Ch 29: Financing Sources

Question 1

What is the primary mortgage market?

Answer 1

The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction

Question 2

What is the major difference between an institutional lender and a non-institutional lender?

Answer 2

Institutional lenders are highly regulated by state and federal agencies, while non-institutional lenders have few, if any, regulations.

Question 3

What entities does the Pennsylvania Department of Banking and Securities regulate?

Answer 3

The Pennsylvania Department of Banking and Securities regulates state-chartered banks, savings banks, savings and loan associations, trust companies, and credit unions.

Question 4

What kinds of projects are typical for life insurance company investments?

Answer 4

Life insurance companies are a major source of credit for shopping centers, office buildings, hotels and motels, industrial buildings and large apartment complexes.

Question 5

What is usury law?

Answer 5

Usury laws regulate the maximum amount of interest an entity can charge on various loans.

Question 6

What are the two types of municipal bonds and how are they used?

Answer 6

General obligation (GO) bonds are typically used to fund projects that will benefit the entire community, like sewers, road paving and parks.

Revenue bonds are used to fund projects that will benefit specific populations, who provide the revenue to repay the debt through user fees and user taxes, such as toll charges for a bond-financed toll bridge construction project.

Question 7

What is an endowment?

Answer 7

A transfer of money or property which is donated to an institution, with the stipulation that it be invested, keeping the principal intact

Question 8

What kinds of loans do credit unions typically make?

Answer 8

Credit unions make mostly short-term loans. When they do make real estate loans, they tend to be second mortgages or home improvement loans.

Question 9

How would you define the concept of participation?

Answer 9

When one institution can sell a part interest in a block of loans to another institution

Question 10

Who are the important players in the secondary mortgage market?

Answer 10

Ginnie Mae. Government National Mortgage Association (GNMA) – a government agency

Fannie Mae. Federal National Mortgage Association (FNMA) – a former government agency that became a private corporation in 1968

Freddie Mac. Federal Home Loan Mortgage Corporation (FHLMC) – a quasi-government agency

Question 11

What are the three main types of down payment assistance programs offered by HUD?

Answer 11

Grants

Second mortgage loans

Tax credits

Question 12

What program provides down payment and closing cost assistance up to $5,000 through a 0% interest loan with no monthly payments?

Answer 12

The Lancaster Housing Opportunity Partnership Down Payment Assistance Program

Question 13

How are the Pennsylvania Housing Finance Agency programs funded?

Answer 13

Operations are funded through investment activities, program fees, and financing programs.

Question 14

One financial institution can sell a part interest in a block of loans to another institution. This is called:

Answer 14

participation.

Question 15

What is any financial institution whose loans and lending practices are regulated by law?

Answer 15

An institutional lender

Question 16

What type of funds collect contributions from workers and sometimes employers and then invest those funds to create a large money pool from which the workers may withdraw when they reach retirement?

Answer 16

Pension funds

Question 17

What type of lenders eliminate the traditional financial institution “intermediary” and make loans directly to the borrower?

Answer 17

Direct lenders

Question 18

What was formed in 1960 to influence small investors to combine their resources with others to raise venture capital for real estate transactions?

Answer 18

The Real Estate Investment Trust

Question 19

What is a financial institution whose primary function is to promote thrift and home ownership?

Answer 19

A savings and loan association

Question 20

What is a shareholder-owned company that works to make sure mortgage money is available for people across the country but does not lend money directly to home buyers?

Answer 20

Fannie Mae

Question 21

How are institutional lenders regulated?

Answer 21

Institutional lenders are regulated by laws.

Question 22

While banks use their traditional sources of funding to close loans, mortgage bankers typically use what is known as:

Answer 22

a warehouse line of credit.

Question 23

What is the market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction?

Answer 23

The primary mortgage market

Question 24

What refers to second deeds of trust that allow borrowers to pull out some of the equity in their property to use for other purchases?

Answer 24

Junior financing