Finance Flashcards
In a traditional second mortgage, a borrower would take all of the money loaned to them at one time. In a ____________ the borrower may take up to a specified amount, but they do not need to take that amount in full or all at one time.
home equity line of credit
a document from the lender that states the property has been paid off and is released from the lien.
satisfaction piece
Which government entity was created to encourage low-income housing?
GNMA (Ginnie Mae)
equal to 1% of the total loan amount.
point
Mortgage lenders use this process to assess the risks of making a loan. To assess a potential borrower’s risk, they look at factors such as salary, credit history, and terms of employment.
underwriting
a short term loan that allows borrowers to borrow against their current property in order to buy a new one.
swing loan (bridge, gap)
The three C’s of underwriting
Collateral, Capacity, Credit
the lender gives money to the borrower using the home itself as collateral. The loan typically does not require repayment until death or until the homeowner moves out.
reverse mortgage (reverse annuity mortgage)
an intermediary and does not create, sell, or underwrite loans
mortgage broker
Three ways lenders make money
- loan application fees
- annual loan service fees
- loan origination fees
These loans carry a higher interest rate because the bank/lender feels they carry greater risk of full repayment.
subprime loans
The annual interest is the balance of the loan multiplied by the interest rate.
simple interest
Which ways can the Federal Reserve use to control/influence monetary policy and supply?
- Buy/sell securities on open market
- set discount rate
- raise/lower reserve requirements for banks
What financial instrument is given by a borrower to the lender as promise to repay a debt?
(promissory) note
written contract pledging real property owned to secure a debt
The mortgage along with the note are given to the lender to obtain a loan.
mortgage
Gradual liquidation through periodic payments of principal and interest is called
amortized loans
Fixed rate mortgages are locked in at the same rate for the life of the loan, while _______ mortgages have a rate that can “float” or “ride” market rates.
adjustable rate mortgage (ARM)
occurs when the owner cannot sell the property via short sale. If it doesn’t sell in a foreclosure auction, it becomes property of the lending institution.
foreclosure sale
placed on real estate by a lender in exchange for funds to buy the real estate
mortgage lien
A promissory note must contain the following three things: ____.
- amount of loan
- term of the loan
- interest rate of the loan
the mortgagor (borrower) receives legal and equitable title to the real property, and the mortgagee (lender) receives the right to place a lien on the property.
lien theory
most likely be used by a veteran or active-duty member of the U.S. military
VA loan
FHA loans are insured by the Federal Housing Administration and allow for a down payment as low as _____. For this reason, FHA loans are favored by many first-time home buyers.
3.5%
refers to the process by which monthly payments are calculated so that the principal is paid off over the life of the loan
amortization
a loan made on a movable piece of property. a car, or in this case, a mobile home.
chattel loan
founded to expand the secondary mortgage market in the United States. It is one of the largest corporations in the U.S. when measured by assets.
Fannie Mae
a judicial foreclosure where the lender gets the property instead of a sale
strict foreclosure
the type most often used in large commercial projects where the lender/bank gets part ownership
participation mortgage
a mortgage that covers more than one parcel of real estate
blanket mortgage
a second mortgage that includes the amount of the first mortgage
wraparound mortgage
a mortgage in which a borrower uses both real and personal property as security for a loan
package mortgage
A provision in a loan where a large payment is either due at the end of the term or if a default occurs.
balloon payment
If a note is transferred or sold to another party, to protect their risk, the lender can call the amount of the note due.
alienation clause
it allows lender to declare an unpaid balance due upon the default of any/all terms.
acceleration clause
a loan for an amount in excess of Fannie Mae and Freddie Mac standards
jumbo loan
The loans meet Fannie Mae and Freddie Mac standards.
conforming
prepaid interest charges to get a mortgage at a lower interest rate
points or discount points
the process in which lenders assemble loans and pledge them with a commercial bank to serve as security for a line of credit
warehousing
