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33 Cards in this Set

  • Front
  • Back

Real Estate Cycle

Activity of he real estate market as it facts to the forces of supply and demand

4 phases of the business cycle






Highest point in a new business cycle and is usually higher than the peak of the previous cycle


Contraction or slump

Peak down to a trough, during which output and employment fall



Evidenced by a fall in output and employment followed by and increase on business activity


Expansion or boom

Period when bottom up to a peak when output and employment rise

Sellers market

When demand for a product exceeds the supply the price for the product tends to increase

Buyers market

Demand catches up to supply and cycle begins again


Economic principle.

Value is created and maintained when opposing economic market forces are in a state of equilibrium


Loss of saving deposits to higher yielding competing investments

Dot com market

Downturn in market prices made money available at lower rates for real estate loans


Refer to the study and description of the population of an area

Deficit spending

Congress Forces the government to barrow money making less money available for construction and home loans

Predatory loan practices

Include usury, deception, and fraud and refer to a variety of abusive lending practices, such as excessive or hidden fees, refinancing loans at no benefit to the borrower, offering a loan knowing the borrower lacks the means to repay it back and using high pressure sale tactics to sell a loan

Impact fees

Charges to all new housing that is developed with the community and are levied to pay for community infrastructure

Primary market

Made up of lenders such as savings banks, commercial banks and mortgage companies who make mortgage loans directly to borrows

Secondary market

Consist of private, quasi-public and government agencies that buy and sell existing mortgages or mortgage backed securities from primary lenders and in so doing provide greater availability of funds for additional mortgage lending and primary lenders

Present value

Total amount of cash today it would take to generate the same amount of income at a 12.5% rate return

Degree of risk

Likelihood of default by the borrower and also to the ability of the lender to recover the loan proceeds by selling the security property

Qualify a borrower

Ensure the borrower has a large enough and stable enough income to minimize the risk of default

Qualify a property

Make sure the property is worth enough to satisfy the loan on the event of default and foreclosures

Secondary markets include

Federal national mortgage association - Fannie Mae

Government national mortgage association - ginnie Mae

The federal home loan mortgage corporation - Freddie Mac

Underwriting criteria

Used to qualify the borrower and the property and include such item as loan to value ratio and income to expense ratios

FNMA (federal national mortgage association) FANNIE MAE

Dominates the secondary mortgage market. Largest investor in residential mortgages. First to be sponsored by the government

Desktop underwriter

Online system permits brokers to submit a borrowers application and loan request called the "limited appraisal form (2055)"

Government National Mortgage Association (GINNIE MAE)

"Special assistance"

Created with the passage of the housing and urban development act 1968(HUD)

Responsible for managing and liquidating the remain of FNMA mortgages

Bond type securities

Long term, pay interest annually, and provide repayment at a specified redemption date

Pass through securities

Pay interest and principle on a monthly basis

Fully modified pass-through securities

Pay interest and principle monthly regardless of whether the payments have been collected from the mortgages

Federal Home Loan Mortgage Corporation (FHLMC) Freddie Mac

Created through e emergency home finance act (1970)

Primary function to aid savings and loan associations who were hit particularly hard by the recession of 1969-1970

Helped acquire additional funds for lending in the mortgage market

Emphasizes on conventional mortgage loans and sells mortgage loans from its portfolio

Immediate delivery program

Seller ms have 60 days to deliver the mortgages (FHLMC) has agreed to purchase

Forward Commitment Purchase Program

Commitment made for 6-8 month periods

Investment quality loan

Loan from a borrower whose timely repayment of the debt can be expected, that is secured by a property of sufficient value to recover the lenders investment of a mortgage default occurs