Re Exam Financing

Front 1

what are the financing components?

Back 1

1.) Government influences (Fed reserve, Home Loan Bank system, and Office thrift supervision)
2.) Primary Mortgage Market
3.) Secondary Mortgage Market

Front 2

Fannie Mae

Back 2

gov sponsored but privately owned corp that issues its own common stock

creates MBS, deals in conventional, FHA, and VA loans

Front 3

Ginnie Mae

Back 3

government agency

division of the department of housing and urban development, organized as a corp but w/o corp stock

administers:
1.) special assistance programs
2.) guarantees MBS using FHA and VA

Front 4

Freddie Mac

Back 4

gov sponsored enterprise that as authority to purchase mortgages, pool them, and use them as security for bonds sold on open market, but does not guarantee payment

Front 5

Types of Loans

Back 5

1.) Straight term
2.) Interest Only mortgage
3.) Balloon Payment (partially amortized)
4.) Amortized loan
5.) Adjustable-rate mortgage (ARM)
6.) Growing Equity Mortgage
7.) Reverse Annuity Mortgage

Front 6

The Federal Reserve

Back 6

1.) Reserve Requirements - a certain amount of assets each member bank keeps on hand as reserve funds

2.) Discount Rates - the rate charged by the fed reserve when it lends to its member banks

Fed Funds Rate - rate recommended by the fed reserve for the member banks ti charge each other on short term loans

Front 7

Conventional Loans are the most secure loans

Back 7

1.) Loan to Value ratio is often lowest for these loans

2.) not government insured or guaranteed

Front 8

Primary Mortgage Market

Back 8

Realizes income based on:

1.) Finance charges collected at loan closing (loan origination fees, discount pts)

2.) Recurring income - interest collected during term of loan

Front 9

secondary mortgage market

Back 9

loans are bought and sold after being funded

1.) provides additional income to lender and frees up funds to make more loans

2.) purchase mortgage loans thru agencies, assemble pools, and sells them as shares

Front 10

Private Mortgage Insurance

Back 10

maybe required by LTV's higher than 80%

1.) law requires PMI to automatically terminate if borrower accumulated 22% equity in the home and is current on mort payment

2.) Fannie Mae and Freddie Mac have extended the auto termination option to all loans that are in good standing and that have had no additional financing added to original loan

Front 11

FHA requirements

Back 11

1.) up-front premium - a % of loan as a premium for FHA insurance, paid during closing by borrower

2.) FHA sets standards for type and construction of buildings, quality of neighborhood, and credit requirements for borrowers

3.) Approved FHA appraiser

Front 12

Department of Veteran Affairs

Back 12

1.) authorized to guarantee loans to purchase or construct homes for eligible vets and spouses with little or no down payment at market interest rates

2.) certificate of eligibility

3.) certificate of reasonable value

Front 13

When a person purchases RE that has an outstanding mortgage/deed of trust, the buyer may take property over in 2 ways

Back 13

1.) Subject to mortgage or deed of trust (buyer not personally obligated to pay debt in full)

2.) Assume mortgage or deed of trust (buyer personally obligated to pay debt in full)

Front 14

Novation

Back 14

makes the buyer (assumer) solely responsible for any default on the loan and original buyer is freed from any obligations

Front 15

Flood Insurance

Back 15

1.) Separate from home, rental, or building insurance. Available to any community participating in the National Flood Insurance Program

Front 16

National Flood Insurance Reform Act of 1994

Back 16

mandatory obligations on lenders to and loan services to set aside escrow funds for flood insurance on new loans for property in flood prone areas. Borrowers has 45 days to purchase insurance, if borrower fails to do so, lender has to purchase it for borrower.

Front 17

Federal Flood insurance program

Back 17

to finance property with federal or federally related mortgage loans, owners in flood prone areas must obtain flood insurance. If not, no assistance