Chapter 13 Flashcards
What are the two types of nonconventional loans?
FHA and VA loans
Where does most of the money paid in payments at the beginning of a fixed rate amortized mortgage go to?
Interest
Where does most of the money paid in payments at the end of a fixed rate amortized mortgage go to?
Principal
Finish this sentence: FHA is a government_________ loan.
Insured
Finish this sentence: VA is a government__________ loan.
Guaranteed
What are the two components of an adjustable-rate mortgage?
- The index 2. The margin
Which of the components of an adjustable-rate mortgage is the economic indicator that adjusts?
The index
Is there a pre-payment penalty for FHA and VA loans?
No
Can the spouse of a veteran use the VA benefit?
Yes, unless she remarries. If she remarries, then the benefit is not available to her
Which nonconventional loan is accompanied by a funding fee?
VA loan
What is a purchase money mortgage?
A purchase money mortgage is seller financing. It’s when the buyer gets a loan from the seller and it’s a real mortgage that is recorded
What kind of mortgage requires a balloon payment at the end?
A partially amortized mortgage
What kind of mortgage is paid off at the end and does not require any additional payments?
An amortized mortgage
What kind of mortgage occurs when the mortgage payments are not large enough to cover the interest expense and the loan balance increases and the borrower owes more at the end than they originally borrowed?
Negative amortization
What entity is the largest contributor in the secondary mortgage market?
Fannie Mae
What is the secondary mortgage market?
The secondary mortgage market is an investors market where loans are bought and sold. These loans were originated in the primary mortgage market
What is the purpose of the secondary mortgage market?
The purpose of the secondary mortgage market is to provide liquidity/cash flow to the primary mortgage market.
Who regulates the money supply by altering the cost of credit?
The Federal Reserve System, (The Fed)
What does the Truth in Lending Act, (TILA) state?
TILA states that consumers must be given the true cost of credit, in writing, before borrowing
What is the Federal Reserve rule that implements how TILA is applied?
Regulation Z
What law regulates kickbacks?
Real Estate Settlement Procedures Act, (RESPA)
What is the Federal Reserve rule that implements how RESPA is applied?
Regulation X
