Government Financing Regulations

Question 1

The Federal Open Market Committee

Answer 1

• Buying and selling of US debt to and from, member banks of the FED
• Stabilizes the cost of borrowing for the US Government
• The more the Fed buys, the more money that is available for banks to lend out
• and vice versa

Question 2

The Discount Rate

Answer 2

• Rate at which banks may borrow directly from the Fed

Question 3

The Fed Funds Rate

Answer 3

• The rate at which banks loan to each other
  *Short term interbank lending
• “set” by The Fed

Question 4

The Prime Rate

Answer 4

• Theoretical best interest rate available from a bank
• Typically not possible to borrow at the prime rate unless a large corperation
  
  • Used as a benchmark, pay a preium over it
• Set by the market, floats above the Fed Funds Rate

Question 5

How the Government Raises Money?

Answer 5

• United States Department of Treasury manages government revenue
  *Pay for the cost of running the government in three ways =
  - Raising Revenue
  - Borrowing Money
  - Printing Money

Question 6

Raising Revenue

Answer 6

• Make people and businesses pay taxes
  Brawback: reduces purchasing power of consumers

Question 7

Borrowing Money

Answer 7

• Issuing Government securities, such as bills, bond
  Drawback: Deficit spending - Complete with consumers for loans.

Question 8

Printing Money

Answer 8

• Print money to pay debts
  Drawbacks: Reduces value and causes inflation.

Question 9

The Real Estate Settlement Procedures Act (RESPA)

Answer 9

• Requires, lenders to provide borrowers with information about closing costs for financing 1-2 family residential homes
• Lender must report transactions to the IRS

Question 10

Affiliated Business Arrangements (ABA’S)

Answer 10

Permitted = any real estate service providers who package services together
- All firms must share at least 1% common ownership
- Consumer must be fully informed
- Consumer must be given other opents if desired
- ABA provideers can be paid for their services and recieve a return on their 1% investment, but nothing more

Question 11

The Truth in Lending Act 1.

Regulation Z

Answer 11

• Enforced by Consumer Financial Protection Bureau
• Provides consumers with full disclosure of the costs of credit

Question 12

The Truth in Lending Act 2.

Answer 12

• Advertising of soecific loan terms requires lenders to calculate their costs of credit
  *APR includes = interest rates, points, loan fees
  APR doesnt’t include = municipal taxes, attorney fees, credit reports, etc.

Question 13

When is Regulation Z triggered?

Answer 13

Anytime you are advertising a specific rate

Question 14

Do real estate agents fall under TILA?

Answer 14

If advertising loan arrangements for a referral fee.

Question 15

Proration

Answer 15

• An expense that is prepaid or unpaid at closing will be prorated
• Reflected on the closing disclosure

Question 16

EXAM NOTES

Answer 16

• Need to note who he closing belongs to
• If it doesn’t indicate, then assume it is the seller
• 360 days in a calender year, unless otherwise sated in the question

Remember: Taxes run on a fiscal year July 1st - June… 30th 30 days in a month

Question 17

Lending Credit Opportunity Act (ECOA)

Answer 17

Equal Credit Opportunity Act (ECOA)
- Prohibits discrimination in lending

Question 18

Redlining

Answer 18

Refers to any type of discrimination in lending

Question 19

Predatory Lending

Answer 19

-Any unfair or abusing lending
Examples include = unfairly high interest rates, loan flipping

Question 20

Usury

Answer 20

• Charging an illegally high rate of interest

Question 21

If it doesn say,who has the closing fay - seller!

Answer 21

If it doesn’t say, always assume its the seller