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87 Cards in this Set
- Front
- Back
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Federal Reserve Bank System |
Nation's central bank and acts as the banker's bank. Purpose is to regulate the flow of money and credit and to promote economic growth with stability. |
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Board of governors |
Seven member board headquartered in Washington DC for the purpose of carrying out day to day operations of the Fed reserve system |
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Monetary policy |
Actions taken by the fed to influence to influence the availability and cost of money and credit as means of promoting national economic goals |
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Federal Reserve Bank |
Operating arms of the central bank, stores currency and coin, processes checks and electronic payments |
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Federal Open Market Committee |
Responsible for developing policies to promote economic growth, full employment, and stable prices. |
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Reserve requirements |
Certain percentage of bank deposits required to be set aside that cannot be lent. |
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Discount rate |
Decrease in interest rate that allows more bank borrowing from the fed to increase money for lending |
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Federal Open Market Committee |
Buys and sells government securities, typically existing bonds, to influence the amount of available credit. |
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Tight money market |
Fed sells government securities to the public to reduce banks cash, tighten up money supply, increase interest rates |
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Glass Steagall Act |
Great Depression; prohibits banks from collaborating with full service brokerage firms or participating in investment banking activities |
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Deregulation |
Process whereby regulatory restraints are gradually relaxed |
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Disintermediation |
Savers taking money out of savings and loan associations to put into investments that pay a higher rate of interest |
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Depository Institutions Deregulation and Monetary Control Act |
1980; raised deposit insurance from 40k to be 100k, permitted savings and loans to offe3 a much wider range of services; commercial lending, trust services, non-mortgage consumer lending |
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Garn-St Germain Depository Institutions Act |
1982; completed process of giving expanded powers to federally chartered s&ls and enabled them to diversify activities. |
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Financial Institutions Reform, Recovery, and Enforcement Act |
1989; Office of Thrift Supervision and Housing Finance Board were authorized to oversee s&l regulation responsibilities. FDIC now insures deposits up to 250k |
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Gramm-Leach-Bliley Act |
1999; allowed commercial banks, investment banks, insurance companies, and securities firms to consolidate. New financial holding company that could engage in insurance and securities underwriting |
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Housing and Economic Recovery Act |
2008; passed to stimulate housing market and established FHFA |
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Federal Housing Finance Agency |
Has conservator ship of Fannie MAE and Freddie Mac in an attempt to stabilize floundering mortgage markets 9.7.2008 |
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Dodd-Frank Wall Street Reform and Consumer Protection Act |
Established consumer financial protection bureau and authorized it to regulate consumer financial products and enforce 17 inherited consumer protection laws |
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primary mortgage market |
market in which lenders make mortgage loans by lending directly to borrowers. Participants in the primary mortgage market sell loans in the secondary mortgage market to replenish their funds. |
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financial intermediary |
Lenders that make real estate loans, stand between suppliers and users of credit, combines funds from many sources (individual savers, short-term or long-term investors) and adapts them into loans for the consumer |
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intermediation |
combines funds from many sources (individual savers, short-term or long-term investors) and adapts them into loans for the consumer |
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depository institution |
accepts deposits in the form of savings accounts, and makes loans using their depositors’ monies. These loans are carefully regulated by law because they consist of other peoples’ money. |
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Institutional Lender |
as a depository, such as a commercial bank, accepts deposits that are then pooled to be invested in various ways, including trust deeds and mortgages. Institutional lenders receive most of their deposits from household savings (savings of individual investors); Main job is to transfer money from people who invest to borrowers |
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Mortgage Yield |
lender receives the interest as well as the origination fees and points expressed as a percentage |
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Commercial Banks |
all-purpose lenders whose real estate loans represent only a portion of their overall activity. They make the widest range of loans, including loans for buying real estate, home equity loans, business loans, and other short-term loans. The major type of lending activity funded by commercial banks is for short-term (6-to-36 months) construction loans, |
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Compensating Balance |
borrower deposits funds with the bank in order to induce the lender into making a loan |
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Thrifts |
largest single resource for residential mortgage credit. Types of thrifts include savings and loan associations (S&Ls), savings banks, and mutual savings banks. Any thrift can be owned either as a mutual organization or as a stock institution. |
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Mutual ownership |
all the depositors share ownership in the savings and loan or bank, which is managed by a board of trustees. The depositors (investors) in S&Ls, savings banks or mutual savings banks are paid dividends on their share of the earnings of the organization. |
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Savings and loan institutions |
pool the savings of individuals to fund residential mortgages. The first customers of S&Ls were depositors as well as borrowers, and as their customer base grew, the S&L associations became a primary source of loans to finance homebuilding. |
