Finance 4 - The Secondary Mortgage Market

Question 1

System by which Fannie Mae adjusts required yields in accordance with market factors and its financial needs.

Answer 1

administered price system

Question 2

A type of mortgage-backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities, called tranches. The repayments from the pool of pass-through securities are used to retire the bonds in the order specified by the bonds’ prospectus.

Answer 2

collateralized mortgage obligation (CMO)

Question 3

A loan that meets the dollar amount limit set b Fannie Mae and Freddie Mac guidelines.

Answer 3

conforming loan

Question 4

Fannie Mae’s automated underwriting system for independent mortgage broker/agents.

Answer 4

Desktop Originator (DO)

Question 5

Fannie Mae’s automated underwriting system for lending services

Answer 5

Desktop Underwriter (DU)

Question 6

A government-supervised enterprise established to purchase any kind of mortgage loan in secondary mortgage market from the primary lenders.

Answer 6

Fannie Mae

Question 7

A source, for member institutions, of low cost funds when needed for liquidity to meet reserve requirement or have funds to lend. These borrowings are called “advances” and are secured by pledged loans already in their portfolio.

Answer 7

Federal Home Loan Bank (FHLB)

Question 8

Created in 2008 under the Housing and Economic Recovery Act to oversee Fannie Mae, Freddie Mac, and the Federal Home loan Banks; currently acting as conservator for Fannie Mae and Freddie Mac.

Answer 8

Federal Housing Finance Agency (FHFA)

Question 9

A government-supervised enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market.

Answer 9

Freddie Mac

Question 10

A government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA-insured and VA-guaranteed loans as collateral.

Answer 10

Ginnie Mae

Question 11

Organizations created by the federal government (Fannie Mae, Freddie Mac, Farmer Mac, Ginnie Mae) to help increase loan opportunities for homebuyers.

Answer 11

government-sponsored enterprise (GSE)

Question 12

Any loan exceeding the current Fannie Mae/Freddie Mac conforming loan limit.

Answer 12

jumbo loans

Question 13

Freddie Mac’s automated underwriting system.

Answer 13

Loan Prospector

Question 14

A loan that exceeds the Federal Housing Finance Agency (FHFA) loan limits; also called a jumbo loan.

Answer 14

nonconforming loan

Question 15

With regard to mortgage loans; means bough at full-face value.

Answer 15

par

Question 16

Another name for mortgage-backed securities sold by Freddie Mac.

Answer 16

participation certificates (PCs)

Question 17

Mortgage-backed securities where the principal and interest payments are passed through to the investor in one of several different formats.

Answer 17

pass-through certificates

Question 18

1) in discounting, a payment of more than face value for security. 2) Insurance, the fee paid for coverage.

Answer 18

premium

Question 19

Institutions that make mortgage loans; primarily banks, savings associations, credit unions, mortgage brokers, and mortgage bankers.

Answer 19

primary lender

Question 20

A set of mortgage loan requirements that establishes if a loan is safe and eligible for sale to investors as part of a mortgage-backed security without the lender retaining a percentage of the loan amount.

Answer 20

qualified residential mortgage (QRM)

Question 21

A tax entity that issues multiple classes of investor interests (securities) backed by a pool of mortgages.

Answer 21

real estate mortgage investment conduits (REMICs)