Chapter 13: Types of Mortgages & Sources of Financing Flashcards
Types of Mortgages
What are the three types of mortgages?
FHA insured, VA guaranteed, and conventional
When was the Federal Housing Administration (FHA) created and why was it created?
1934 to provide sound lending practices, promote home ownership, and upgrade housing standards
True or False
The FHA issues loans
False
The FHA DOES NOT make/issue loans, it INSURES loans
FHA Insured Loan Programs
What is the qualifying loan ratios for an FHA insured loan?
31% housing expense
43% total obligations
Mortgage Loan Terms (FHA)
FHA insured mortgage loans have a maximum term of ____ years.
30
VA Guaranteed Loan
When and why was the VA mortgage loan program created?
In 1944 to assist military vets w/financing the purchase of reasonably priced homes
VA Guaranteed Loan
What is the maximum loan amount on VA guaranteed loans?
No max amount
VA Guaranteed Loan
The VA mortgage loan program guarantees permanent long-term mortgage loans for _______________ residences.
owner-occupied
VA Guaranteed Loan
What are the qualifying ratio for a VA loan?
No housing expense ratio
41% Total obligations
Conventional Mortgage Loans
What qualifies a loan as a conventional loan?
Any loan not insured or guaranteed by the government
Conventional Mortgage Loans
To offset higher risk and to allow conventional lenders to compete with FHA and VA loans, _________ ________ ________ was developed.
private mortgage insurance (PMI)
Conventional Mortgage Loans
When was PMI introduced?
1957
Conventional Mortgage Loans
When does federal lending regulators require PMI?
When the loan amount exceeds 80% of the value of the property
(Loan to value ratio is above 80%)
Laws Regarding Fair Credit and Lending Procedures
Real Estate Settlement Procedures Act (RESPA)
RESPA (of 1974) covers most residential mortgage loans used to finance the purchase of _______________-family properties.
one- to four-
Laws Regarding Fair Credit and Lending Procedures
RESPA standardizes closings by:
Requiring lenders to provide a _______ _________ of _________ costs no later than 3 business days following the date of the mortgage application
loan estimate; settlement
Laws Regarding Fair Credit and Lending Procedures
RESPA standardizes closings by:
Requiring each applicant to be provided with the __________ __________ titled “Your Home Loan Toolkit” with examples of closing charges
information booklet
Laws Regarding Fair Credit and Lending Procedures
RESPA standardizes closings by:
Requiring a ___________ ____________ be completed and provide to the borrower no later than 3 business days before the closing
Closing Disclosure
Laws Regarding Fair Credit and Lending Procedures
RESPA standardizes closings by:
Prohibiting kickbacks/rebates on any transaction regulated under _______ except those defined. Kickbacks/rebates are allowed. if a service has been provided, the recipient of the fee has the __________ ____________, and all parties to the transaction have been advised of the payment.
RESPA
appropriate license
Laws Regarding Fair Credit and Lending Procedures
RESPA standardizes closings by:
Requiring a __________ _________ ________ statement that discloses to the borrower whether the lender intends to service the loan or transfer it to another lender.
mortgage servicing disclosure
Truth-in-Lending Act
The Truth-in-Lending Act is also known as the ________ ________ _____ __ _____
Consumer Protection Act of 1968
Truth-in-Lending Act
Why was the Truth-in-Lending Act enacted?
To assure consumers receive meaningful information concerning true cots of credit
Truth-in-Lending Act
What does Regulation Z, published by the Board of Governors of the Federal Reserve require?
That residential borrowers be clearly shown the cost of credit in both dollars and percentages
Primary Market
What are the components and the purpose of the primary mortgage market?
Purpose: create mortgage loans
Components: commercial bank; savings association; credit union; mortgage lenders
Its components call for the deposit of money
Secondary Mortgage Market
What is the purpose of the secondary market and what are its components?
Purpose: buy mortgage loans from primary market
Components: government agencies—FANNIE MAE; FREDDIE MACK; GINNIE MAE
Its components does not call for deposits of money
