Primary and Secondary Markets Flashcards
purchase-money mortgage
any mortgage placed when property is bought
refinancing
further borrowing after the realty is already owned
reverse mortgage
a financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments
home equity loans
a form of second mortgage where homeowners whose property has appreciated in value may borrow up to new loan-to-value ratios
interim financing
loans used most often in the case that people need to buy a house before selling their own
usually lasts fro no longer than six months, and provide for interest-only payments
shared equity mortgage
purchaser receives financial help in the form of a contribution to down payment, concessionary interest rate, or assistance with monthly payments
partner receives hare of profit when property is sold
package mortgage
loan in which the personal property and furniture is included in the purchase price of the house
used often in financing furnished condos
blanket mortgage
a single mortgage that covers more than one parcel of land
partial release clause
a mortgage provision that allows some of the collateral to be released from a mortgage after the borrower pays a certain amount of the loan
used in blanket mortgages
wraparound mortgage
a type of junior loan which wraps or includes, the current note due on the property
open-end mortgage
mortgage where borrowers can obtain additional funds to improve property
construction loan
loan made to finance the construction improvements on real estate
what are the three seller-buyer arrangements?
seller financing and land contracts
lease-option
sale-leaseback
seller financing and land contracts
buyer makes payments to seller, until total sum has been paid at which time the seller issues a satisfaction of the mortgage lien
Institutions to get mortgage loans
1.savings and loan associations
2. commercial banks
3. mutual savings banks
4. life insurance companies
5. mortgage banking companies
6. mortgage brokers
7. credit unions
lease-option
an agreement that gives a renter a choice to purchase the rented property during or at the end of the rental period
sale-leaseback
an asset that is previously owned by the seller is sold to someone else and then leased back to the first owner for a long duration
primary mortgage market
where prospective homeowners connect with primary lenders to secure mortgages for both owner-occupant and investment properties
mortgage bankers
people that use money borrowed from other institutions and funds of their own to make real estate loan that may be later sold to investors
mortgage brokers
individuals who are licensed to act as intermediaries in briningng borrowers and lenders together
credit unions
cooperative organizations in which members place money in savings accounts, usually higher interest rates than other savings institutions offer
underwriting
the process lenders use to evaluate the honesty, creditworthiness, and risk of a potential customer
credit history
how timely applicant repaid debt
preapproval
a solid written commitment from lender to hold a mortgage up to a given amount
better than prequalification
prequalification
estimates the maximum amount the borrower is likely to qualify for
qualifying ratios
financial ratios used by mortgage lenders to qualify a potential home-buyer for a mortgage loan
28/36: borrower is allowed to spend up to 28% of gross monthly income for PITI or up to 36% of income including other payments of long term debts
federal reserve system
helps to maintain sound credit conditions, counteracts inflationary and deflationary trends, creates favorable economic climate
Fannie Mae
formerly FNMA
buy VA and FHA loans, sell bonds to investors to make them money not he return
largest buyer/seller on the secondary mortgage market
Truth in Lending Act
law that requires credit institutions to inform consumers of the true cost of obtaining credit so consumer can compare costs of various vendors
Regulation Z
prohibits certain practices relating to payments made to compensate mortgage brokers and other loan originators.
portfolio loans
a kind of mortgage that a lender originates and retains instead of offloading on the secondary mortgage market
the lender gets to pick the standards for the loans – what kind of credit score they’ll approve and how much money they’ll offer to the borrower
jumbo loans
a mortgage used to finance properties that are too expensive for a conventional conforming loan. The maximum amount for a conforming loan is $647,200
triggering terms
a word or phrase that, when used in advertising literature, requires the presentation of the terms of a credit agreement
FICO credit scores
a three-digit number based on the information in your credit reports
Ginnie Mae
sells certificates to investors (stocks)
gives a dividend as a return to hte investor
purchases low and moderate income homes, high risk loans
Freddie Mac
lower risk loans, conventional mortgages
APR
annual percentage rate
the interest rate for a whole year as applied to a loan
creditor
one who extends consumer credit more than 25 times a year
penalties for noncompliance with Regulation Z
- violation of administrative order = $10000/day
- engaging in deceptive practice = up to $10000
Equal Credit Opportunity Act
prohibits lenders from discriminating against applicants on basis of race, color, religion, national origin, sex, age, marital status
Real Estate Settlement Procedures Act
ensures buyer and seller in transaction with first mortgage loan have knowledge of all settlement costs
TILA-RESPA Integrated Disclosure (TRID)
combines disclosures required by Truth-in lending act and RESPA
intent to proceed
unofficial commitment to a lender
ALIENS
required for a loan to be considered complete
Address of property
Loan amount requested
Income
Estimated property value
name
social security number
secondary mortgage market
where home loans and servicing rights are bought and sold between lenders and investors
when do TRID rules not apply?
- HELOCS
- mortgages for mobile homes
- reverse mortgages
- cash transactions
- loans ofr commercial purposes
three-day right of rescission
borrower has three business days to rescind the transaction for any reason
