production expense divided by loans funded. It drives break-even pricing and channel profitability decisions.