Chapter 1: Mortgage Lending Overview

Question 1

Federal Reserve Act

Answer 1

1913. Created the Federal Reserve System. This Act established a federal charter for banks that permitted them to make real estate loans.

Question 2

Federal Home Loan Bank Act

Answer 2

1932. Established Federal Home Loan Banks, which had the authority to lend money to thrifts—savings and loan associations (S & Ls), credit unions, and savings banks—so that they could finance home mortgages in their neighborhoods.

Question 3

Banking Act

Answer 3

1933. AKA the Glass-Steagall Act, created the Federal Deposit Insurance Corporation (FDIC) to insure depositors against bank default.

Question 4

National Housing Act

Answer 4

1934. Extended FDIC protection to savings and loan depositors with the creation of the Federal Savings and Loan Insurance Corporation (FSLIC)

Question 5

Federal Home Loan Banks

Answer 5

1932. Established by the Federal Home Loan Banking Act, are twelve regional cooperative banks that U.S. lending institutions use to finance housing and economic development in their communities.

Question 6

Federal Housing Administration

Answer 6

1934. FHA. FHA provided mortgage insurance so banks would not have to incur losses for defaults on home loans. Largest insurer of mortgage loans with over 34 Million. 1965 became part of HUD.

Question 7

Federal Deposit Insurance Corporation

Answer 7

FDIC. Established by Congress in 1933 that insures up to $250,000 for each depositor for most member commercial banks and S & Ls.

Question 8

Office of Thrift Supervision

Answer 8

OTS. A division of the U.S. Department of the Treasury, was established in 1989 to supervise, charter, and regulate federal thrift institutions. (Savings banks, savings and loans, cooperative banks, and credit unions)

Question 9

Office of Comptroller of Currency

Answer 9

(OCC) charters, regulates, and supervises all national banks and federal branches/agencies of foreign banks.

Question 10

National Credit Union Administration

Answer 10

(NCUA) is the independent federal agency that charters and supervises federal credit unions.

Question 11

Federal Financial Institutions Examination Council

Answer 11

(FFIEC) is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the FDIC, the NCUA, the OCC, and the OTS.

Question 12

Federal Housing Finance Agency

Answer 12

(FHFA) is an independent federal agency created by the Federal Housing Finance Regulatory Reform Act of 2008. The purpose of the FHFA is to promote a stronger, safer U.S. housing finance system.

Question 13

Mortgage

Answer 13

Written instruments using real property to secure repayment of a debt

Question 14

Commercial banks

Answer 14

Financial institutions that provide a variety of financial services, including loans.

Question 15

Demand Deposit

Answer 15

Money that a customer may withdraw from the bank at any time.

Question 16

Savings and Loan Associations

Answer 16

Also called thrifts—are financial institutions that specialize in taking savings deposits and making mortgage loans.

Question 17

Disintermediation

Answer 17

Loss of deposits to competing investments (e.g., money market funds and government bonds) that offered much higher returns.

Question 18

Mortgage Banking Companies

Answer 18

Institutions that specialize in mortgage loans for consumers.

Question 19

Mortgage Banker

Answer 19

A company, individual, or entity that originates, processes, underwrites, closes/funds, and services mortgage loans.

Question 20

Service Release Premium

Answer 20

The payment received by a lending institution, such as a bank or retail mortgage lender, on the sale of the right to service a closed mortgage loan.

Question 21

Mortgage Broker

Answer 21

A company or individual who, for a fee, places loans with wholesale lenders, but does not service such loans.

Question 22

Credit Unions

Answer 22

Cooperative financial institutions owned and controlled by their members in order to pool their deposits, receive better interest rates, and loan money to fellow members.

Question 23

Finance Companies

Answer 23

Organizations that specialize in making higher-risk loans at higher interest rates.

Question 24

Mutual Savings Banks

Answer 24

State- or federal-chartered banks that are owned by depositors and operate for their benefit.

Question 25

Portfolio Lending

Answer 25

Financial institutions that make real estate loans keep and service those loans in-house as part of their investment portfolios instead of selling on the secondary market.

Question 26

Secondary Mortgage Markets

Answer 26

Secondary markets are private investors or government agencies that buy and sell real estate mortgages.

Question 27

Mortgage-Backed Securities

Answer 27

Debt obligations that represent claims to the cash flows from pools of mortgage loans.

Question 28

Securitization

Answer 28

the procedure where an issuer designs a marketable financial instrument by merging or pooling various financial assets into one group. The issuer then sells this group of repackaged assets to investors.

Question 29

Fannie Mae

Answer 29

FNMA. Federal National Mortgage Association. Nation’s largest investor in residential mortgages.

Question 30

Ginnie Mae

Answer 30

GNMA. Government National Mortgage Association. Promotes investment by guaranteeing the payment of principal and interest on FHA, VA, Rural Housing Service, or HUD’s Office of Public and Indian Housing federally-insured or guaranteed mortgages through its mortgage-backed securities program.

Question 31

Freddie Mac

Answer 31

FHLMC. Federal Home Loan Mortgage Corporation

Question 32

Dodd-Frank Wall Street Reform and Consumer Protection Act

Answer 32

Dodd Frank. To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.

Question 33

Title X - Dodd Frank

Answer 33

Consumer Financial Protection Act. Consumer Financial Protection Bureau. To enforce consumer financial protection laws.

Question 34

Title XIV - Dodd Frank

Answer 34

Title XIV of the Act amends the Truth in Lending Act, the Equal Credit Opportunity Act, and other consumer financial laws to prevent mortgage-related abuses and to improve availability of responsible, affordable mortgage credit. It addresses compensation-based incentives; inappropriate steering, discrimination, and other abusive, unfair, deceptive, or predatory practices; minimum federal lending standards; high-cost mortgages; mortgage servicing; and appraisals.