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01 Basic App Princ Quiz > Ch 9-11 > Flashcards

Ch 9-11 Flashcards

1
Q

An active market is defined as:

A

A market characterized by numerous transactions.

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2
Q

A buyers market is defined as:

A

A market in which buyers have the advantage; exists when market prices are relatively low
due to an oversupply of property or reduced buyer demand.

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2
Q

A sellers market is defined as:

A

An active market in which the sellers of available properties can obtain higher prices than those obtainable in the immediately preceding period; a market in which a few available properties are demanded at prevailing prices by many users and potential users.

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3
Q

A depressed market is defined as:

A

A market in which a drop in demand is accompanied by a relative oversupply and a decline in prices.

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4
Q

A good market, in classic economic theory, exhibits the following characteristics:

A
  • Homogeneous products (toothpaste)
  • Prices are relatively low
  • Prices are stable
  • Products are easily transportable
  • Organized market mechanism
  • A large number of buyers and sellers
  • Buyers and sellers are knowledgeable
  • Buyers and sellers act rationally
  • Little regulation or government intervention
  • Supply and demand operate freely
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5
Q

The real estate market is not a well

A

-organized market

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6
Q

Real property is one of the most x industries in the United States. Some of these manifestations can be found in:

A

regulated

  • Zoning regulations
  • Building codes
  • Health and safety codes
  • Rent controls
  • Mortgage limits
  • Building moratoriums
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7
Q

The problem with the real property market is that the amount of supply is very xxx. The demand side of the equation is x and subject to x change.

A

rigid and slow to change
dynamic
immediate

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8
Q

We could classify the real property market as x

A

an imperfect market.

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8
Q

We could classify the real property market as x

A

an imperfect market.

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9
Q

An imperfect market is defined as

A

A market in which product differentiation exists,
there is a lack of important product or market information, and some of the producers and/or consumers are significant enough to affect the price and quantity of goods by their actions alone.”

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10
Q

A market is defined in terms of x.

A

competition

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11
Q

Money is a x that is bought and sold on the market, just as is lumber, shares of stock or real estate.

A

commodity

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12
Q

Money is the standard unit of x.

A

exchange

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13
Q

The “price of money” is expressed as x

A

an interest rate.

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14
Q

The supply of money in the U.S is regulated by the Federal Reserve System (the Fed). Founded in x, the Fed consists of x xx. The Board of Governors of the Federal Reserve System is made up of x who are appointed to x terms by the x of the United States; appointees must be confirmed by the U.S. x.

A

1913
12 regional banks
7 individuals
14-year
President
Senate

15
Q

Please note that the Fed has and uses two tools. It can influence both the x of money and the x of money.

A

supply
cost

16
Q

Difference between Discount rate and prime rate?

A

The Fed has the power to raise or lower the interest rate it employs when lending money to commercial banks and other depository institutions (called the discount rate).

Prime rate is the rate set by individual banks when lending money to their most highly rated customers.

17
Q

Difference between Money market and Capital Market?

A

Money market trades short term and Capital market trades long term instruments like Mortgages, Bonds, Stocks.

18
Q

Primary sources of mortgage capital in the 1930s-1960s:

A
  • State or federally chartered savings banks
  • Savings and loan institutions
  • Commercial banks
  • Credit unions
19
Q

In 1968, FNMA was split into two organizations:

A
  • Fannie Mae; a federally chartered corporation owned by private shareholders
  • Government National Mortgage Association (Ginnie Mae), a government agency
    under the oversight of the Department of Housing and Urban Development (HUD)
20
Q

Fannie Mae purchases

The mortgages purchased from originators may be held in portfolio or may be securitized and sold to investors as

A

single family and multifamily FHA, VA and conventional mortgages.

mortgage-backed securities (MBS).

21
Q

What does Ginnie Mae do?

A

guarantees securities that are backed by government-guaranteed or government-insured loans (e.g, VA, USDA, and FHA).

Ginnie does not purchase loans.

22
Q

Difference between Fannie and Ginnie?

A

Fannie Mae purchases
Ginnie Mae guarantees

23
Q

What is a mortgage assumption?

A

When mortgage rates are going up or in a state of flux, it may be attractive for a buyer to purchase a house and take over its existing mortgage, rather than getting a new one at a higher or less stable rate. All the mortgage obligations are then transferred to the qualified buyer.

24
Q

What is “due-on-sale” clause

A

Due-on-sale prohibits a home purchaser from assuming a seller’s existing mortgage without the lender’s permission, or buying the property “subject to” the existing financing. If permission for a mortgage assumption is given, it will usually be at the current market rate.

25
Q

What is a contract for deed?

A

Seller financing
also called land contract or
installment contract
Attractive when mortgage rates are high

26
Q

Difference between Contract for Deed and Deed of Trust?

A

Contract for Deed is a two-party document (buyer and seller)
Deed of Trust is a three-party document: lender, borrower, and trustee.

In the Trust Deed sale, the buyer receives legal title at the original closing of the purchase transaction, then begins making the payments on the installment sale.
In the Contract for Deed, the buyer receives legal title after the last payment is made on the installment sale.

27
Q

What is a wrap-around contract

A

Seller financing.
Seller offers buyer to keep the existing mortgage on behalf of the buyer, plus lends additional money to cover the price paid above the balance of the underlying loan.

28
Q

Many high loan-to-value conventional loans do have private mortgage insurance (PMI) covering the part of the loan that exceeds x.

A

80% LTV

29
Q

In the event of a default on an FHA loan,

A

HUD reimburses the originating lender for losses

30
Q

In the event of a default on a VA loan

A

the VA would reimburse the lender for any losses.

31
Q

What is UFMIP

A

HUD/FHA does not lend money; instead they charge the borrower an up-front mortgage insurance premium (UFMIP) based on a percentage of the loan amount, plus a monthly mortgage insurance premium (MIP)

32
Q

FRM
GPM
ARM
HEM

A

Fixed Rate Mortgage
Graduated Payment Mortgage
Adjustable Rate Mortgage
Equity Conversion Mortgage (Reverse Annuity)

01 Basic App Princ Quiz (18 decks)

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