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Savings banks |
distinctive types of thrift institutions, behaving sometimes like commercial banks and sometimes like S&Ls. While savings banks are authorized to make mortgage loans, most specialize in consumer and commercial loans |
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Mutual savings banks |
state-chartered, mutual organizations relying on their customers’ savings to provide all the capital they needed to be successful |
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Credit union |
association whose members usually have the same type of occupation. The members join for mutual benefit by saving money in their own bank and receiving better interest rates. Both secured and unsecured loans are made at rates lower than other lenders can offer. |
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Insurance companies |
major suppliers of money for large commercial loans to developers and builders. Loans made by insurance companies have low interest rates and the lowest loan-to-value ratio. |
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Non-institutional lenders |
non-depository institutions and do not take deposits. They are private lenders that invest their own funds or borrowed funds. This group includes private individuals, mortgage companies, and investment companies, as well as others—like pension funds and title companies |
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Mortgage company (mortgage banker) |
company whose principal business is the origination, closing, funding, selling, and servicing of loans secured by real property. Since they are not depository institutions, they lend their own or money borrowed from warehouse lenders to fund loans. |
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Warehouse line |
revolving line of credit extended to a mortgage company from a warehouse lender to make loans to borrowers |
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Mortgage broker |
third party originator (TPOs)—not a lender. Mortgage brokers coordinate the loan process between the borrower and the lender and charge an origination fee to provide this service to the borrower. Mortgage brokers qualify borrowers, take applications, and send completed loan packages to the lender. |
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Real Estate Investment Trust |
company that owns operates income-producing real estate or engages in financing real estate. REITs generally fall into three categories: equity REITs, mortgage REITs, and hybrid REITs. Equity REITs typically own and operate income-producing real estate. Mortgage REITs provide money to real estate owners and operators either directly in the form of mortgages or indirectly through the acquisition of mortgage-backed securities. Hybrid REITs generally are companies that use the investment strategies of both equity REITs and mortgage REITs. |
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Secondary mortgage market |
is for buying and selling existing mortgages from the primary mortgage market or from each other. Participants in the secondary mortgage market do not originate loans |
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Debt instruments (mortgage backed securities) |
collateralized by the mortgages that have been bought in the secondary market |
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Government sponsored enterprise |
financial services corporation created by the United States Congress |
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Housing GSE's |
annie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs). The housing GSEs are critical in providing liquidity, stability, and affordability to the mortgage market, particularly for long-term, fixed-rate mortgages. |
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Federal Housing Finance Agency |
regulates GSEs; independent regulatory agency that was established by the Federal Housing Finance Reform Act of 2007. Each year FHFA sets the limit of the size of a conforming loan, which is based on the October-to-October changes in mean home price. |
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Mortgage-backed securities |
pools of mortgages used as collateral for the issuance of securities in the secondary market. MBS are commonly referred to as pass-through securities because the principal and interest of the underlying loans are passed through to investors |
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Federal Home Loan Banks |
12 regional cooperative banks that lending institutions use to finance housing and economic develop-ment in their communities. Created by Congress |
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Ginnie Mae |
government-owned corporation within the Department of Housing and Urban Development (HUD); government-owned corporation within the Department of Housing and Urban Development (HUD) |
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Underwriting |
process of evaluating a borrower’s risk factors before the lender will make a loan |
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Credit scoring |
objective, statistical method that lenders use to quickly assess the borrower’s credit risk |
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FICO |
developed by Fair Isaac & Company, Inc. The FICO® scores run from 350 to 620 for the applicants who are late in paying bills and between 700 to above 800 for those applicants who always pay bills on time |
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Loan-to-value |
percentage of appraised value to the loan |
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Equity |
difference between the appraised value and the loan |
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Equity funds |
downpayment |
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Debt |
loan funds |
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Desktop Underwriter & Loan Prospector |
most widely used automated underwriting systems ; Users receive an analysis of the borrower’s credit, estimate of the property’s value, and an opinion of the risk involve |
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Consumer Credit Protection Act 1968 |
creditors had to state the cost of borrowing in a common language so that the consumer could figure out what the charges are, compare the costs of loans, and shop for the best credit deal |
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Truth in Lending Act |
aimed at promoting the informed use of consumer credit by requiring disclosures about its terms and cost; compare the cost of a cash transaction with the cost of a credit transaction and to see the difference in the cost of credit among different lenders |
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Dwelling (TILA) |
1-4 residential structure , individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence. Real estate loans that are exempt from the TILA include credit extended primarily for business, commercial, or agricultural purposes, or credit extended to other than a natural person |
