Subject 5 of 19
Mortgage instruments, loan types, underwriting, consumer protection, and predatory-lending risks.
3 chapters 14 lessons 5 free practice questions
Read the rule, try the recall check, then continue to the next lesson.
Chapter 1
Read every mortgage question in order: identify the debt, the collateral, the payment plan, the controlling clause and the remedy that follows.
Exam rule
The loan is the credit. The promissory note or bond is the borrower's personal promise to repay it, and the mortgage is the security instrument that gives the mortgagee, or lender, a lien on the mortgagor's real property. New York follows lien theory, so the owner keeps title and the usual rights of ownership. Recording the mortgage gives public notice and helps protect its priority. An unrecorded mortgage may still bind the parties, but it can lose priority to a later protected buyer or lender. An assignment transfers the lender's interest and the related debt to a new holder without changing the loan terms. A satisfaction or certificate of discharge clears the recorded lien after full payment. Special structures change the collateral. A blanket mortgage covers two or more parcels, and a release clause can free one parcel. A package mortgage covers real estate and named personal property. A pledged-account mortgage adds a cash or savings account as collateral. A purchase-money mortgage helps finance the purchase. A wraparound mortgage includes an older loan within a new, larger obligation. A construction mortgage commonly releases funds in draws as work passes inspection. Under a land contract, the buyer gets possession and equitable interest while the seller keeps legal title until the contract conditions are met.
Why it matters
Sort every question into three parts. Identify the debt paper, the lien paper and the property or account that secures the debt.
New York scenario
A developer mortgages twelve lots. The lender releases one lot after the stated payment. The loan uses a blanket mortgage with a release clause.
Common misconception: Failure to record does not erase the lien between the original parties. Recording is mainly about notice and priority. Assignment is not satisfaction.
Check your recall
The note carries the promise to repay. The mortgage gives the lender a lien on the named real property.
Assignment transfers the lender's interest. Satisfaction shows that the debt was paid and clears the recorded lien.
A blanket mortgage covers several parcels, and a release clause can remove one parcel from the lien.
Exam rule
PITI stands for principal, interest, taxes and insurance. Principal is the unpaid amount borrowed. Only the part of a payment applied to principal lowers that balance. Interest is the price charged for using the money. Property taxes and hazard insurance may be collected each month in an escrow account. The lender or servicer then pays those bills when due. Mortgage insurance, flood insurance and association charges may add to the housing cost even though they are not all part of the four-letter term. A fixed interest rate can keep principal and interest steady while taxes, insurance and escrow amounts still change. A lender may require the owner to insure the property and pay taxes because unpaid taxes or serious damage can weaken the lender's security. Interest and real estate taxes may affect income taxes, but deductibility depends on current tax law and the taxpayer's facts. A salesperson should never promise a deduction.
Why it matters
Build the payment one stated item at a time. Keep loan principal, interest and escrow separate so nothing is counted twice.
New York scenario
A payment has $1,650 for principal and interest, $700 for taxes and $150 for insurance. The stated PITI is $2,500.
Common misconception: Fixed rate does not mean fixed total housing cost. Escrow can change. PMI is insurance, but exam questions may list it apart from basic PITI.
Check your recall
Principal, interest, taxes and insurance.
Only the amount applied to principal lowers the balance.
Taxes, insurance and other escrowed charges can change even when principal and interest stay level.
Exam rule
A fully amortizing loan pays principal and interest in installments that reduce the balance to zero by maturity. On a level-payment fixed-rate loan, early payments contain more interest and later payments contain more principal. A straight or term mortgage may require interest payments during the term and leave principal due at maturity, and a balloon loan also leaves a large final payment. A graduated-payment mortgage starts low and rises on a schedule. If a payment is too small to cover interest, unpaid interest can be added to principal, which is negative amortization. An adjustable-rate mortgage, or ARM, commonly uses an index plus a set margin. A periodic rate cap limits one rate change. A lifetime cap sets the total rate ceiling. A payment cap limits the payment change, so it may allow negative amortization. Inflation reduces the buying power of future fixed payments, while an ARM shifts more rate risk to the borrower. One discount point equals 1 percent of the loan amount, and points paid to lower the rate are a buydown. The annual percentage rate is a broader cost measure than the note rate, because it includes interest and certain finance charges. New York usury law sets a general civil ceiling on interest, and Banking Law Section 14-a puts that maximum at 16 percent a year, subject to stated exceptions. An open-end mortgage or home equity line can allow new advances up to a limit. A home equity loan is commonly a closed-end lump sum secured by existing equity. A bridge loan supplies short-term money between transactions. A reverse mortgage lets an eligible older homeowner draw equity, but the owner still must meet duties such as taxes, insurance and upkeep. The syllabus calls a monthly-payout form a reverse annuity mortgage. A reverse mortgage can also pay a lump sum or provide a line of credit.
