Real Estate Test 3 Ch 11 Set 1

Front 1

is the loan origination markets, in which borrowers and lenders come together.
• Where loans are created (originated)

Back 1

primary mortgage market

Front 2

protects a lender against losses due to default on a loan

Back 2

pmi

Front 3

Mortgage originators can either hold the loans in their portfolios or sell them in the

Back 3

Secondary Mortgage Market

Front 4

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

Back 4

Conventional Mortgage Loans

Front 5

Meets the requirements for purchase by Freddie Mac or Fannie Mae:

Back 5

• Conforming conventional home loan

Front 6

loans that fail one or more of these underwriting standards. Does not meet GSE requirements in some respect

Back 6

• Nonconforming conventional loan

Front 7

Nonconforming loans that exceed the dollar limit. Nonconforming in terms of size (currently over $417,000)

Back 7

• Jumbo loans

Front 8

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

Back 8

• Three major developments in the history of conventional mortgage loans since the 1930s

Front 9

• 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.

Back 9

maturity imbalance problem

Front 10

• For depository lenders, the most compelling alternative home mortgage is the ----------

Back 10

adjustable rate mortgage (ARM).

Front 11

the predominant form of conventional mortgage remains the (fixed rate) --------------

Back 11

level payment mortgage (lpm)

Front 12

up-front insurance premium by FHA-insured loans.

Back 12

• Mortgage insurance premium (MIP):

Front 13

the most widely used FHA program insures single-family home mortgages

Back 13

• Section 203b loans

Front 14

• Mostly open-end or credit-line loans

Back 14

• Home Equity Loans

Front 15

a fixed amount is borrowed all at once and repaid in monthly installments over a set period, such as 10 years.

Back 15

1. Closed-end loan

Front 16

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.

Back 16

2. Open-end of credit

Front 17

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

Back 17

• Reverse Mortgage

Front 18

converts regular interest expense and up-front loan fees into a single equivalent interest expense

Back 18

Annual Percentage Rate (APR)

Front 19

• ------ borrow heavily because additional cash is extremely useful
• --------------- often borrow less because additional cash is less useful

Back 19

Young households, established households.

Front 20

provides additional funds for homebuyers in return for additional collateral

Back 20

package mortgage