Chapter 16: Types and Sources of Mortgage Money Flashcards
Adjustable Rate Mortgage (ARM)
A mortgage loan with a calculated interest rate that may increase or decrease during the term of the loan
Amortized Mortgage
A mortgage loan that is fully repaid according to a periodic and consistent schedule that includes both principal and interest
Balloon Payment
A final installment payment on a note that is much larger than the previous monthly payments on the note
Biweekly Mortgage
Mortgage payments that are made every other week (26 payments a year)
Blanket Mortgage
A mortgage that is secured by two or more items of real property
Conforming Loan
A loan that meets FNMA and FHLMC borrowing requirements
Disintermediation
When depositors withdraw money from savings for direct investment with a borrower
Home Equity Loan
A mortgage secured by a personal residence up to the value of the mortgagor’s equity
Index
Financial indicator that will be the basis for an adjustable rate mortgage interest fluctuations
Intermediation
The process of depositing funds in financial institutions that serve as “intermediaries” for flow of funds for investment and borrowing
Land Contract
An agreement in which the seller of real estate obligates itself to deliver a merchantable title to the buyer upon buyer’s performance of certain agreed conditions such as payment of a certain number of installment payments; Also known as a Contract for Deed.
Level Payment Plan
A method for amortizing a mortgage whereby the borrower pays the same amount each month
Lifetime Cap
Sets the upper and lower interest limits for an adjustable rate mortgage
Margin
The additional rate of interest charged over and above the index rate in an adjustable rate mortgage
MIP
Mortgage Insurance Premium; payment for mortgage insurance which protects the lender in the event of default
Negative Amortization
When the monthly payment is insufficient to pay the accumulated interest for that month, resulting in an increase in the amount of the principal
Nonconforming Loan
A loan that does not meet FNMA and FHLMC borrowing requirements
Package Mortgage
A debt secured by pledge of both real property and personal property such as range, refrigerator or furniture
Partially Amortized Mortgage
Mortgage loan repayment with equal monthly payments, but there is a large balloon payment due at the end of the term
Periodic Cap
Limits the time period interval for ARM interest rate adjustments
Private Mortgage Insurance (PMI)
Non-governmental mortgage insurance needed to insure the portion of the mortgage balance that exceeds an 80% loan to value ratio
Purchase money mortgage
A mortgage given by the buyer as part or all of the purchase price consideration for real property
Reverse annuity mortgage
A loan arrangement in which a lender makes payments to the borrower
Teaser rate
Below-market introductory rate for an adjustable rate mortgage
Term mortgage
A mortgage loan that provides for periodic payments of interest only, with a balloon payment at the end of the loan term
UFMIP
Up Front Mortgage Insurance Premium; lump sum mortgage insurance premium paid at closing for FHA loans
If the Federal Reserve System sells securities from its inventory, what will happen to interest rates and the supply of money in circulation?
Interest rates will rise and the supply of money in circulation will be reduced
In a fully amortized mortgage, although the monthly payment stays the same, the portion of each monthly payment that is applied to reduce the principal debt:
Increases each month
Michael earns $4,000 per month (gross) and has a car payment of $600. He is applying for mortgage that will have monthly PITI of $1,100. How much is his total obligations ratio?
PITI + Other obligations / MGI = 42.5%
The Federal Truth in Lending Act is governed by Regulation:
Federal Reserve Regulation Z
Which of the following secondary mortgage market agencies is a government agency?
Government National Mortgage Association
What are the qualifying ratios for a conventional loan?
28% housing expense ratio
36% total obligations ratio
Christina has entered into a mortgage for a condominium that she intends to rent on a weekly basis. The lender has accepted a mortgage that covers the condominium plus all its furnishings. Which type of mortgage has Christina entered into?
Package Mortgage
A below-market interest rate offered on adjustable rate mortgages utilized to attract new borrowers is known as the:
Teaser rate
The amount of a VA guarantee on a mortgage loan depends on
The amount of the loan
The component of an adjustable rate mortgage that remains constant throughout the term of the loan is the:
Margin
All of the following are sources of lendable funds for mortgages, except:
A Credit unions B Savings associations C Life insurance companies D Federal Reserve System
Federal Reserve System
A person borrowing money directly from the owner of the funds is an example of:
Disintermediation
What is the association known as “Fannie Mae”?
Federal National Mortgage Association
Which type of mortgage requires an upfront mortgage insurance payment plus a monthly mortgage insurance payment?
FHA
