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42 Cards in this Set
- Front
- Back
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The Fed
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Federal Reserve System
maintain credit conditions to create a favorable economic climate |
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primary mortgage market
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made up of lenders that originate mortgage loans
lend money in the interest of an eventual return through finance charges (loan origination feeds and discount points) and recurring income (interest) |
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FDIC
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Federal Deposit Insurance Corporation
set standards for fiduciary lenders (savings associations, commercial banks, and thrifts) |
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The primary mortgage market is made up of what 9 groups?
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thrifts
savings associations commerical banks insurance companies credit unions pension funds endowment funds investment group financing mortgage banking companies |
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secondary mortgage market
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where loans (pools) are bought and sold after they have been funded
buy loans from primary mortgage market -- sell shares that represent these loans to investors helps lenders make capital to continue making mortgage loans; when primaries sell their loans to the secondary, they are able to make more mortgage loans, thus expanding the availability of loans to the general public and stimulating the market |
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Fannie Mae
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Federal National Mortgage Association
in 2008, became a gov't owned deals conventional, FHA, and VA loans buys a pool of loans from lenders |
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Freddie Mac
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Federal Home Loan Mortgage Corporation
gov't owned, deals mostly conventional loans buy loans from lenders |
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Ginnie Mae
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Government National Mortgage Association
gov't owned, deals mostly subsidized loans (special assistance) |
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straight loan
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term loan/interest-only
divides the payment of a loan into 2 parts: interest only payments periodically followed by a full payment of the principal at the end of the term |
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interest-only mortgage
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mortgage where payment is interest-only for a period of time with the principal balance due at the end of term
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balloon payment
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final payment of a loan where the principal is larger than that of the periodic payments because the loan was not fully amortized
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amortized loan
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partial payoff of both principal and interest of a loan over a period of time
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Adjustable-Rate Mortgage (ARM)
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loans that start at one interest rate but adjust over time
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index
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economic indicator used to adjust the interest rate in a loan
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margin
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represents the lender's cost of doing business; premium + index
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payment cap
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sets max amount of payments to keep lenders from charging too much interest rate
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growing-equity mortgage
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rapid payoff mortgage
a fixed interest rate with increasing periodic payments of principal |
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reverse mortgage
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for those 62 years+, allows people to receive money based on their life expectancy
home equity diminishes as loan amount increases |
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loan to value ratio (LTV ratio)
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the ratio of debt to value on a property
borrowing based on the value of property Value is based on either the sales price or appraisal value of the property (whichever is less) -the lower the LTV, the higher the down payment and more security to the lender -the higher the LTV, the lower the down payment and more risk to the lender |
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conventional loan
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loan that requires no insurance or guarantee
borrower makes 20% down payment in order to take out loan |
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private mortgage insurance (PMI)
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gives borrowers the ability to take out conventional loan without paying a high down payment
borrowers buy an insurance policy as security for the loan |
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FHA Loan
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a loan that is insured by the Federal Housing Administration; not actually given out by them
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mortgage insurance premium
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a charge for when the borrower gets a FHA loan `
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VA loans
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Department of Veteran Affairs guarantees loans for eligible veterans and their spouses
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certificate of reasonable value (CRV)
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a certificate issued by the VA that indicates the appraised value of a property, which will be used to place a ceiling on the amount of a VA loan allowed
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Agricultural loan programs
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offered by the Farm Service Agency (FSA) to help families purchase or operate family farms or homes in rural areas
give out their own loans and guarantees private lenders' loans |
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purchase-money mortgages (PMM)
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sellers finances part or all of the purchase price of a property
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package loan
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includes real and personal property; if borrower defaults, they'd be able to take things like furniture and appliances along with the property
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blanket loan
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loan that covers several properties
lender creates less risk for himself by issuing a partial release clause, which permits the borrower to obtain a release for a parcel of property after he has repaid a certain amount |
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wraparound loan
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allows borrower to refinance an existing loan because it will be assumed by the second lender; the newly refinanced loan has a higher interest rate
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open-end loan
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secures the current loan to the borrower and future advances made by the lender to the borrower
borrower pays back equity line and then is able to take out another loan |
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construction loan
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a short term loan where the borrower pays interest only at first but arranges a end loan/take-out loan to repay the lender when the work is completed
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sale-and-leaseback
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to finance large commercial and industrial properties;
property sold to investor --> lease to seller --> conducts business as tenant to the buyer |
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buydown
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pays a fee to lower the interest rate on a mortgage or deed of trust loan
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home equity loan
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a loan that uses equity built up in a home as collateral
has a fixed loan amount unless the lender allows to extend it with an equity line of credit (HELOC) |
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How does the federal government regulate lending practices of mortgage lenders?
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Truth in Lending Act and Regulation Z
Equal Credit Opportunity Act Community Reinvestment Act (1977) RESPA (Real Estate Settlement Procedures Act) |
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Regulation Z
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requires lenders to inform borrowers of the true cost of borrowing, give borrowers the right of rescission (3 days to cancel), and regulate the use of trigger terms in advertisements
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trigger terms
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refers to credit terms like down payment, monthly payment, dollar amount of the finance charge, or term of the loan
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Equal Credit Opportunity Act
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prohibits lenders from discriminating against applicants based on race, color, religion, national origin, sex, marital status, age (@ least legal age), or dependence on public assistance; must give proper notice of the reason for denial in 30 days
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Community Reinvestment Act of 1977 (CRA)
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has financial institutions responsible for re-investing into the communities they are located in by meeting its needs for low/moderate income housing
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RESPA (Real Estate Settlement Procedures Act)
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disclosures to the buyer and seller of all settlement costs of any residential real estate transaction involving a new first mortgage loan
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CLO (computerized loan origination)
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handles all loan applications electronically
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