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Law of Finance Flashcards

1
Q

mortgage broker

A

someone who brings together a borrower and a lender in order to create a mortgage

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2
Q

mortgage banker

A

An entity or person who provides mortgage financing by using their own funds

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3
Q

correspondent lender

A

A lender who offers loans using their own money at their own risk, generally on a smaller scale than mortgage brokers and bankers

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4
Q

origination

A

the creation of a new mortgage

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5
Q

underwriting

A

The process of deciding the level of risk a lender would take on by offering a loan to a certain borrower for a specific property

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6
Q

servicing

A

The ongoing collection of monthly payments and maintenance of records by a loan servicer

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7
Q

How can local governments influence real estate market economies?

A

by imposing zoning policies to either encourage or slow down the growth of the community.

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8
Q

portfolio lender

A

Local banks that lend their own money and do not sell their loans on the secondary market

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9
Q

servicing

A

is a collection of monthly payments, usually including payments on the principal, interest, taxes, and insurance, or PITI

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10
Q

primary market

A

Market in which mortgages are first created by connecting lenders to borrowers

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11
Q

secondary market

A

Market in which loans and servicing rights are sold to investors

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12
Q

sales comparison approach

A

Property valuation method that determines value by comparing the subject property to the sales prices of similar properties that have sold recently

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13
Q

cost approach

A

Method of estimating the value of a property by determining how much it would cost to completely replace it and then subtracting from that value to account for depreciation

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14
Q

income approach

A

Method of estimating the value of a property based on the amount of income it could produce for its owner

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15
Q

conforming loan

A

A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market

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16
Q

non conforming loan

A

A loan that does not meet the guidelines to be sold on the secondary market

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17
Q

hypothecation

A

it involves a borrower pledging a certain asset as collateral for the loan

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18
Q

Can loan ownership be transferred?

A

yes. Ownership of a loan can change without action on the part of the debtor. A new owner must provide notice to the borrower within 30 days of possessing the loan.

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19
Q

2 types of conventional loans

A

conforming conventional loans and non conforming conventional loans

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20
Q

Total annual interest =

A

loan amount x interest rate

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21
Q

hard money lending

A

Private investors (lenders) may have higher interest rates or unusual terms compared to banks

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22
Q

Who is responsible for the foreclosure fees?

A

the borrower

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23
Q

Secure and Fair Enforcement for Mortgage Licensing Act

A

SAFE Act- national law required the states to pass legislation saying that all mortgage loan originators (MLOs for short) must be licensed in accordance with national standards.

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24
Q

recovery

A

The economic phase in which conditions stabilize after a recession and the outlook for the market starts to look brighter

