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Real Estate 1 > Deck 2 > Flashcards

Deck 2 Flashcards

1
Q

Rural economic and community development (RECD)

A

Loans for homes or construction in rural areas and small communities

Direct loans from RECD Having population of 200,000 or less or by private lender with RECD guaranteeing certain percentage

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2
Q

Debt coverage ratio

A

Ratio of annual net income to annual debt service

Example: lender may require that qualified corporate borrower have net income of 1.5x the debt service of loan being approved

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3
Q

Abstract and opinion

A

Condensed history that merely discloses those items about property that are of public record

Consecutive grants, conveniences, wills, records, judicial proceedings affecting title with statement of all recorded liens and encumbrances

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4
Q

Mortgage to income ratio

A

Ratio between the monthly housing expense and stable monthly income

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5
Q

Chain of title

A

Recorded history of matters that affect title to a specific parcel of real estate, such as ownership, encumbrances, and liens

Shows successive change of ownership, each one link to the next so “chain” is formed

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6
Q

Title Insurance

A

Protects a policyholder against loss from some occurrence that has already happened, such as forged dead somewhere in chain of title

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7
Q

Non-recourse loan

A

Power is not held personally liable on the note
Lender generally feels confident that collateral property will be adequate security for loan

(If collateral sells for less lender cannot seek deficiency balance from borrower)

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8
Q

Non-recourse clause

A

When included in sales agreement, the seller of the security IS NOT Liable if borrower defaults

If lender forecloses, borrower will not be personally liable beyond collateral pledge for loan

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9
Q

Default

A

The non-performance of a duty/obligation that’s part of a contract

Normally “breach of contract” and defaulting party can seek legal remedies to recover any loss.

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10
Q

Conditional approval

Conditional/qualified commitment

A

Written pledge by lender to lend certain amount of money to qualified borrower on particular property for a specific time under specific terms

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11
Q

Underwriting

A

Underwriting a loan includes the process of preparing the terms & conditions of the loan and determining borrowers ability to repay.

Analysis of the extent of risk assumed in connection with the loan

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12
Q

Appraisal fees

A

Typically based on TIME AND EXPENSES

NEVER based on a percent of appraisal value

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13
Q

Estoppel certificate

A

Legal doctrine by which a person is prevented from asserting rights/facts that are inconsistent with previous representation by act, conduct or silence

(Can’t go back on your act, conduct or silence)

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14
Q

Exculpatory clause

A

When lender waves rights to a deficiency judgment. Sometimes inserted in mortgage note

(Power to surrender property to lender without further personal liability for deficiency)

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15
Q

Impounds

A

Also, buyers escrow

Fund of buyers money that lender sets aside for future needs relating to property

Impound account simply mortgage company to collect insurance tax payments necessary to keep your home not technically part of a mortgage

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16
Q

Disintermediation

A

To withdraw funds from financial institute, such as bank and savings to invest them directly

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17
Q

Savings and loans

A

Specialize in long-term residential loans

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18
Q

Banks

A

Make short term loans but becoming more active in home, FHA, and VA loans

Example of short term loans car, mobile home, household loan

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19
Q

Insurance companies

A

Prefer large commercial loans, but will make residential loans. Like to have equity position sometimes partners with developers “participation financing”

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20
Q

Participation financing

A

Mortgage in which lender participates in income of property beyond to fix return/receives yield on a loan

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21
Q

Mortgage broker

A

Person, corporation, firm – not otherwise banking and finance – that either provide own funds, negotiates, sales, or arranges loans for compensation

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22
Q

Mutual savings banks

A

Also lenders in primary market

Primarily in eastern states

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23
Q

The federal reserve system/the fed

A

“The fed” central banking system to manage nations economy. Each 12 districts is secured by federal reserve bank. “Fed “has great impact on real estate investment through various functions

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24
Q

Reserves

A

The amount of money “assets “banks are required to keep on hand.

Takes 30 to 60 days to have an effect on the market

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25
Q

Discount rates

A

The rate at which the “Fed” charges banks for money. This influences economy much more quickly – almost overnight in some areas

26
Q

Buying – selling securities (Bonds)

A

“The Fed quote is buying or selling bonds

Buying= more money in the market, low interest, economy is stimulated

Selling= less money in the market, rise in interest, economy is slowed

Six months- one year to have affect on economy

27
Q

Lending laws

A

For consumer protection and lending

28
Q

Secondary mortgage market

A

Purpose is to provide liquidity (funds) for primary market (institutional lenders)

Lender seller notes and second mortgage market to free up money so they can make more loans

**Provide funds for primary market(lenders)

Fannie Mae
Ginnie Mae
Freddie Mac

29
Q

Federal national mortgage association

Or Fannie Mae- FMMA

A
  • Largest purchaser and secondary market
  • buys FHA, VA, and conventional loans

