Chapter 12: Mortgage Markets and Lender Regulations Flashcards
What is the primary market?
Where loans are originated directly to buyers
What is the main source for funding for home loan mortgage markets (S&L’s)?
Savings and loans associations.
All savings and loan associations must be chartered by who?
Either the Federal government or state or the state they are in
Who manages the S&L’s and commercial bank deposits?
FDIC (Federal Deposit Insurance Corporation)
Who ensures the S&L deposits?
Savings Association Insurance Fund (SAIF)
What is the purpose of FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act)?
Responded to the S&L crisis. Restructured the S&L regulatory system
What does the Office of Thrift Supervision do?
Also monitors and regulates S&Ls.
Required S&Ls to keep 70% of their loan portfolio in housing-related loans
What does the Federal Reserve do?
Regulates the flow of money and interest rates in the market place indirectly by controlling discount rates and reserve requirements
Who manages the deposits in the Federal Reserve?
Federal Deposit Insurance Corporation
Who insures the deposits in the Federal Reserve?
Bank Insurance Fund
What are Mutual Savings Banks?
They operate like S&Ls and are located primarily in the North East of USA
- They issue no stocks
- Are mutually owned by their investors
What are life insurance companies?
They amass large sums of money from the premiums paid by their policy holders.
- Portion is held in reserve
- The rest is invested
What do most insurance companies like to invest their loans in?
Large, long term loans that finance commercial and industrial property
What are mortgage banking companies?
- Operate as loan correspondents
- They originate mortgage loans with money belonging to other institutions such as insurance companies, pension funds, or to the individual
- Act as the liaison between buyer and seller
What is a mortgage broker?
individuals who are licensed to act as intermediaries in bringing borrowers and lenders together
What are credit unions?
Cooperative organizations in which members place money in savings accounts, usually at higher interest rates than other savings institutions
What is the secondary mortgage market?
The market that buys and sells loans that originated from the primary market
What is the major source of 2nd mortgage market activity?
Warehousing agency
What is Warehousing agency?
An agency that purchases a number of mortgage loans and assembles them into one or more packages of loans for resale to investors.
The 3 major warehousing agencies are:
- FNMA: Federal National Mortgage Association
- GNMA: Government National Mortgage Association
- FHLMC: Federal Home Loan Mortgage Corporation
What is FNMA (Federal National Mortgage Association) also called “FANNIE MAE”?
- Quasi-governmental agency
- Organized as a privately owned corporation
- Provides 2nd market 4 VA , FHA, and Conventional L.
- It’s a Government Sponsored Enterprise (GSE)
- Regulated by FHFA (Fed. Housing Finance Agency)
What is GNMA (Government National Mortgage Association) also known as “GINNY MAE”?
- Exists as a corporation w/o capital stock
- It is a division of HUD
- Designed to administer special assistance programs and work with FNMA in 2nd market activities
- Offers “subsidy” programs to construct housing specifically for low and middle income families and in areas with special needs
What is FHLMC (Federal Home Loan Mortgage Corporation) also known as Freddie Mac?
- Provides 2nd market for VA, FHA, and conventional mortgage loans
- Has the authority to purchase mortgages, pool them together, and sell bonds in the open market with the mortgages as security
- Freddie Mac is the main secondary outlet 4 S&Ls
What is the Federal Equal Credit Opportunity Act (ECOA)?
Enacted to prohibit discrimination agains credit applicants on the basis of race, color, religion, sex, national orientation, marital status, or age
What criteria must be used for evaluating an applicant’s financial ability?
- Income
- Job stability
- Net worth
- Credit History
