Chapter 4

Question 1

Loan origination

Answer 1

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.

Question 2

Retail lending

Answer 2

the lender deals directly with the borrower. aka retail loans or direct lending.

Question 3

Loan originator

Answer 3

the person who helps buyers apply for a loan

Question 4

Loan officer

Answer 4

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.

Question 5

Wholesale lending

Answer 5

the borrower deals with a loan correspondent, who represents the lender

Question 6

Mortgage brokers and loan correspondents…

Answer 6

…find borrowers for wholesale lenders

Question 7

Table-funded loan

Answer 7

a mortgage broker stays involved in the lending process all the way to closing, even naming itself as the originating lender.

Question 8

Service release premium

Answer 8

a mortgage broker’s commission for originating the loan

Question 9

S.A.F.E. / Secure and Fair Enforcement for Mortgage Licensing Act

Answer 9

• 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

Question 10

Types of mortgage lenders in the primary market

Answer 10

• 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.

Question 11

Investment banks

Answer 11

securities firms involved in corporate finance

Question 12

Financial Services Modernization Act

Answer 12

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.)

Question 13

Independent mortgage companies

Answer 13

mortgage companies that aren’t associated with a bank or a thrift

Question 14

Mortgage banker

Answer 14

a type of lender. takes buyer’s application, makes underwriting decision, and funds loan

Question 15

Mortgage broker

Answer 15

an intermediary, not a lender. Helps buyer choose and apply for a loan.

Question 16

Usury

Answer 16

limits on interest rates for certain types of loans

Question 17

Housing bubble

Answer 17

an artificial increase in property values

Question 18

Piggyback loans

Answer 18

primary and secondary loans from the same lender that equaled the total purchase price of the home, meaning no downpayment was required.

Question 19

HERA / Housing and Economic Recovery Act

Answer 19

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

Question 20

TARP / Troubled Asset Relief Program

Answer 20

$700 billion bailout law

Question 21

American Recovery and Reinvestment Act of 2009

Answer 21

economic stimulus bill, designed to create jobs and promote both investment and consumer spending. Also a temporary tax credit to home buyers.

Question 22

Dodd-Frank Wall Street Reform and Consumer Protection Act

Answer 22

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

Question 23

FIRREA / Financial Institutions Reform, Recovery, and Enforcement Act

Answer 23

reorganized the federal agencies that oversee financial institutions. enacted in response to S&L crisis.