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Real Estate Principles - Vocab > Chapter 10 - Finance: Lending Institutions Vocabulary > Flashcards

Chapter 10 - Finance: Lending Institutions Vocabulary Flashcards

Chap 10 Vocab

1
Q

Advertisement

A

A public notification in any type of media featuring property for sale or rent or marketing brokerage services; must follow guidelines of federal, state, and local fair housing laws.

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2
Q

Bait and Switch

A

A deceptive sales technique that involves advertising to a consumer with a particular product, service, or rate to attract them, then persuading them to accept something more costly. Most states have consumer protection laws that make this tactic illegal.

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3
Q

Blind Advertisement

A

Generally, any real estate advertisement that is used by a licensee regarding the sale or lease of real estate or of licensed activities that does not include the broker’s name or business name. Prohibited in most states.

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4
Q

blind advertising

A

Advertising that fails to disclose that the party is a licensee acting as an agent.

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5
Q

blind pool

A

A type of syndication where money is raised for unspecified properties that meet specific investment criteria.

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6
Q

Buffer Zone

A

A means by which planners use space to separate two adjoining districts which have incompatible uses. A buffer zone consists of uses which are compatible with uses in each adjoining district.

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7
Q

capital

A

Money and/or property owned or used by a person or business to acquire goods or services.

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8
Q

Commercial Banks

A

The largest financial intermediary directly involved in the financing of real estate. Their primary real estate activity involves short–term loans.

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9
Q

commercial e-mail message

A

Any electronic mail message whose primary purpose is the commercial advertisement or promotion of a commercial product or service.

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10
Q

compensating balance

A

When a borrower deposits funds with the bank in order to induce the lender into making a loan.

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11
Q

credit

A

A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of an addition to a liability or item of equity or revenue.

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12
Q

Credit

A

A sum of money that is to be received. – A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of an addition to a liability or item of equity or revenue.

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13
Q

Credit History

A

Record of debt repayment, detailing how a borrower has paid debts and obligations in the past, used to predict whether the borrower is likely to pay debts in the future.

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14
Q

Credit Report

A

A listing of a borrower’s credit history, including the amount of debt, record of repayment, job info, address info, etc.

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15
Q

credit reporting agency

A

A company that researches the credit records of consumers and summarizes the findings in a factual credit report.

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16
Q

Credit Scoring

A

A method in which numerical values are assigned to different aspects of a borrower’s loan application and used by lenders to gauge creditworthiness and assess credit risk.

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17
Q

credit unions

A

An association whose members usually have the same type of occupation.

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18
Q

Debit

A

A sum of money that is owed.

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19
Q

depository institution

A

An institution that accepts deposits in the form of savings accounts, and makes loans using their depositors’ monies.

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20
Q

Deregulation

A

A process whereby regulatory restraints are gradually relaxed.

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21
Q

Disability

A

A physical or mental impairment that substantially limits or curtails one or more major life activities.

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22
Q

Discrimination

A

Treating people unequally because of their race, religion, sex, national origin, age, or some other characteristic of a protected class, in violation of civil rights laws.

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23
Q

Disintermediation

A

The movement of money out of savings accounts and into higher yield investments, such as corporate securities or government instruments.

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24
Q

Disparate Impact

A

When a law that isn’t discriminatory on the face of it has a greater impact on a minority group than it has on other groups. Also called Disparate Effect.

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25
Q

Disparate Intent

A

An intentional decision to treat some people differently than others in a similar situation. Also called Disparate Treatment.

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26
Q

Equal Credit Opportunity Act (ECOA)

A

A law that requires all lenders to make credit available with fairness and without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. – Federal act to ensure that all consumers are given an equal chance to obtain credit.

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27
Q

Fair Housing Act

A

Common name for Title VIII of the Civil Rights Act of 1968 and its amendments.

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28
Q

Familial Status

A

A protected group under the federal Fair Housing Act, making it illegal to discriminate against a person for being the parent or guardian of a child under 18 years of age.

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29
Q

Federal Deposit Insurance Corporation (FDIC)

A

The Federal Deposit Insurance Corporation (FDIC) insures depositors for at least $250,000 per insured bank if a bank or thrift institution fails.

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30
Q

Federal Deposit Insurance Corporation (FDIC)

A

A federal agency established to insure the deposits in member commercial banks. It determines the maximum insurance amount per account.