Why it matters
Ask what can change, when principal is repaid and whether the balance can rise. Those three questions separate most payment plans.
New York scenario
An ARM has a moving index, a fixed margin and a one-point periodic cap. The index may rise, but the cap can limit the next rate change.
Common misconception: A payment cap is not a rate cap. A low payment can hide unpaid interest. Also, APR is a cost measure, not the contract's note rate.
Check your recall
The required payment fails to cover all accrued interest, so the unpaid part is added to principal.
A periodic cap limits one rate change. A lifetime cap limits the rate over the whole loan.
$2,800, because one point is 1 percent of the loan amount.
Exam rule
A mortgagor must pay the debt, taxes and assessments. The owner must keep the property insured and in reasonable repair. Failure to perform a required duty is default. A grace period gives a short time after a due date before a stated late consequence applies. It does not cancel the payment. An acceleration clause can make the full unpaid balance due after a covered default and required notices. An alienation clause, often called a due-on-sale clause, can permit acceleration after an unapproved transfer. A prepayment penalty clause can charge for an early payoff when law and the loan terms allow it. These clauses do different jobs. New York mortgage foreclosure is a court action under RPAPL Article 13. For a covered home loan, RPAPL Section 1304 generally requires a prescribed borrower notice at least 90 days before the action starts. Bankruptcy or loss of principal-residence status may end the waiting period, but the notice duty remains. The borrower keeps an equity of redemption, which is the right to stop the foreclosure by paying the required debt and costs before the right ends. If the foreclosure sale brings less than the amount owed, the lender must follow RPAPL Section 1371 to seek a deficiency judgment for the allowed shortfall. Acceleration starts a collection step. It does not give the lender an instant deed.
Why it matters
Put the events in order. Find the duty, the default, the clause, the required notice and then the court remedy.
New York scenario
A borrower misses payments and the lender accelerates. The lender still must use the New York foreclosure process before the property can be sold.
Common misconception: Due-on-sale responds to transfer. Acceleration responds to a covered default. A grace period delays a consequence, not the debt itself.
Check your recall
Pay the debt, pay taxes and assessments, insure the property and keep it in repair.
It allows the lender to call the entire unpaid balance due after a covered default and required notices.
RPAPL Section 1304 requires a prescribed borrower notice at least 90 days before suit. Some facts can end the wait, but not the notice duty.
Exam rule
Property with a mortgage can be sold in three tested ways. In a sale free and clear, the existing lien is paid and discharged at or before closing. A buyer who assumes the mortgage agrees to pay the existing debt and becomes personally liable on that promise. A buyer who takes title subject to the mortgage does not promise the lender to pay it. The property still secures the debt and can be foreclosed, but that buyer does not become personally liable merely from taking subject to it. In either transfer, the seller may remain liable on the original note unless the lender gives a release or agrees to a novation. The parties must also check the due-on-sale clause because an unapproved transfer may permit acceleration. A sale-and-leaseback is different. The owner sells the property and leases it from the buyer. The seller gets cash and keeps possession as a tenant. A shared-equity or shared-appreciation plan is also different. A lender or investor receives an agreed share of later value or gain in return for financing help.
Why it matters
Keep two questions apart. Who can lose the property? Who can be sued for the debt? Then check whether the seller got a release.
New York scenario
A buyer takes subject to an old mortgage and stops paying. The property can be foreclosed, while the seller may still face personal liability on the note.
Common misconception: Lender approval of an assumption does not always release the seller. Release or novation is a separate step. Subject to does not make the buyer a note debtor.
Check your recall
The existing mortgage lien is paid and discharged at or before closing.
An assuming buyer promises to pay and becomes personally liable. A subject-to buyer makes no promise to the lender, though the property stays at risk.
An owner sells the property and leases it from the buyer, so the seller becomes a tenant.
Chapter 2
Match each loan to its backing, borrower, property and purpose, then follow it from the primary lender into the secondary market.
