Ch. 15

Question 1

Blanket Loan

Answer 1

A mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien upon repayment of a definite portion of the debt.

Question 2

Buydown

Answer 2

A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or the seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.

Question 3

Certificate of Reasonable Value (CRV)

Answer 3

A form indicating the appraised value of a property being financed with a VA loan.

Question 4

Community Reinvestment Act of 1977 (CRA)

Answer 4

Under the act, which was revised most recently in 2008, financial institutions are expected to meet the deposit and credit needs of their Communities; participate and invest in local Community Development and Rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms.

Question 5

Construction Loan

Answer 5

A short-term loan usually made during the construction phase of a building project.

Question 6

Conventional Loan

Answer 6

A loan that requires no federally sponsored insurance or guarantee.

Question 7

Fannie Mae

Answer 7

A government-supervised enterprise established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders.

Question 8

Farmer Mac

Answer 8

The Federal Agriculture Mortgage Corporation - a privately owned and publicly traded company established by Congress to create a secondary market for agricultural mortgage and rural utilities loans and the portions of agricultural and rural development loans guaranteed by the US Department of Agriculture (USDA).

Question 9

Federal Deposit Insurance Corporation (FDIC)

Answer 9

An independent federal agency established by Congress to examine and supervise financial institutions, manage receiverships, and insure deposits (currently up to $250,000 per depositor per financial institution).

Question 10

Federal Reserve System (the Fed)

Answer 10

The country’s central banking system, which establishes the nation’s monetary policy by regulating the supply of money and interest rates.

Question 11

FHA-Insured Loan

Answer 11

A loan insured by the Federal Housing Administration and made by an approved lender in accordance with FHA regulations.

Question 12

Freddie Mac

Answer 12

A government-supervised enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage Market.

Question 13

Ginnie Mae

Answer 13

A government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA-insured and VA-guaranteed loans as collateral.

Question 14

Government-Sponsored Enterprises (GSEs)

Answer 14

Organizations created by the federal government (Fannie Mae Freddie Mac farmer Mac Ginnie Mae) to help increase loan opportunities for home buyers.

Question 15

Home Equity Loan

Answer 15

A loan under which a property owner uses the property as collateral and can then draw funds up to a pre-arranged amount against the property. Also called a home equity line of credit or HELOC.

Question 16

Mortgage Insurance Premium (MIP)

Answer 16

The FHA insurance that is a percentage of the loan amount that the borrower is charged as a premium.

Question 17

Office of the Comptroller of the Currency (OCC)

Answer 17

Government agency which sets standards and regulations for fiduciary lenders.

Question 18

Open-End Loan

Answer 18

A mortgage loan that is expandable by increments up to a maximum dollar amount, with the full loan being secured by the same original mortgage.

Question 19

Package Loan

Answer 19

A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances.

Question 20

Primary Mortgage Market

Answer 20

The mortgage market in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mutual savings banks.

Question 21

Private Mortgage Insurance (PMI)

Answer 21

Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.

Question 22

Real Estate Settlement Procedures Act (RESPA)

Answer 22

The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees.

Question 23

Regulation Z

Answer 23

Implements the Truth in Lending Act, requiring credit institutions to inform borrowers of the true cost of obtaining credit.

Question 24

Sale-and-Leaseback

Answer 24

A transaction in which the owner sells improved property and, as part of the same transaction, signs a lease to remain in possession of the premises.

Question 25

Secondary Mortgage Market

Answer 25

A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages. Mortgages are first originated in the primary mortgage market.

Question 26

Triggering Terms

Answer 26

Specific credit terms, such as down payment, monthly payment, and amount of finance charges or term of loan.

Question 27

Truth in Lending Act (TILA)

Answer 27

Federal government regulates the lending practices of mortgage lenders through this act.

Question 28

VA-Guaranteed Loan

Answer 28

A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the US Department of Veterans Affairs in order to limit the lender’s possible loss.

Question 29

Wraparound Loan

Answer 29

A method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. In essence, it is an additional mortgage in which another lender refinance is a borrower by lending an amount over the existing first mortgage amount without disturbing the existence of the first mortgage.