– privately owned, established 1938

30
Q

Government national mortgage association or Ginnie Mae-GNMA

A

-Buys FHA and VA loans

– controlled by an agency of Department of HUD

In Tatum means when Fannie Mae and Ginnie Mae work together

31
Q

Federal home loan mortgage Corporation or Freddie Mac NFHLMC

A

Buys conventional loans

32
Q

Depository institutions

A

In California mortgage market, traditional loan sources are:

Savings and loans, savings or commercial banks, thrift and loans, and credit unions

33
Q

California real estate lenders into three major categories

A
  1. institutional lenders: there are three types:, commercial banks, savings banks, and life insurance companies
  2. Non-institutional lenders: Mortgage lenders, REIT’s, credit unions, private lenders and pension funds
    3.Government backed programs:
    FHA, VA and Calvet
34
Q

Conventional loans

A

NO GOVERNMENT GUARANTEES OR INSURES.

  1. Obtained at local savings & loan, mortgage brokers, & mortgage bankers
  2. Minimum down payment of 20%, unless buyer gets PMI
  3. Most packaged by lenders and sold in secondary mortgage market

No guarantees if you fail to repay the loan

35
Q

Conventional Insured Loans

A

No government guarantees insurance but Instead from private insurance companies

(Insurance paid by borrower backed by private lenders)

36
Q

Private Mortgage Insurance (PMI)

A

Insurance provided by a private insurer that protects the lender against loss in an event of foreclosure & deficiency.

PMI Required for all loans with less than 20% down

37
Q

Mortgage Guarantee insurance corporation (MGIC)

A

Largest private insurance

38
Q

Syndicate Equity Financing

A

Syndicates offer small investors opportunities to invest in high-yield real estate

39
Q

Commercial Loan

A

A straight bank loan that borrowe obtains based of good credit or some non real property collateral

40
Q

Bond or Stocks

A

Some large corporations sell stocks or general obligation bonds so they may buy real property without mortgage

41
Q

Exchange

A

Trade or property of equal or lesser value

42
Q

Sale- Leaseback

A

Owner sells then leases back from purchaser.

More common in commercial deals to free up money

43
Q

Sales contract (not popular in Cali)

A

Also, installment sale contract or land contract

Seller agrees to convey title after buyer has met certain conditions & which does not require conveyance within a year

Used in a case when buyer can only make small down payment and “rent”

44
Q

Long term lease

A

Good if property is usable as. 100% of rent being deductible as expenses & tenants total debt load remains the same

45
Q

Real estate syndicate

A

Several investors combine skill, resources and capital to purchase and manage property they otherwise couldn’t afford

46
Q

Originations phase

A

Of syndication… planning and buying the property, following registration and disclosure mandates etc..

47
Q

Operation phase

A

Of syndication… which sponsor generally manages BOTH the syndicate and the real property

48
Q

Completion or liquidation phase

A

Of syndication…. the property’s resale

49
Q

The corporate form

A

Allows for both centralized management and limited liability for the investors. Downside, has negative tax features that make it unappealing for modern syndicates.

50
Q

The general partnership or joint venture

A

Avoids the double taxation
Downside there is on unlimited liability provision as well as lack of centralized management.
-when one person has unlimited liability and the rest have limited

51
Q

Limited Partnership

A

Limited liability and centralized management.

52
Q

The limited liability company

A

Added in 1994, includes a liability limitation not unlike that offered to corporate shareholders

53
Q

Real estate investment trust (REIT)

A

Requires minimum of 100 investors who invest in an Assorted portfolio for real estate and mortgage investments.
Sells securities specializing in real estate ventures

Two types – equity trust and mortgage trust

54
Q

The department of corporations

A

Regulates all real estate investment trusts and has authority to grant either a permit or an exemption in deciding whether given form of business for pooling investment money constitutes a securities offering

55
Q

Equity trust

A

Companies that invest in real estate itself or in several real estate projects

56
Q

Mortgage trust

A

Company that invest in mortgage and other types of real estate loans/obligations

57
Q

Combination trusts

A

Engage in both equity and mortgage trust investments

58
Q

Call if Acacian as a trust

A
  1. REIT Must be been officially owned by 100 investors.
    * 2.No five or fewer persons may hold more than 50% of beneficial interest.
  2. Transferable shares/certificates of interest must prove the beneficial interest.
  3. In California each share/certificate of interest must carry with it and equivalent vote.
59
Q

Professional management

A

Is considered essential to a successful syndication

60
Q

Real estate syndicate act

A

1970

Turned the regulation of all our REITS to the Department of corporations

Real Estate 1 (3 decks)

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