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20 Cards in this Set

  • Front
  • Back
is the loan origination markets, in which borrowers and lenders come together.
• Where loans are created (originated)
primary mortgage market
protects a lender against losses due to default on a loan
Mortgage originators can either hold the loans in their portfolios or sell them in the
Secondary Mortgage Market
Oldest form, most common
• Any standard home mortgage loan not insured by FHA or guaranteed by Department of Veterans Affairs
• Revolutionized in 1940s by private mortgage insurance
Conventional Mortgage Loans
Meets the requirements for purchase by Freddie Mac or Fannie Mae:
• Conforming conventional home loan
loans that fail one or more of these underwriting standards. Does not meet GSE requirements in some respect
• Nonconforming conventional loan
Nonconforming loans that exceed the dollar limit. Nonconforming in terms of size (currently over $417,000)
• Jumbo loans
1. Introduction of the level payment mortgage (LPM), assisted with private mortgage insurance
2. Introduction of adjustable mortgage loans
3. Introduction of numerous alternatives to the standard 80-90 % LPM beginning in the late 1990s
• Three major developments in the history of conventional mortgage loans since the 1930s
• In financial management terms, funding long-term LPMs with short-term deposits and savings creates a severe -------------------- for depository institutions because their assets are very long term, whereas their liabilities are short term.
maturity imbalance problem
• For depository lenders, the most compelling alternative home mortgage is the ----------
adjustable rate mortgage (ARM).
the predominant form of conventional mortgage remains the (fixed rate) --------------
level payment mortgage (lpm)
up-front insurance premium by FHA-insured loans.
• Mortgage insurance premium (MIP):
the most widely used FHA program insures single-family home mortgages
• Section 203b loans
• Mostly open-end or credit-line loans
• Home Equity Loans
a fixed amount is borrowed all at once and repaid in monthly installments over a set period, such as 10 years.
1. Closed-end loan
money is borrowed, as it is needed, drawn against a maximum amount that is established when the account is opened. Interest is paid on the balance due, just as with a credit card.
2. Open-end of credit
an arrangement where the lender agrees to pay money to an elderly homeowner, either regularly or occasionally, and to be repaid from the homeowners equity when he or she sells the home or obtains other financing.
• Many older households are income constrained
• Reverse Mortgage
converts regular interest expense and up-front loan fees into a single equivalent interest expense
Annual Percentage Rate (APR)
• ------ borrow heavily because additional cash is extremely useful
• --------------- often borrow less because additional cash is less useful
Young households, established households.
provides additional funds for homebuyers in return for additional collateral
package mortgage