Exam rule
A conventional mortgage has no FHA insurance, VA guaranty or USDA guaranty, and it can be conforming or nonconforming. A conforming loan meets the purchase standards used by Fannie Mae or Freddie Mac, and those standards include a loan limit set by FHFA each year. A loan above the applicable limit is commonly called a jumbo loan. Conventional does not mean cheap, easy or low risk. The lender still sets credit, income, asset, appraisal and down-payment rules. Loan names can also describe purpose or collateral. A purchase-money mortgage is given as part of a purchase. A construction loan funds work in stages, often through inspected draws. A bridge or swing loan supplies short-term funds while one transaction waits for another. A blanket loan covers more than one parcel, a package loan includes real estate and named personal property, and an open-end loan permits later advances under its terms. These labels can overlap. A conventional construction loan, for example, can later be replaced by a conforming permanent loan.
Why it matters
Do not force one label to answer every question. One label may describe the backing, another the market standard and another the loan's purpose.
New York scenario
A borrower gets a private bridge loan above the county's conforming limit. It can be conventional, nonconforming and short term at the same time.
Common misconception: Conventional and conforming are not synonyms. Do not memorize one conforming limit forever because FHFA changes the figures each year.
Check your recall
It has no FHA insurance, VA guaranty or USDA guaranty.
It meets Fannie Mae or Freddie Mac purchase standards, including the current FHFA loan limit.
Construction financing pays building costs in stages. A bridge loan supplies short-term funds between transactions.
Exam rule
Government-backed does not mean the government usually hands the buyer the money. An approved private lender makes the loan. FHA insures the lender against covered loss. FHA borrowers pay mortgage insurance under program rules. The Department of Veterans Affairs guarantees part of an eligible VA loan. A standard VA-backed purchase loan may permit no down payment and does not require monthly private mortgage insurance, but a funding fee can apply. Eligibility and occupancy rules still matter. The USDA Rural Housing Service Section 502 guaranteed program backs approved-lender loans for eligible households buying a primary residence in an eligible rural area. Income, property, credit and program rules apply. FHA insurance, a VA guaranty and a USDA guaranty all protect the lender in different ways. None is a promise that every applicant will qualify, and none is conventional financing.
Why it matters
For each program, name the lender and the agency. Then identify who can apply and which property rules apply.
New York scenario
An eligible veteran uses a VA-backed loan for a New York primary home. No monthly PMI is required, but lender approval and any funding fee still matter.
Common misconception: No PMI does not mean no mortgage-related charge. FHA uses mortgage insurance, while VA may charge a funding fee and provides a guaranty.
Check your recall
An approved private lender makes the loan, and the government program backs it.
FHA insures the loan. VA guarantees part of the loan for an eligible borrower.
An eligible borrower's primary residence in an eligible rural area.
Exam rule
SONYMA is the State of New York Mortgage Agency. It works through participating lenders to support homeownership in New York. Its programs may offer below-market financing or help with down payment, closing costs or mortgage insurance. The Low Interest Rate Program waives its first-time buyer rule for eligible veterans. Other loan tests still apply. Exact rules depend on the current program. Income limits, purchase-price limits, rates, property rules, borrower contributions and assistance terms can vary by location and program. A buyer starts with a participating lender, not with a salesperson deciding eligibility. The lender checks current documents and program fit. A salesperson can explain the program's purpose and direct the buyer to official HCR material. The salesperson should not quote an old rate or limit from memory, promise approval or describe assistance as a free grant unless the current terms say so.
Why it matters
The exam tests what SONYMA does. Real buyers need the live terms. Learn the stable purpose and verify every changing figure.
New York scenario
A buyer asks for the SONYMA income limit in Albany County. The salesperson names a likely program. A participating lender checks the current figure.
Common misconception: SONYMA is not one loan with one statewide limit. Assistance may be a junior lien with repayment or recapture terms, not free money.
Check your recall
It supports New York homebuyers through mortgage and assistance programs offered by participating lenders.
With a participating lender that checks the current program rules.
No. It waives the first-time buyer rule for eligible veterans in the Low Interest Rate Program, not the other loan tests.
