Chapter 15: Financing II: Primary and Secondary Markets

Question 1

an acronym to remember the six items that the lender must obtain before issuing a Loan Estimate (LE)

• Address of the subject property
• Loan amount
• Income
• Estimate of property value
• Name of borrower(s)
• Social Security Number

Answer 1

ALIENS

Question 2

a mortgage covering more than one parcel of real estate

Answer 2

blanket mortgage

Question 3

straight loan for short building period

Answer 3

construction loan

Question 4

cooperative organization for saver and borrowers

Answer 4

credit union

Question 5

(formerly Federal Home Loan Mortgage Corporation), sets standards and buys mortgages

Answer 5

Fannie Mae

Question 6

(Federal Home Loan Mortgage Corporation), warehouses packages or mortgages

Answer 6

Freddie Mac

Question 7

(Government National Mortgage Association), Pools mortgages for investors

Answer 7

Ginnie Mae

Question 8

additional financing for homeowner; type of second mortgage

Answer 8

home equity loan

Question 9

bridge or swing loan to cover the gap between the purchase of a new home and sale of the old one

Answer 9

interim financing

Question 10

loan for a higher amount than those generally bought by the secondary market

Answer 10

jumbo loan

Question 11

a 3-page, TRID required document that itemizes important details of the mortgage loan; lender must provide the borrower within 3 business days after recieving the borrower’s intent to proceed

Answer 11

Loan Estimate (LE)

Question 12

institution set up to make mortgage loans

Answer 12

mortgage banker

Question 13

agent who brings together lender and borrower for a fee

Answer 13

mortgage broker

Question 14

a mortgage loan that is expandable back to its original amount after the principal has been reduced

Answer 14

open-end mortgage

Question 15

mortgage covering both real and personal property

Answer 15

package mortgage

Question 16

loan not intended for sale in the secondary market

Answer 16

portfolio loan

Question 17

lenders who make individual loans directly to borrowers

Answer 17

primary mortgage market

Question 18

a note secured by a mortgage given by a buyer, as a mortgagor, to a seller as a mortgagee. Also any mortgage for purchase rather than refinancing

Answer 18

purchase-money mortgage

Question 19

percentage of income a borrower is allowed to spend on mortgage payments

Answer 19

qualifying ratio

Question 20

implements the Truth in Lending Act

Answer 20

Regulation Z

Question 21

mortgage through which an elderly homeowner can draw against equity, building up a gradual debt with no repayment until moving out

Answer 21

reverse mortgage

Question 22

a transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premise

Answer 22

sale-leaseback

Question 23

a mortgage loan in which the lender in exchange for a loan with a favorable interest rate, participates in the profits (if any) the mortgagor receives when the property is eventually sold

Answer 23

shared equity mortgage

Question 24

words in an advertisement that require disclosure of all financing conditions

Answer 24

triggering terms

Question 25

an acronym for the rule that combines the disclosure required by the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA)

Answer 25

TRID

Question 26

a federal law that obligates a lender to fully disclose in writing all fees, terms and conditions associated with obtaining credit

Answer 26

Truth in Lending Act

Question 27

process of deciding whether to make a specific loan

Answer 27

underwriting

Question 28

an additional mortgage in which another lender refinances a borrower by lending an amount including the existing first mortgage amount without disturbing the existence of the first mortgage

Answer 28

wrap around mortgage