Real Estate Finance - Ne

Front 1

Fannie Mae

Back 1

private corporation - buys and sells loans - primary participant in the secondary market

Front 2

Freddie Mac

Back 2

private corporation - buys and sells loans - primary participant in the secondary market

Front 3

Ginne Mae

Back 3

Gov't agency - backs VA and FHA loans - primary participant in secondary market

Front 4

Secondary market

Back 4

market where mortgages and trust deeds are traded

Front 5

all lending activities require...

Back 5

savings

Front 6

Definition of money

Back 6

- medium of exchange
-storehouse of purchasing power
-standard of value

Front 7

larger supply of money equals...

Back 7

greater economic activity

Front 8

Properties of Commercial Banks (5)

Back 8

-short term leders
-construction loans
-warehouse LOC for mortgage bankers
-equity loans
-commercial loans with 5-7 balloon

Front 9

S&L and Thrifts

Back 9

long term lenders - created to make loans on houses

Front 10

Disintermediate

Back 10

more funds flowing out of savings than into savings

Front 11

Hypothecation

Back 11

lender secures equitable title while owner retains owneship

Front 12

Leverage

Back 12

Using other people's money to make a purchase (small down payment)

Front 13

Real estate values are most affected by...

Back 13

activites at the local level

Front 14

Mortgage rates are most affected by...

Back 14

activities at the national and international level

Front 15

The Fed

Back 15

country's money manager - manage supply of money through Instruments of Credit Policy

Front 16

Instruments of Credit Policy (3)

Back 16

Reserve Requirements - greatest impact on supply of money
Discount Rate - rate banks pay to borrow from the fed
Open Market Operations

Front 17

Open Market Operations
aka Quantitative Easing

Back 17

purchase or sale of gov't securities (US Treasuries, FHLB, FHA, Ginnie Mae, etc.)

Front 18

FDIC (3)

Back 18

Insures deposits at banks and S&Ls, collects insurance premiums, oversees bank operations and liquidity

Front 19

Mortgage banker

Back 19

brings borrower and lender together for a fee

Front 20

Mortgage banker

Back 20

continues to service the loan for the investor and collects service fees

Front 21

Fiduciary

Back 21

one who acts as an agent for another - applies to institutional and non-institutional lenders

Front 22

Regulation Z

Back 22

Part of Truth-in-Lending - requires loan term APR disclosures

Front 23

ECOA

Back 23

intended to eliminate discriminatory practices in lending

Front 24

CRA

Back 24

requires lenders meet he credit needs of all qualified buyers in the community

Front 25

RESPA

Back 25

requires disclosure of closing costs to buyers and sellers prior to closing

Front 26

US Treasury

Back 26

Fiscal manager - properties: collecting taxes, producing currency and coinage, enforcing tax laws

Front 27

Encumbrance

Back 27

a right or interest in property held by someone other than the legal owner of the property

Front 28

Financial encumbrance

Back 28

impacts owners interest and equity in the property - mortgage, deed of trust, land contract, IRS tax liens

Front 29

Physical encumbrance

Back 29

does not affect owners interest or equity in the property ie: easements, encroachments, right of way - these run with the property

Front 30

Priority position (lien)

Back 30

First in time, first in right

Front 31

Properties of a Note (5)

Back 31

-note is a contract in itself
-can be secured or unsecured
-establishes promise to pay
-borrower signs (not attested or notarized)
-always contains an acceleration clause

Front 32

Acceleration clause

Back 32

Entire debit is due if the borrower defaults on the loan

Front 33

Deed of Trust

Back 33

financial instrument where borrower conveys title to a trustee (usually atty) to be held for the beneficiary/lender.

Front 34

Deed of Trust Properties (3)

Back 34

Non-judicial foreclosure
Participants = trustor, trustee, beneficiary
Power of sale - allows trustee to sell property in the event of default

Front 35

Mortgage

Back 35

a financial instrument pledging real estate as collateral to secure a debt

Front 36

Covenant of Seisen

Back 36

clause stating that the mortgagors have title to the property and have the authority to pledge the property as collateral (unique to mortgages)

Front 37

Defeasance Clause

Back 37

clause stating that mortgagor will get full free and clear title upon repayment of the debt

Front 38

Pre-payment penalty

Back 38

imposed on a buyer if the loan is paid off prematurely - usually constitutes a percentage of the original principle amount

Front 39

Lock-in clause

Back 39

borrower is forbidden to prepay a loan before a certain date. (most drastic)

Front 40

Due-on-Sale Clause

Back 40

stipulates borrower cannot sell, transfer, encumber, assign, convey, etc. any part of the collateral property without express prior written consent of the lender. If that happens, the entire balance is due.

Front 41

Release clause

Back 41

allows for releasing a certain portion of the collateral as certain amounts of the loan are repaid. Used with blanket mortgage.

Front 42

Exculpatory clause

Back 42

provides for exclusion of other personal assets from lender's recovery in the event of a default on the loan

Front 43

Subordination Clause

Back 43

placing an existing encumbrance or right in a lower priority position (often used with leasehold properties)

Front 44

Assumed Loan

Back 44

buyer and original borrower and any intervening buyers become liable to the lender for repayment

Front 45

Subject To

Back 45

Buyer purchases a property with existing encumbrance, however stipulates that only the original borrower is responsible. Buyer can walk away from property and forfiet equity but is no longer responsible for loan

Front 46

Interest in Secured Liens include (5)

Back 46

- fee simple
- leasehold
- life estate
- air and mineral rights
- personal property
ALL ARE PLEDGABLE

Front 47

Nonrecourse Clause

Back 47

makes the seller of a security not liable if the buyer defaults