Chapter 4 Flashcards
Loan origination
the processing of a loan application, including collecting all the necessary info about the borrower and submitting the required documentation to the lender for review.
Retail lending
the lender deals directly with the borrower. aka retail loans or direct lending.
Loan originator
the person who helps buyers apply for a loan
Loan officer
an employee of the lender who helps the buyers decide what type of financing they want and help them prepare their application. A loan originator working for a particular lender.
Wholesale lending
the borrower deals with a loan correspondent, who represents the lender
Mortgage brokers and loan correspondents…
…find borrowers for wholesale lenders
Table-funded loan
a mortgage broker stays involved in the lending process all the way to closing, even naming itself as the originating lender.
Service release premium
a mortgage broker’s commission for originating the loan
S.A.F.E. / Secure and Fair Enforcement for Mortgage Licensing Act
- requires loan originators to be registered or licensed.
- requires all states to comply with standard reporting requirements and use uniform license application forms for state-licensed loan originators
- increases the tracking and reporting of loan originator info (background checks and fingerprinting, employment history, and disciplinary actions across state lines
- imposing fiduciary duties on all loan originators
- enhancing consumer protection and anti-fraud measures
Types of mortgage lenders in the primary market
- Commercial banks (typically don’t make many home mortgage loans)
- Thrift institutions (S&L and saving banks)
- Credit Unions (a nonprofit depository institution that serves the members of a particular group)
- Mortgage companies (aka mortgage bankers) are not depository institutions.
Investment banks
securities firms involved in corporate finance
Financial Services Modernization Act
became legal for a holding company to have a bank, a securities firm, and an insurance company as subsidiaries. aka Gramm-Leach-Bliley Act. (A holding company is basically a corporate entity created for the purpose of owning other companies.)
Independent mortgage companies
mortgage companies that aren’t associated with a bank or a thrift
Mortgage banker
a type of lender. takes buyer’s application, makes underwriting decision, and funds loan
Mortgage broker
an intermediary, not a lender. Helps buyer choose and apply for a loan.
Usury
limits on interest rates for certain types of loans
Housing bubble
an artificial increase in property values
Piggyback loans
primary and secondary loans from the same lender that equaled the total purchase price of the home, meaning no downpayment was required.
HERA / Housing and Economic Recovery Act
federal law passed to strengthen the housing market.
- established a tax credit for first-time home buyers
- provided neighborhood revitalization funds that communities could use to purchase foreclosed homes
- reformed the FHA lending program by increasing FHA loan limits
- strengthened the regulation of and provided more capital to Fannie and Freddie
- set out new rules for mortgage disclosures
- established the HOPE for Homeowners Program
TARP / Troubled Asset Relief Program
$700 billion bailout law
American Recovery and Reinvestment Act of 2009
economic stimulus bill, designed to create jobs and promote both investment and consumer spending. Also a temporary tax credit to home buyers.
Dodd-Frank Wall Street Reform and Consumer Protection Act
sweeping changes to the govt.’s financial regulatory scheme.
- Regulatory oversight. Created the CFPB, Consumer Financial Protection Bureau
- Liquidation authority
- Risk retention
- Mortgage Reform and Anti-Predatory Lending
FIRREA / Financial Institutions Reform, Recovery, and Enforcement Act
reorganized the federal agencies that oversee financial institutions. enacted in response to S&L crisis.