Exam rule
The primary market, also called the primary mortgage market, is where a borrower obtains a loan from a lender, and banks, credit unions, mortgage banks and other approved lenders can all operate there. The secondary market comes after origination. A lender may assign or sell a mortgage and its debt to recover funds and make more loans. Fannie Mae and Freddie Mac buy eligible mortgages, hold some and package others into mortgage-backed securities, and they are government-sponsored enterprises rather than direct federal mortgage insurers. Ginnie Mae has a different job. It does not buy the loans and does not issue the securities. It guarantees timely payment to investors on qualifying securities backed by government-insured or guaranteed loans. A sale or assignment changes who owns the loan interest, while servicing may stay with the old company or move to another one. The borrower's rate, balance and other contract terms do not change merely because the loan was sold.
Why it matters
Follow the loan in order. Borrower and lender meet first. The lender may then sell the loan, and an investor may fund the market behind it.
New York scenario
A New York bank closes a mortgage and later assigns it to an investor. The borrower still follows the note, even if a new company collects payments.
Common misconception: Ginnie Mae is not another Fannie Mae. Fannie and Freddie buy loans. Ginnie guarantees qualifying securities backed by government loans.
Check your recall
A borrower obtains the mortgage loan from a lender.
They buy eligible mortgages and may hold or securitize them.
Timely payment to investors on qualifying securities backed by government-insured or guaranteed loans.
Chapter 3
Know what credit costs must be disclosed, how lenders judge a file, when PMI ends and which practices cross into unlawful abuse.
Exam rule
The Truth in Lending Act is part of the Consumer Credit Protection Act. Regulation Z gives consumers a standard way to compare credit costs. Key disclosures include the finance charge and annual percentage rate. The right to rescind generally applies to covered nonpurchase credit secured by a consumer's principal dwelling, such as many home equity loans and refinances. The clock starts after the last of three events: consummation, delivery of the rescission notice, or delivery of all material disclosures. The consumer usually has until midnight of the third business day after that event. A loan used to acquire or initially construct the principal dwelling is generally exempt. Do not confuse this cancellation period with the three-business-day wait for a Closing Disclosure. Closed-end credit advertising has triggering terms. They include the down payment as an amount or percentage, the number of payments or repayment period, the payment amount and the amount of any finance charge. If an ad states one, it must give the required additional disclosures clearly. If an ad states a rate, it must state it as an annual percentage rate. Advertised terms must actually be available. A real estate licensee should use approved truthful copy and should not invent financing terms.
Why it matters
First decide whether the question is about disclosure, cancellation or advertising. Each has its own rule and its own three-day concept.
New York scenario
An ad says 5 percent down and 360 monthly payments. Both are triggering terms, so the rest of the required credit details must appear.
Common misconception: A home purchase mortgage generally has no TILA rescission right. Also, a vague call for rates is not a triggering term because it states no credit figure.
Check your recall
A loan used to acquire or initially construct the consumer's principal dwelling.
The down payment and the number of payments or repayment period.
As an annual percentage rate under the applicable Regulation Z rule.
Exam rule
For a covered mortgage, the creditor must deliver or mail the Loan Estimate no later than the third business day after receiving the six-item application. Those items are the consumer's name, income, Social Security number for a credit report, property address, estimated property value and loan amount sought. The form helps the applicant compare projected terms and costs. The consumer must receive the first Closing Disclosure at least three business days before consummation. It shows the final terms and closing figures. A corrected Closing Disclosure starts a new three-business-day wait in only three cases. The APR becomes inaccurate, the loan product changes or a prepayment penalty is added. Most other changes need a corrected form but do not restart the wait. RESPA and Regulation X cover settlement practices. Section 8 bars giving or accepting a thing of value for settlement-service referrals and bars splitting charges for work not performed. Payment for real services at reasonable value is different from a referral kickback.
Why it matters
Learn the two forms, the two timing rules, the six application items and the three events that restart the closing wait.
New York scenario
A lender changes the loan from fixed rate to adjustable rate after the first Closing Disclosure. The product change starts a new three-business-day wait.
Common misconception: The Loan Estimate is not a final approval. Not every corrected fee starts a new wait. RESPA does not ban payment for real, documented services.
Check your recall
No later than the third business day after the creditor receives the six-item application.
At least three business days before consummation.
Settlement-service referral kickbacks and fee splits for work that was not performed.
