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Real Estate > Government Financing Regulations > Flashcards

Government Financing Regulations Flashcards

1
Q

FOMC (Federal Open Market Operations)

A

The Federal Open Market Committee

  • Buying and selling of US debt to and from Fed members banks
  • The more FOMC buys the more money available for banks to lend out, vice versa
  • Stabilizes US government borrowing
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2
Q

Discount Rate

A

Rate at which banks borrow directly from the Fed
Set by the Fed
-Lowest interest rate

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3
Q

Fed Funds Rate

A

The rate at which banks loan to each other
Short term interbank lending

Highest

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4
Q

Prime Rate

A

The theoretical best interest rate available from a bank

Typically not possible to borrow at the prime rate unless a large corporation

Used as a benchmark, pay a premium over it

Set by the market, floats above the Fed Funds Rate

The best interest rate, middle ground

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5
Q

Raising Revenue (Define and state drawback)

A

Make People and businesses pay taxes

Drawback: Reduces purchasing power of consumers

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6
Q

Borrowing Money

A

Issuing Government securities, such as bills, bond

Drawback: Deficit spending - compete with consumers for loans

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7
Q

Printing Money (Define and state drawback)

A

Print money to pay for debts

Drawback - reduces value and causes inflation

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8
Q

What are the three ways that the government raises Money?

A

US Department of Treasury manages government revenue.

  • Raising Revenue
  • Borrowing Money
  • Printing Money
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9
Q

Which rate has the greatest impact

A

Federal Funds Rate

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10
Q

Real Estate Settlement Procedures Act (RESPA)

A

A federal law that requires lenders to provide borrowers with information about closing costs (fee, points, commissions, etc.) for financing 1-4 family residential homes.
Prohibits certain kickbacks, referral fees, and unearned fees.
The lender must report transactions to the IRS.

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11
Q

Affiliated Business Arrangements (ABA’s)

A

Mortgage and brokerage companies, title companies, home inspectors and other service providers package services together are permitted to package services together under RESPA

  • Must share at least 1% common ownership
    Consumer must:
  • be fully informed
  • be given other options if desired

ABA providers can be paid for their services and receive a return on 1% investment but nothing more (no additional fees)

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12
Q

Dodd Frank Act & TILA-RESPA

A
  • Changed some RESPA requirements and processes
  • Loan estate Form must be given details at closing
  • Must be given to consumer no later than 3 business days after loan app
  • Closing Disclosure is called a CD (must be given at least 3 days prior to the date of the closing)
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13
Q

Truth in Lending Act

A

(Regulation Z

  • Enforced by Consumer Financial Protection Bureau
  • Provides consumers with full disclosure of the cost of credit
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14
Q

APR (Annual Percentage Rate)

A

TILA requires lenders to calculate their cost of credit and express them as APR if they advertise specific loans terms

Must express them as APR
APR includes = interest rates, points, loan fees, disclosure of penalties, etc.
-APR doesn’t include - municipal taxes, attorney fees, credit reports, etc.

APR Disclosure required when triggered
Ex. 3% down payment
No triggered terms
Ex. low down payment

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15
Q

When is regulation triggered?

A

Anytime you are advertising a specific rate.

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16
Q

Do real estate agents fall under TILA?

A

If advertising loan arrangements for a referral fee.

17
Q

Proration

A

If there is an expense prepaid or unpaid at closing, or income that must be divided between the buyer and seller, it will be prorated and reflected on the Closing Disclosure

18
Q

Proration : What would prepaid expenses show at closing?

A

Credit to the seller, and debit to the buyer

19
Q

Proration : What do unpaid expenses show at closing?

A

Debit to the seller and credit to the buyer.

20
Q

Closing Disclosure (Closing statement)

A
  • Consumers must receive a closing disclosure
  • Replaced HUD-1
  • Details the actual costs of closing no later than 3 days before the date of closing
21
Q

TRID (TILA -RESPA Integrated Disclosure

A
  • Established under the Dodd Frank Act

- Combines Truth in Lending and the RESPA rules

22
Q

Redlining

A

Illegal practice of credit discrimination. It is outlawed under the Equal Credit Opportunity Act (ECOA)

23
Q

Blockbusting

A

Employing fear tactics to induce panic selling or panic peddling a neighborhood
illegal

24
Q

Steering

A

Directing client to or away from certain areas or properties based on protected class status

25
Q

Property taxes payment?

A

Paid quarterly (4times per year

26
Q

RESPA (Real Estate Settlement Procedures Act)

A

A federal law that requires lenders to provide borrowers with information on closing
costs for financing 1-4 family residential homes and sets forth additional prohibitions
- Banks must provide a borrower with a bona die (good faith) estimate of the amount
and range of charges for real estate settlement within 3 days of the loan application

27
Q

TILA (Truth in Lending Act) or Regulation Z

A
  • Law enforced by the Consumer Financial Protection Bureau.
  • Supposed to provide consumers with full disclosure of the cost of credit.
  • Requires the disclosure of pertinent information such as down payment and annual percentage rate if a triggering item such as interest rate is advertised.
28
Q

In a 1031 taxes are:

A

Deferred

29
Q

Residential properties are depreciated on a ______year schedule.

A

27.5 YEAR

30
Q

Equal Credit Opportunity Act (ECOA)

A
  • Prohibits discrimination in lending

- requires credit application only based on income and stable source of income, credit rating

31
Q

Predatory Lending

A

When lending is unfair, deceptive and abusive.

Lenders fail to disclose loan costs and risks, steer borrowers towards unfairly high-interest rates

32
Q

Usury

A

When someone charges an illegally high rate of interest

33
Q

1031 Like Kind Exchanges

A

Defers the payment of capital gains taxes

alleviates the disincentive for business growth created by tax code

34
Q

203b

A

FHA section that allows anyone to qualify for assistance as long as they are purchasing a primary residence

  • generally for 1-4 family owner occupied homes
  • condos and co-ops qualify

Real Estate (20 decks)

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