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31
Q

Federal Fair Housing Act of 1968

A

An act prohibiting discrimination in the sale or rental of housing on the basis of race, color, religion or national origin sex, handicap, and familial status. – This law, amended in 1988, was created to provide fair housing throughout the United States.

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32
Q

Federal Home Loan Bank System (FHLB)

A

A government-sponsored enterprise, created by Congress but privately funded, that supports mortgage lending and related community investment for its member banks and financial institutions.

33
Q

Federal Home Loan Mortgage Corporation (FHLMC)

A

“Freddie Mac,” as it is officially known, is a government sponsored entity regulated by the Federal Housing Finance Agency that operates in the secondary mortgage market to purchase mortgage loans from lenders.

34
Q

Federal National Mortgage Association (FNMA)

A

Commonly known as “Fannie Mae,” this government sponsored entity regulated by the Federal Housing Finance Agency is the largest buyer of existing mortgages in the secondary mortgage market.

35
Q

Federal Reserve System

A

The federal banking system of the United States under the control of a central board of governors (Federal Reserve Board) involving a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.

36
Q

Federal Reserve System (FRS)

A

A federal agency which oversees and regulates monetary policy, which in turn affects interest rates and the availability of credit. All federally chartered commercial banks must be members.

37
Q

financial intermediary

A

(1) An organization that obtains funds through deposits and then lends those funds to earn a return such as savings banks, commercial banks, credit unions and mutual savings banks. (2) Lenders that make real estate loans.

38
Q

finder’s fee

A

(1) Money paid to a person for finding a buyer to purchase a property or a seller to list property. (2) Also known as a referral fee.

39
Q

Holden Act

A

(1) A law designed primarily to eliminate discrimination in leading practices based upon the character of the neighborhood in which real property in located. (2) Also known as Housing Financial Discrimination Act of 1977. (See redlining)

40
Q

Housing and Urban Development (HUD)

A

An agency of the federal government that oversees many federal housing programs.

41
Q

institutional lenders

A

A financial intermediary, such as a savings and loan association, commercial bank, or life insurance company, which pools money of its depositors and then invests funds in various ways, including trust deed and mortgage loans.

42
Q

insurance company

A

Major supplier of money for large commercial loans to developers and builders.

43
Q

Intermediation

A

The process of transfer capital from those who invest funds to those who wish to borrow.

44
Q

Intermediation

A

The flow of funds through financial intermediaries (such as banks and thrifts) on its way to borrowers. Money deposited at financial institutions that then make the money available to corporate borrowers is an example of intermediation.

45
Q

Loan-to-Value Ratio (LTV)

A

The relationship between the loan amount and the sales price or appraised value of the property, whichever is less. – The percentage of appraised value to the loan.

46
Q

monetary policy

A

The actions taken by the federal government to influence the availability and cost of money and credit as a means of promoting national economic goals.

47
Q

Mortgage Banker

A

A financial institution that usually originates and funds its own loans, which may then be sold on the secondary market. Also called Mortgage Banking Company. – A person whose principal business is the originating financing, closing, selling, and servicing of loans secured by real property for institutional lenders on a contractual basis.

48
Q

mortgage loan disclosure statement

A

A statement that informs the buyer of all charges and expenses related to a particular loan.

49
Q

mortgage yield

A

The amount received or returned from an investment expressed as a percentage.

50
Q

mortgage-backed securities

A

Pools of mortgages used as collateral for the issuance of securities in the secondary market.

51
Q

Mrs. Murphy Exemption

A

A nickname for the Fair Housing Act exemption for the rental of a unit or a room in an owner-occupied dwelling with four units or less. This exemption is provided only when rental advertising is not discriminatory, a real estate agent is not involved, and there is no discrimination based on race or color. Not recognized in all states.

52
Q

Net Operating Income (NOI)

A

Net income after all operating expenses have been deducted.

53
Q

Net to Seller

A

An estimate of the money a seller should receive from a real estate transaction based on a certain selling price after all costs and expenses have been paid. Also called Seller’s Net.

54
Q

Nonpublic Personal Information

A

A consumer’s personal financial information that would not be easily obtainable by the general public, such as credit reports, bank accounts, transactions.

55
Q

Pass-Through

A

An additional operating cost that is passed from a property owner to a tenant, such as when property taxes go up.