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Creditor |
includes a lender (person or company) who regularly makes real estate loans; who extends credit for loans secured by a dwelling; and the credit extended is subject to a finance charge or is payable in more than four installments, excluding the down payment |
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Closing Disclosure
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contains the actual terms and costs of the transaction |
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Finance Charge |
dollar amount the credit will cost, and, as a condition to obtaining credit, is composed of any direct or indirect charges. Those include interest, loan fees, finder fees, credit report fees, insurance fees, and mortgage insurance fees. |
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Annual percentage rate (APR) |
relative cost of credit expressed as a yearly rate. It is the relationship of the total finance charge to the total amount financed, expressed as a percentage |
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Material disclosures |
must be displayed to allow consumers ease of comparison; amount financed, finance charge, APR, total payments, payment schedule, name of lender, |
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Amount financed |
he amount of credit provided to you or on your behalf |
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Finance charge |
the dollar amount the credit will cost you |
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Right to rescind |
right to cancel a real estate loan applies to most consumer credit loans and refinance |
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Real Estate Settlement Procedures Act |
A) protects consumers by mandating a series of disclosures that prevent unethical practices by mortgage lenders. The disclosures must take place at various times throughout the settlement process |
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Loan Estimate |
summarizes key loan terms and gives an estimate of loan and closing costs. The lender is generally required to provide the Loan Estimate within 3 business days of the receipt of the borrower’s loan application |
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7-business day waiting period |
amount of time lender's must give applicants od after mailing or delivering the Loan Estimate prior to closing the loan |
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Mortgage Servicing Disclosure Statement |
states whether the lender intends to sell the real estate loan servicing immediately or in the future |
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3 Business days before consummation |
Lenders must ensure that borrowers receive the Closing Disclosure at least 3 business days before consummation (the day the loan closes) |
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Consummation |
the day the loan closes |
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Annual Escrow Loan Statement |
loan servicer must deliver to the borrower after closing |
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Equal Credit Opportunity Act |
ensures that all consumers are given an equal chance to obtain credit |
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Home Mortgage Disclosure Act (1975) |
requires most mortgage lenders to gather data from borrowers who apply for loans. Its purpose is to determine whether lenders are serving their communities and to identify discriminatory lending pattern |
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Fair Credit Reporting Act |
designed to promote the accuracy, fairness, and privacy of the information collected and maintained by credit reporting agencies |
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Fair and Accurate Credit Transactions Act |
gives borrowers the right to see what is in their credit file and to have any errors corrected |
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FTC Red Flags Rules |
financial institutions and creditors must develop a written “Identity Theft Prevention Program” to detect, prevent, and mitigate identity theft in covered accounts |
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covered account |
any personal account, such as checking and savings accounts, credit card accounts, mortgage loans, automobile loans, margin accounts, and cell phone or utility accounts |
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Red flags |
suspicious patterns or practices or specific activities that indicate the possibility of identity theft: Alerts, Notifications, & Warnings from a Credit Reporting Agency•Suspicious Documents•Suspicious Personal Identifying Information•Suspicious Account Activity•Notice from Other Sources |
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Redlining |
illegal lending policy of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, because of alleged higher lending risks, without due consideration being given by the lending institution to the creditworthiness of the individual loan applicant |
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Holden act |
encourages increased lending in neighborhoods where, in the past, financing has been unavailable. |
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Real Property Loan Law (Mortgage Loan Brokers' Law) |
curb a variety of lending abuses perpetrated by real estate brokers who engaged in loan transactions. The abuses included exorbitant commissions, inflated costs and expenses, short term loans with large balloon payments, and misrepresentations or concealments of material facts |
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Sheltered loan |
first trust deed of LESS THAN $30,000 or a junior loan of LESS THAN $20,000 |
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Mortgage Loan Disclosure Statement |
written disclosure to be delivered within 3 days of receipt of the borrower's written loan application, or before the borrower becomes obligated to complete the loan, whichever is earlier; disclose expected maximum costs and expenses of making the loan that are to be paid by the borrower, including fees for appraisal, escrow, credit report, title insurance, recording, and notary services |
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Arranger of Credit |
person who is not a party to the transaction, but will be compensated for arranging the credit, negotiating the credit terms, completing the credit documents, and facilitating the transaction |
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Seller Financing Disclosure Statement |
arranger of credit must deliver before the execution of any note or security document; must be signed by the arranger of credit, the buyer, and the seller, who are each to receive a copy. The disclosure statement must include comprehensiveinformation about the financing cautions applicable to certain types of financing, and suggestions of procedures that will protect the parties during the terms of the financing |
