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Alpha Real Estate > Chapter 12: Mortgage Markets and Lender Regulations > Flashcards

Chapter 12: Mortgage Markets and Lender Regulations Flashcards

1
Q

What is the primary market?

A

Where loans are originated directly to buyers

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2
Q

What is the main source for funding for home loan mortgage markets (S&L’s)?

A

Savings and loans associations.

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3
Q

All savings and loan associations must be chartered by who?

A

Either the Federal government or state or the state they are in

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4
Q

Who manages the S&L’s and commercial bank deposits?

A

FDIC (Federal Deposit Insurance Corporation)

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5
Q

Who ensures the S&L deposits?

A

Savings Association Insurance Fund (SAIF)

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6
Q

What is the purpose of FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act)?

A

Responded to the S&L crisis. Restructured the S&L regulatory system

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7
Q

What does the Office of Thrift Supervision do?

A

Also monitors and regulates S&Ls.

Required S&Ls to keep 70% of their loan portfolio in housing-related loans

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8
Q

What does the Federal Reserve do?

A

Regulates the flow of money and interest rates in the market place indirectly by controlling discount rates and reserve requirements

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9
Q

Who manages the deposits in the Federal Reserve?

A

Federal Deposit Insurance Corporation

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10
Q

Who insures the deposits in the Federal Reserve?

A

Bank Insurance Fund

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11
Q

What are Mutual Savings Banks?

A

They operate like S&Ls and are located primarily in the North East of USA

  1. They issue no stocks
  2. Are mutually owned by their investors
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12
Q

What are life insurance companies?

A

They amass large sums of money from the premiums paid by their policy holders.

  1. Portion is held in reserve
  2. The rest is invested
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13
Q

What do most insurance companies like to invest their loans in?

A

Large, long term loans that finance commercial and industrial property

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14
Q

What are mortgage banking companies?

A
  1. Operate as loan correspondents
  2. They originate mortgage loans with money belonging to other institutions such as insurance companies, pension funds, or to the individual
  3. Act as the liaison between buyer and seller
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15
Q

What is a mortgage broker?

A

individuals who are licensed to act as intermediaries in bringing borrowers and lenders together

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16
Q

What are credit unions?

A

Cooperative organizations in which members place money in savings accounts, usually at higher interest rates than other savings institutions

17
Q

What is the secondary mortgage market?

A

The market that buys and sells loans that originated from the primary market

18
Q

What is the major source of 2nd mortgage market activity?

A

Warehousing agency

19
Q

What is Warehousing agency?

A

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:

  1. FNMA: Federal National Mortgage Association
  2. GNMA: Government National Mortgage Association
  3. FHLMC: Federal Home Loan Mortgage Corporation
20
Q

What is FNMA (Federal National Mortgage Association) also called “FANNIE MAE”?

A
  1. Quasi-governmental agency
  2. Organized as a privately owned corporation
  3. Provides 2nd market 4 VA , FHA, and Conventional L.
  4. It’s a Government Sponsored Enterprise (GSE)
  5. Regulated by FHFA (Fed. Housing Finance Agency)
21
Q

What is GNMA (Government National Mortgage Association) also known as “GINNY MAE”?

A
  1. Exists as a corporation w/o capital stock
  2. It is a division of HUD
  3. Designed to administer special assistance programs and work with FNMA in 2nd market activities
  4. Offers “subsidy” programs to construct housing specifically for low and middle income families and in areas with special needs
22
Q

What is FHLMC (Federal Home Loan Mortgage Corporation) also known as Freddie Mac?

A
  1. Provides 2nd market for VA, FHA, and conventional mortgage loans
  2. Has the authority to purchase mortgages, pool them together, and sell bonds in the open market with the mortgages as security
  3. Freddie Mac is the main secondary outlet 4 S&Ls
23
Q

What is the Federal Equal Credit Opportunity Act (ECOA)?

A

Enacted to prohibit discrimination agains credit applicants on the basis of race, color, religion, sex, national orientation, marital status, or age

24
Q

What criteria must be used for evaluating an applicant’s financial ability?

A
  1. Income
  2. Job stability
  3. Net worth
  4. Credit History
25
Q

What is TILA (Truth In Lending Law)?

A

the Act requires creditors who deal with consumers to make certain written disclosures concerning finance charges and related aspects of credit transactions

Examples include:

  1. disclosing an annual percentage rate)
  2. comply with other mandates
  3. requires advertisements to include certain disclosures. 4. requirements for credit cards and open-end credit;
  4. requirements for mortgage credit such as ability to repay standards, l
  5. requirements for loan origination, anti-steering, appraisal independence, and mortgage servicing; and others.
26
Q

What is Regulation Z?

A

protects consumers from misleading practices by the credit industry and provides them with reliable information about the “costs of credit”. Must disclose about credit costs!

27
Q

Who does Regulation Z cover?

A

All real estate that is extended to a natural person and is not used for business, commercial, or agricultural purposes.

Also personal property credit transactions over $25,000 are exempt

Not available for an owner of a dwelling containing more than 4-family housing units

Does not include a construction loan to a builder

28
Q

What re the main disclosures that are required for homes under Regulation Z?

A
  1. The loan amount
  2. The finance charge
  3. The APR
  4. The total of the payments (unless the loan is a 1st mortgage loan for the purchase of a residence)

Covers advertisements as well

29
Q

What is the finance charge?

A

The total of all costs the borrower must pay for obtaining credit such as interest, origination fee, and discount points

30
Q

What is the annual percentage rate

A

the annual rate of interest charged to borrowers and paid to investors. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan or income earned on an investment

APR= [(Fees + Interest + Principal)/# of years] ×365×100

31
Q

How long does one have to rescind the credit offer?

A

3 days unless for a residential 1st mortgage or trust deed loans

32
Q

What are the trigger terms

A
  1. Amount of % of down payment
  2. Amt of installment
  3. Any credit charge
  4. # of installments
  5. Period of repayment
33
Q

What is the penalty for Reg. Z vioation?

A
  1. Twice the amount of the finance charge or
  2. A minimum $100 or a max $1,000
  3. Court costs

Willful is $5,000 and or a year in prison

34
Q

Who enforces Regulation Z?

A

The Federal Trade Commission

35
Q

What is RESPA (Real Estate Settlement Procedures Act)?

A

Was created to ensure that the buyer and seller in a residential real estate sale or transfer have knowledge of all settlement costs

1.) Is administered by CFPB (Consumer Financial Protection Bureau)

2.) Residential real estate includes:
1-4 family homes, coops, and condos.

  1. ) RESPA only applies to purchases made through a “federally-related mortgage loan”
  2. Only applies to “new first mortgage loans”
  3. Prohibits kickbacks (unearned fees given to agents)
  4. Prohibits the charging of excessive impounds/reserves consisting of prepaid taxes, insurance, and other charges to be escrowed
36
Q

What are federally related mortgage loans

A
  1. Banks, savings, and loan associations
  2. Lenders insured by the FDIC or FSLIC
  3. Insured by FHA or guaranteed by VA
  4. Administered by HUD
  5. Intended to be sold to Fanni, Ginni, or Freddie
37
Q

What’s not covered by RESPA?

A

Transactions financed soley by:

  1. Purchase money mortgage
  2. Land contract,
  3. Contract Deed
  4. Buyer’s assumption of the seller’s existing loan
38
Q

What are kickbacks

A

When an agent gets “unearned fees” from transactions or deals

Alpha Real Estate (20 decks)

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