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Real Estate Finance > Chapter 3 > Flashcards

Chapter 3 Flashcards

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1
Q

Primary market

A

where lenders make loans to home buyers

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2
Q

Secondary market

A

where lenders sell loans to investors

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3
Q

Loan origination process

A

1) Processing application
2) Approval decision
3) Funding the loan

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4
Q

Disintermediation

A

when depository institutions lose funds to higher-yielding investments

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5
Q

Secondary market activities

A

1) Buying and selling loans

2) Issuing mortgage-backed securities

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6
Q

Loan servicing

A 
Processing payments
Collections
Keeping payment records
Preventing default
(The entity that services a loan isn't necessarily the lender that originated it.)
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7
Q

Mortgage-backed securities

A

investment instruments with pools of mortgage loans as collateral. May be purchased directly from secondary market agencies or on Wall St.

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8
Q

Secondary market functions

A

Promotes home ownership and investment
Provides funds
Stabilizes primary market

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9
Q

Fannie Mae

A

Federal National Mortgage Association. Buys conventional, FHA, and VA loans from all types of lenders. Issues MBSs based on pools of conventional, FHA, or VA loans.

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10
Q

GSE / Government-sponsored enterprise

A

Created and supervised by the federal govt. but owned by private stockholders. Ex. Fannie Mae and Freddie Mac.

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11
Q

Ginnie Mae

A

Government National Mortgage Association. Wholly owned govt. corporation. Agency within HUD. Guarantees MBSs based primarily on FHA and VA loans (not conventional loans).

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12
Q

Freddie Mac

A

Federal Home Loan Mortgage Corporation. Buys conventional, FHA, and VA loans from all types of lenders. Issues MBSs based on pools of conventional, FHA, or VA loans.

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13
Q

Subprime loans

A

loans made to less creditworthy buyers

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14
Q

FHFA / Federal Housing Finance Agency

A

regulates Fannie Mae and Freddie Mac

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15
Q

Secondary market agency

A

one of the 3 govt.-created entities that buy loans and issue MBSs (or guarantees them): Fannie, Freddie, and Ginnie

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16
Q

Securitizing

A

When a secondary market agency creates MBSs by buying a large number of mortgage loans, “pooling” them together, and pledging the pool as collateral for the securities.

17
Q

Portfolio loan

A

A mortgage loan that the lender keeps in its own investment portfolio until the loan is repaid (instead of selling the loan on the secondary market).

18
Q

Conventional loan

A

A loan that is not insured or guaranteed by a govt. agency.

Real Estate Finance (4 decks)

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