Chapter 19/20 Flashcards
The __________________ is made up of lenders who originate loans. They make the money available directly to borrowers. The primary mortgage market is made of many different types of lenders and is made of many different types of leaders.
Primary mortgage market
A _________________ is a financial institution whose primary function is to promote thrift and home ownership.
Savings and loan association
A _______________________ is a financial institution whose primary function is to promote thrift and home ownership. Also known as “savings banks” or “thrifts,”
Savings and loan association
What is the purpose of a savings and loan association?
1) offer their depositors a higher rate of interest on their deposits than commercial banks offer.
2) invests at least part of their deposits in residential mortgage loans, which then allows more people to purchase and/or make repairs on their homes.
True or false: Savings banks must be either state or federally chartered.
True
__________________ savings institutions are licensed by the State of Texas and are regulated by the Department of Savings and Mortgage Lending (SML). If they are insured they also operate under the supervision of the Federal Housing Finance Board.
State-chartered
__________________ savings institutions are licensed by the Federal Housing Finance Board and regulated by the Office of Thrift Supervision. Their accounts are insured by the Savings Association Insurance Fund (SAIF) under the Federal Deposit Insurance Corporation (FDIC).
Federally insured
A ___________________ is a financial institution that is designed to act as a depository for funds and as a lender for commercial activities – usually short-term loans.
Commercial bank
True or false: Most of the funds deposited in banks are in demand accounts (personal and business checking accounts). Since this money can be withdrawn at any time by a depositor, the bank rarely uses these funds for mortgage lending. On the other hand, the depositors’ savings accounts (along with loans from other banks and bank owners’ equity) give the bank the long-term funds it needs for its investment ventures, including real estate loans.
True
___________________ banks primarily do short term loans, such as:
1) construction loans
2) home improvement loans
3) manufactured housing loans
Commercial
Commercial banks operate under a state or federal charter. The _____________________licenses state-chartered banks, while the ________________________ gives licenses to nationally-chartered banks.
Texas Department of Banking (TXDOB) , Comptroller of the Currency
___________________ make mostly short-term loans. When they do make real estate loans, they tend to be second mortgages or home improvement loans. Under the Federal Credit Union Act, credit unions have the authority to make 30-year loans to their members to finance a principal residence. They can also make FHA or VA loans at interest rates comparable to market value.
Credit unions
___________________ companies hold a major portion of the savings of the American public. Only savings and loan associations control more savings than life insurance companies do
Life insurance
_______________________ are a major source of credit for shopping centers, office buildings, hotels and motels, industrial buildings and large apartment complexes.
Life insurance companies
Life insurance companies typically invest up to _________ of their assets in real estate loans.
1/3
True or false: Texas has one of the largest dollar volumes of insurance company real estate loans of any state in the United States, second only to California. No other states even come close.
True
___________________ was formed in 1960 by federal tax law.
Real Estate Investment Trust (REIT)
The goal of the _______________________ was to influence small investors to combine their resources with others to raise venture capital for real estate transactions.
Real Estate Investment Trust (REIT)
__________________ are exempt from corporate tax if they invest at least 75 percent of their assets in real estate and distribute 95 percent or more of their annual real estate income to their investors.
Real Estate Investment Trusts (REIT)
________________ prefer to target their lending activities towards land development projects and permanent financing for condominiums, high rises, warehouses, office complexes, single-family subdivisions and other major projects. They concentrate on income-producing properties and generally diversify their holdings both with regard to property type and geographical location.
Real Estate Investment Trusts (REIT)
True or false: The loan departments of many banks are also involved in originating and servicing loans for other lenders. When so doing, they act as mortgage bankers and can represent life insurance companies, real estate investment or mortgage trusts and, in some cases, other banks. When performing these activities, the bank will get an origination fee plus a percentage for servicing the account.
True
According to the _______________________________, any individual “acting as or engaged in the business of a residential mortgage loan originator” must have a valid mortgage loan originator license.
Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 (Texas SAFE Act)
Lenders who lend money directly to borrowers make up what is known as the ____________________.
Primary mortgage market
Loans originated in the primary mortgage market can be bought, sold or traded in the __________________.
Secondary mortgage market