Exam rule
A lender studies both the property and the borrower. For the property, it reviews the sales price and appraised value, then checks location, condition, comparable sales, property type, occupancy and income potential. One-to-four-family, owner-occupied and income-producing properties may use different rules. Loan-to-value, or LTV, compares the loan with the value used by the lender. A larger down payment lowers it. For the borrower, the housing expense ratio compares the new housing payment with gross monthly income, and total debt-to-income adds the other monthly debts. The lender reviews income or salary, employment history, stability and likely continuance. It may weigh education or training when useful. It also checks liquid assets, monthly obligations and repayment history. Self-employed people, partners and owners of corporations may need business and personal records. A credit report helps verify debt and payment history. One passing ratio never guarantees approval. Ability-to-repay rules call for verified financial facts. Redlining is different and unlawful. It means denying or limiting access to credit in an area on a prohibited basis, such as the race or national origin of its residents. Legitimate property and credit risks still require lawful, consistent evaluation.
Why it matters
Use two files in your head. One asks whether the property is sound security. The other asks whether the borrower can repay.
New York scenario
A buyer has steady income but little cash after closing. The ratios may fit, yet the lender can still question liquid assets and reserves.
Common misconception: The lower of price or appraised value often controls purchase LTV under lender rules. Passing a ratio does not erase credit, asset or property concerns.
Check your recall
Multiply the value used by the lender by 0.80.
Housing uses the proposed housing payment. Total debt adds the borrower's other recurring monthly obligations.
The property's investment quality and the borrower's ability to repay.
Exam rule
Private mortgage insurance, or PMI, protects a conventional lender from part of a loss. The borrower usually pays the premium, but the lender gets the protection. PMI is common when a conventional first mortgage has an LTV above 80 percent. The federal Homeowners Protection Act gives general rules for a covered loan. The borrower may ask to cancel PMI at the scheduled 80 percent point of original value, or earlier after extra principal payments reduce the actual balance to that level. The request must be in writing. Payment history, current value and junior-lien conditions may apply. Automatic termination usually occurs when the scheduled balance first reaches 78 percent of original value and the borrower is current. If the borrower is not current then, PMI ends after the borrower becomes current. Final termination is the first day of the month after the amortization midpoint when PMI has not ended sooner and the borrower is current. Extra principal payments can advance requested cancellation, but the general automatic 78 percent rule uses the schedule. FHA mortgage insurance and a VA guaranty are not PMI, so their rules differ. The FHA charge is called a mortgage insurance premium, or MIP. It follows FHA program rules rather than the Homeowners Protection Act.
Why it matters
Match each number to the correct action. Eighty is a borrower request. Seventy-eight is automatic. The midpoint is the final backstop.
New York scenario
A covered loan reaches the scheduled 78 percent point and the borrower is current. PMI ends automatically without a written request.
Common misconception: Do not use home appreciation alone to claim automatic termination. Do not apply the conventional PMI rules to FHA or VA financing.
Check your recall
It protects the lender, although the borrower usually pays the premium.
At scheduled or actual 80 percent of original value, in writing, if the required conditions are met.
At the scheduled 78 percent point of original value when the borrower is current.
Exam rule
Subprime describes higher-risk credit. It does not prove abuse by itself. Predatory lending is a harmful pattern built around unfair terms, false claims or pressure. Warning signs include hidden fees, very high costs and balloon payments that are too large for the borrower. Blank documents and false statements are also warnings. Other signs are debt consolidation that leaves the owner worse off, home-equity lending based only on collateral and repeated refinancing with no reasonable benefit. Under Banking Law §6-l, a covered refinance without a tangible net benefit can be loan flipping even if it occurs only once. Fraud can come from a borrower, broker, appraiser, lender or other participant. Bad loans can strip equity and lead to foreclosure. New York Banking Law Section 6-l adds rules for covered high-cost home loans. It requires due regard to repayment ability based on verified income, obligations, employment and other resources. It bars negative-amortization payment schedules and prepayment penalties on covered loans. A lender or broker may not advise a borrower to default on an existing loan in connection with the new high-cost loan. A licensee who sees pressure, unexplained charges or possible fraud should stop. The licensee should avoid promises and refer the consumer to qualified legal, housing or lending help.
Why it matters
Look past one expensive term. The strongest answer identifies the whole pattern, the missing borrower benefit and the safe professional response.
New York scenario
A lender repeatedly refinances an older owner's home, adds fees each time and shows no reasonable benefit. That pattern is loan flipping and a predatory warning sign.