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25
expansion
The economic phase in which market activity really picks up (businesses start hiring again, people are investing in real estate)
26
hyper supply
The economic phase in which supply catches up with (and then surpasses) demand; the first warning sign is an increase in vacant or unsold property
27
recession
A period in which economic activity drastically declines and stays declined for more than six months
28
economic bubble
Forms when the value of something (typically real estate or stocks) grows so much that its market value is higher than its actual value
29
Housing affordability index
Compares median household income to the income needed to purchase a median-priced home
30
inflation
A general rise in prices as the result of a decrease in the dollar’s purchasing power
31
4 major phases of real estate cycle
recovery, expansion, hyper supply, recession
32
GDP
gross domestic product can predict inflation
33
assessed value
The value a government places on land or buildings for real estate taxes
34
What is TRUE of USDA loans?
it doesn't require down payments
35
legal tender
United States coins and currency good for all debts, public charges, taxes, and dues ex. money
36
Federal Reserve Act
The 1913 act that created the Federal Reserve
37
The Federal Reserve
Centralized United States bank created to conduct monetary policy and stabilize the U.S. economy
38
Monetary Policy
A term used to refer to the actions of central banks to achieve big, macroeconomic policy objectives
39
Federal Reserve System
known as “the Fed”). This system is composed of 12 member banks across the United States, each serving a different geographical area.
40
By becoming a member of the Federal Reserve System:
banks are able to borrow money from the Fed. However, all banks who are members then must also abide by federal rules and regulations.
41
Federal Reserves 2 monetary policies
maximum employment and price stability (known as dual mandate)
42
Federal Open Market Committee (FOMC
The Federal Reserve's policy-making body, which is charged with overseeing the federal government’s open market operations
43
Open Market Operations
Adjustments to the supply of money implemented by the Federal Reserve to influence the interest rate
44
Discount Rate
The interest rate at which the Fed lends money to its member banks
45
The Reserve Requirement:
Requirement that all depository institutions (not just member banks) keep a certain percentage of their funds in the regional Reserve bank
46
Securities:
Any financial asset that can be traded, including futures, stocks, mortgage loans, and options
47
Interest rates are manipulated by either giving or restricting money flow to commercial banks.
True
48
Primary dealers
are banks and securities broker-dealers that trade in U.S. Government securities with the Federal Reserve Bank of New York (FRBNY)
49
federal funds rate
is the rate that depository institutions pay when they borrow money from each other to adjust their reserve balances and to keep an adequate amount of money in their account at the Federal Reserve.
50
the Fed's three instruments for implementing its monetary policy by influencing the money supply:
the discount rate, the reserve requirement and open-market operations
51
The Federal Reserve can influence the supply of money by changing the discount rate. When they raise the discount rate, lenders tend to:
lend less money
52
The committee that is a part of the Federal Reserve System and is responsible for buying and selling securities is the:
Federal Open Market Committee
53
Money Laundering
Financial transaction in which criminals, including terrorist organizations, attempt to disguise the proceeds, sources, or nature of their illicit activities by funneling the money through otherwise legitimate business transactions
54
Shell Companies
Companies that don't have any real operation, but exist as vehicles for business transactions
55
The US Treasury manages the government's revenue by:
promoting conditions abroad that support economic growth promoting national conditions that stabilize the economy strengthening national security against financial threat
56
Office of Terrorism and Financial Intelligence (TFI)
Treasury tracks crimes such as money laundering through this
57
Shell companies are often used:
to obscure the identity of or limit the liability of the true owner/owners of real property
58
Troubled Asset Relief Program (TARP)
created in response to 2008 market crash. created Making Home Affordable® (MHA) and the Hardest Hit Fund® (HHF)
59
Making Home Affordable® (MHA)
provided mortgage relief to homeowners to prevent avoidable foreclosures. expired in Dec 2016
60
Hardest Hit Fund® (HHF)
was created to provide targeted aid to families in states hit hard by the economic and housing market downturn.
61
Which of the following is NOT a function of the U.S. Treasury Department?
While the U.S. Treasury Department has many functions (such as producing coins and currency, borrowing necessary funds to run the federal government, and monitoring for money laundering), it does NOT issue home loans to homebuyers.
62
1933 Banking Act
Depression-era federal act that created the Federal Deposit Insurance Corporation
63
Federal Deposit Insurance Corporation (FDIC)
Independent agency that provides deposit insurance to depositors in U.S. banks
64
Glass-Steagall Act:
Part of the 1933 Banking Act that prevents investment banks from taking deposits and preventing commercial Federal Reserve members banks from various risky behaviors
65
Dodd-Frank
Federal Act passed as a result of the housing bubble and financial crisis that resulted in the most significant financial reforms to the American banking system since the post-Great Depression legislation
66
The government agency that was created in 1933 to give confidence to depositors after the bank failures of the 20s and 30s was the ________.
FDIC
67
The FDIC is funded by private banks and Congress.
False. The FDIC receives no money from Congress. Instead, the FDIC is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. Next Page
68
The Dodd-Frank Act restricted the power of the FDIC regarding liquidating insurance companies and other non-bank financial institutions.
False. The Dodd-Frank Act gave more power to FDIC, allowing them to better protect consumers from risk.
69
Federal Home Loan Bank Act of 1932
Extended $125 million in credit to savings and loan institutions and created the Federal Home Loan Bank System, setting up the twelve regional banks
70
Community Investment Program (CIP)
Program operated by each FHLBank that offers below-market-rate loans to members for long-term financing for housing and economic development that benefits low- and moderate-income families and neighborhoods
71
Federal Home Loan Banks are ______, and their members are ______.
public institutions and general partners
72
Whose purpose is it to support residential mortgage lending and related community investment?
Federal Home Loan Bank
73
What is the purpose of the Federal Home Loan Bank System?
The purpose is to support residential mortgage lending and related community investment through its member financial institutions, and to provide access to reliable economical funding, technical assistance and special affordable housing programs.
74
Real Estate Settlement Procedures Act (RESPA)
An act designed to protect consumers from predatory lending and educate them about closing and settlement services
75
LDP
limited denial of particpation
76
public housing
Housing provided for people with low incomes, subsidized by public funds- housing authority is the landlord
77
Subsidized Housing:
Government sponsored economic assistance programs aimed at alleviating housing costs and expenses for people with low to moderate incomes- housing authority is not the landlord
78
Ginnie Mae
Government National Mortgage Association; a government owned enterprise that promotes homeownership
79
HUD was created with the mission to do all of the following:
is to increase homeownership, support community development, and increase access to affordable housing free from discrimination.
80
Housing and Community Development Act of 1974
created section 8 program
81
Housing Choice Voucher Program
allows a tenant to move from one unit of at least minimum housing quality to another through "tenant-based" rental assistance. It also lets individuals apply their monthly voucher towards the purchase of a home
82
Community Reinvestment Act (CRA)
Helps commercial banks and savings associations meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods
83
Truth in Lending Act (TILA)
Educates and protects consumers against inaccurate and unfair credit billing and credit card practices by requiring lenders to standardize the way costs associated with borrowing are calculated and disclosed
84
Regulation Z
Under TILA, prohibits specific acts and practices in connection with an extension of credit secured by a consumer's dwelling
85
APR
Annual Percentage Rate, a numeric representation of an interest rate
86
Regulation M
Prevents manipulation by individuals with an interest in the outcome of an offering, and prohibits activities and conduct that could artificially influence the market for an offered security
87
Volcker Rule
Federal regulation prohibiting banks from conducting certain investment activities with their own accounts, also limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds
88
CFPB
Consumer Financial Protection Bureau; works to protect consumers from unfair, deceptive, and abusive practices
89
SAFE Act
The Safe Mortgage Licensing Act; sets a minimum standard for licensing and registering mortgage loan originators
90
Administrative Procedure Act
Governs the way administrative agencies of the federal government may propose and establish regulations
91
MARS
Mortgage Assistance Relief Services, makes it illegal to charge upfront fees and requires specific disclosures in ads and when you forward a lender’s offer to a homeowner
92
Regulation Z applies to loans that are __________________________.
(1) extended to consumers; (2) offered on a regular basis; (3) either subject to a finance charge or to be paid in four or more installments; (4) used for personal, family, or household purposes; or (5) a closed-end transaction (not open-ended or revolving). Next Page
93
A federally related loan is one that is directly or indirectly supported by federal regulation, insurance, guarantees, supplements, or assistance.
TRUE

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