56
Q

Portfolio Lenders

A

Financial institutions that make real estate loans that they keep and service in-house instead of selling them on the secondary markets.

57
Q

Predatory Lending

A

Loan tactics that take advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, or frequent refinancing that does not benefit the borrower.

58
Q

Primary Market

A

A financial domain in which various entities—including banks and other financial institutions—produce and issue new securities, such as stocks, bonds, and mortgage loans. Lenders make mortgage loans by lending directly to borrowers.

59
Q

Real Estate Investment Trust (REIT)

A

A company that owns and often operates income-producing real estate; it is organized as a trust with the investors as the beneficiaries. A special arrangement under federal and state law whereby investors may pool funds for investments in real estate and mortgages and yet escape corporation taxes, profits being passed to individual investors who are taxed.

60
Q

Real Estate Settlement Procedures Act (RESPA)

A

A federal law requiring disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphletand forms prescribed by the United States Department of Housing and Urban Development.

61
Q

Reasonable Accommodation

A

Any change or modification in the environment or the way things are customarily accomplished (e.g., rules, services, policies) that enables a qualified individual with a disability to enjoy equal opportunities.

62
Q

Redlining

A

When a lender refuses to make loans secured by property in a certain neighborhood because of the racial or ethnic composition of the neighborhood. (1) The illegal lending policy of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, because of alleged higher lending risks, without due consideration being given by the lending institution to the creditworthiness of the individual loan application. (2) The illegal use of a property’s location to deny financing.

63
Q

Sale-and-Leaseback

A

A method for financing commercial or industrial properties in which a company constructs the building, and then becomes a tenant by selling the building to an investor. A financial arrangement where at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser. The seller receives cash while the buyer is assured a tenant and a fixed return on buyer’s investment.

64
Q

Savings and Loan Association

A

An institution whose primary function is to promote thrift and homeownership. All savings and loan associations must be chartered, either by the federal government or by the state in which they are located. Federally chartered savings and loan associations are owned by the depositors. Deposits are insured by the Federal Deposit Insurance Corporation (FDIC).

65
Q

Secondary Financing

A

When a buyer borrows money from another source in addition to the primary lender to pay for part of the purchase price or closing costs; usually requires a subordination agreement.

66
Q

Secondary Market

A

A financial domain in which investors buy and sell securities—such as stocks, bonds, or mortgage loans—that were created in the primary market. The buying and selling of existing mortgages.

67
Q

Section 203(b)

A

FHA Loan The standard FHA-insured loan program. There are no income limits on this type of loan. The borrower must meet all FHA qualifying standards, and the property cost must not exceed the maximum FHA mortgage amounts.

68
Q

Section 502

A

Loan Loan program through the U.S. Department of Agriculture that either guarantees loans made by approved private lenders or makes direct loans if no local lender is available.

69
Q

Securitization

A

The act of pooling mortgages and then selling them as mortgage-backed securities.

70
Q

Servicing

A

The process of collecting loan payments, keeping records, and handling defaults.

71
Q

servicing loans

A

Supervising and administering a loan after it has been made. This involves such things as collecting the payments, keeping accounting records, computing the interest and principal, foreclosure of defaulted loans, and so on.

72
Q

Tester

A

A person working with a fair housing organization who pretends to be interested in buying or renting property from someone suspected of unlawful discrimination. Also called Checker.

73
Q

Tie-In Agreement

A

An antitrust violation in which one transaction or agreement is contingent on a second transaction or agreement. Also called Tying Agreement.

74
Q

tight money

A

An economic situation in which the supply of money is limited, and the demand for money is high, as evidenced by high interest rates.

75
Q

TRID Rule

A

The TILA-RESPA Integrated Disclosure rule, issued by the Consumer Financial Protection Bureau to create standardized, consumer-friendly disclosure documents, including the Loan Estimate and the Closing Disclosure.

76
Q

Underwriter

A

Individual who evaluates a loan application to determine its risk level for a lender or investor; final decision maker on a loan application.

77
Q

Underwriting

A

The process of evaluating and deciding whether to make a new loan and on what terms.

78
Q

Variable Expense

A

Operating expense necessary to the property, but dependent on the property’s occupancy level.

79
Q

Warehousing

A

The process of assembling into one package a number of mortgage loans, prior to selling them to an investor.

Real Estate Principles - Vocab (15 decks)

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