Common misconception: A subprime or home equity loan is not automatically predatory. The issue is the conduct, terms, fit and law. Equity alone is not repayment ability.
Check your recall
In the New York high-cost-loan rule, refinancing a home loan without a tangible net benefit after considering the terms, costs and borrower's circumstances. One refinance can qualify.
Verified income, obligations, employment and other resources, not just the home's equity.
Negative amortization and a prepayment penalty.
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Name the legal, financial or factual issue the question is testing.
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3. Conclude
Choose the answer that follows the rule without adding assumptions.
Scenario lab
Scenario 1
A developer mortgages twelve lots. The lender releases one lot after the stated payment. The loan uses a blanket mortgage with a release clause.
The loan is the credit. The promissory note or bond is the borrower's personal promise to repay it, and the mortgage is the security instrument that gives the mortgagee, or lender, a lien on the mortgagor's real property. New York follows lien theory, so the owner keeps title and the usual rights of ownership. Recording the mortgage gives public notice and helps protect its priority. An unrecorded mortgage may still bind the parties, but it can lose priority to a later protected buyer or lender. An assignment transfers the lender's interest and the related debt to a new holder without changing the loan terms. A satisfaction or certificate of discharge clears the recorded lien after full payment. Special structures change the collateral. A blanket mortgage covers two or more parcels, and a release clause can free one parcel. A package mortgage covers real estate and named personal property. A pledged-account mortgage adds a cash or savings account as collateral. A purchase-money mortgage helps finance the purchase. A wraparound mortgage includes an older loan within a new, larger obligation. A construction mortgage commonly releases funds in draws as work passes inspection. Under a land contract, the buyer gets possession and equitable interest while the seller keeps legal title until the contract conditions are met.
Scenario 2
A buyer asks for the SONYMA income limit in Albany County. The salesperson names a likely program. A participating lender checks the current figure.
SONYMA is the State of New York Mortgage Agency. It works through participating lenders to support homeownership in New York. Its programs may offer below-market financing or help with down payment, closing costs or mortgage insurance. The Low Interest Rate Program waives its first-time buyer rule for eligible veterans. Other loan tests still apply. Exact rules depend on the current program. Income limits, purchase-price limits, rates, property rules, borrower contributions and assistance terms can vary by location and program. A buyer starts with a participating lender, not with a salesperson deciding eligibility. The lender checks current documents and program fit. A salesperson can explain the program's purpose and direct the buyer to official HCR material. The salesperson should not quote an old rate or limit from memory, promise approval or describe assistance as a free grant unless the current terms say so.
Scenario 3
A lender repeatedly refinances an older owner's home, adds fees each time and shows no reasonable benefit. That pattern is loan flipping and a predatory warning sign.
Subprime describes higher-risk credit. It does not prove abuse by itself. Predatory lending is a harmful pattern built around unfair terms, false claims or pressure. Warning signs include hidden fees, very high costs and balloon payments that are too large for the borrower. Blank documents and false statements are also warnings. Other signs are debt consolidation that leaves the owner worse off, home-equity lending based only on collateral and repeated refinancing with no reasonable benefit. Under Banking Law §6-l, a covered refinance without a tangible net benefit can be loan flipping even if it occurs only once. Fraud can come from a borrower, broker, appraiser, lender or other participant. Bad loans can strip equity and lead to foreclosure. New York Banking Law Section 6-l adds rules for covered high-cost home loans. It requires due regard to repayment ability based on verified income, obligations, employment and other resources. It bars negative-amortization payment schedules and prepayment penalties on covered loans. A lender or broker may not advise a borrower to default on an existing loan in connection with the new high-cost loan. A licensee who sees pressure, unexplained charges or possible fraud should stop. The licensee should avoid promises and refer the consumer to qualified legal, housing or lending help.
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Mortgage, note, lien theory, mortgagor, and mortgagee
Mortgage clauses, recording, assignment, satisfaction, and foreclosure basics
Fixed-rate, adjustable-rate, balloon, purchase-money, blanket, and construction loans
Conventional, FHA, VA, and other government-backed financing
Loan-to-value ratio, down payment, qualifying ratios, and private mortgage insurance
Truth in Lending, RESPA concepts, and lender disclosures
Predatory lending, equity theft, and homeowner protections
The note is evidence of the debt. The mortgage secures the debt with real property.
Loan-to-value compares the loan amount with the applicable property value or price.
Do not treat prequalification and preapproval as identical lender decisions.
Mortgage instruments, loan types, underwriting, consumer protection, and predatory-lending risks. This guide covers 14 lessons with New York scenarios, common mistakes, documents, worked examples, selected web practice and direct links to the sources used.
Subject vocabulary
Open any term for a direct definition, the exam cue, a New York example, the common mix-up and links to the source material.
Exam traps
The note, mortgage, recording and special security plans
Failure to record does not erase the lien between the original parties. Recording is mainly about notice and priority. Assignment is not satisfaction.
Borrower duties, mortgage clauses and foreclosure
Due-on-sale responds to transfer. Acceleration responds to a covered default. A grace period delays a consequence, not the debt itself.
SONYMA programs without memorizing stale numbers
SONYMA is not one loan with one statewide limit. Assistance may be a junior lien with repayment or recapture terms, not free money.
Loan Estimate, Closing Disclosure and RESPA
The Loan Estimate is not a final approval. Not every corrected fee starts a new wait. RESPA does not ban payment for real, documented services.
Predatory lending, loan flipping and high-cost loans
A subprime or home equity loan is not automatically predatory. The issue is the conduct, terms, fit and law. Equity alone is not repayment ability.
Forms and records
The exam often gives you a document and asks who uses it, what it proves or when it belongs in the transaction.
States the borrower's promise to repay, rate, payment terms and default obligations.
Exam cue: The note is evidence of the debt.
Pledges real property as security for the note and gives the lender lien rights.
Exam cue: The mortgagor is the borrower. The mortgagee is the lender.
Summarizes projected loan terms, payments and closing costs early in the federal mortgage process.
Exam cue: It is an estimate, not a guarantee that every charge will stay unchanged.
Shows final loan terms and transaction costs before consummation for covered loans.
Exam cue: Compare it with the Loan Estimate and investigate material changes.
Primary sources
These are the government, statutory and other authoritative materials cited in the lessons and questions above.
12 CFR Part 1024: Real Estate Settlement Procedures Act
Consumer Financial Protection Bureau
Reverse Mortgage Servicing Examination Procedures
Consumer Financial Protection Bureau
12 CFR Part 1026: Truth in Lending, Regulation Z
Electronic Code of Federal Regulations
24 CFR Part 203: Single Family Mortgage Insurance
Electronic Code of Federal Regulations
7 CFR Part 3555: Guaranteed Rural Housing Program
Electronic Code of Federal Regulations
About Fannie Mae and Freddie Mac
Federal Housing Finance Agency
FHFA conforming loan limit values
Federal Housing Finance Agency
Real Estate Salesperson 77-Hour Curriculum
New York Department of State
SONYMA Low Interest Rate Program
New York State Homes and Community Renewal
State of New York Mortgage Agency homebuyer programs
New York State Homes and Community Renewal
Banking Law §14-a: Maximum rate of interest
New York State Senate Open Legislation
Banking Law §6-l: High-cost home loans
New York State Senate Open Legislation
Real Property Actions and Proceedings Law Article 13: Mortgage Foreclosure
New York State Senate Open Legislation
Real Property Law §275: Certificate of discharge of mortgage
New York State Senate Open Legislation
Real Property Law §291: Recording of Conveyances
New York State Senate Open Legislation
Real Property Law §320: Certain deeds deemed mortgages
New York State Senate Open Legislation
Real Property Law Article 8: Conveyances and Mortgages
New York State Senate Open Legislation
RPAPL §1304: Required prior foreclosure notices
New York State Senate Open Legislation
RPAPL §1371: Deficiency judgment after foreclosure sale
New York State Senate Open Legislation
VA-backed purchase loan
U.S. Department of Veterans Affairs
12 U.S.C. §1721: Government National Mortgage Association guaranty
U.S. Government Publishing Office
United States Code, Title 12, Chapter 49: Homeowners Protection
U.S. Government Publishing Office
Separate required course
5 of 77 course hours
New York assigns this time within its required pre-licensing course. It is not the time needed to use this exam-prep guide or mobile app.
14
lessons
117
mobile questions
5
free web samples
22
sources
Editorial record
Built from the mobile app's reviewed New York lesson and question bank, then checked against the official curriculum and cited sources.
Scope note
This guide supports exam study and issue recognition. It does not replace an approved 77-hour course or advice from an attorney, tax professional, lender, engineer, inspector or other qualified specialist.
