Primary and Secondary Markets

Question 1

purchase-money mortgage

Answer 1

any mortgage placed when property is bought

Question 2

refinancing

Answer 2

further borrowing after the realty is already owned

Question 3

reverse mortgage

Answer 3

a financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments

Question 4

home equity loans

Answer 4

a form of second mortgage where homeowners whose property has appreciated in value may borrow up to new loan-to-value ratios

Question 5

interim financing

Answer 5

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

Question 6

shared equity mortgage

Answer 6

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

Question 7

package mortgage

Answer 7

loan in which the personal property and furniture is included in the purchase price of the house

used often in financing furnished condos

Question 8

blanket mortgage

Answer 8

a single mortgage that covers more than one parcel of land

Question 9

partial release clause

Answer 9

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

Question 10

wraparound mortgage

Answer 10

a type of junior loan which wraps or includes, the current note due on the property

Question 11

open-end mortgage

Answer 11

mortgage where borrowers can obtain additional funds to improve property

Question 12

construction loan

Answer 12

loan made to finance the construction improvements on real estate

Question 13

what are the three seller-buyer arrangements?

Answer 13

seller financing and land contracts
lease-option
sale-leaseback

Question 14

seller financing and land contracts

Answer 14

buyer makes payments to seller, until total sum has been paid at which time the seller issues a satisfaction of the mortgage lien

Question 15

Institutions to get mortgage loans

Answer 15

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

Question 16

lease-option

Answer 16

an agreement that gives a renter a choice to purchase the rented property during or at the end of the rental period

Question 17

sale-leaseback

Answer 17

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

Question 18

primary mortgage market

Answer 18

where prospective homeowners connect with primary lenders to secure mortgages for both owner-occupant and investment properties

Question 19

mortgage bankers

Answer 19

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

Question 20

mortgage brokers

Answer 20

individuals who are licensed to act as intermediaries in briningng borrowers and lenders together

Question 21

credit unions

Answer 21

cooperative organizations in which members place money in savings accounts, usually higher interest rates than other savings institutions offer

Question 22

underwriting

Answer 22

the process lenders use to evaluate the honesty, creditworthiness, and risk of a potential customer

Question 23

credit history

Answer 23

how timely applicant repaid debt

Question 24

preapproval

Answer 24

a solid written commitment from lender to hold a mortgage up to a given amount

better than prequalification

Question 25

prequalification

Answer 25

estimates the maximum amount the borrower is likely to qualify for

Question 26

qualifying ratios

Answer 26

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

Question 27

federal reserve system

Answer 27

helps to maintain sound credit conditions, counteracts inflationary and deflationary trends, creates favorable economic climate

Question 28

Fannie Mae

Answer 28

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

Question 29

Truth in Lending Act

Answer 29

law that requires credit institutions to inform consumers of the true cost of obtaining credit so consumer can compare costs of various vendors

Question 30

Regulation Z

Answer 30

prohibits certain practices relating to payments made to compensate mortgage brokers and other loan originators.

Question 31

portfolio loans

Answer 31

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

Question 32

jumbo loans

Answer 32

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

Question 33

triggering terms

Answer 33

a word or phrase that, when used in advertising literature, requires the presentation of the terms of a credit agreement

Question 34

FICO credit scores

Answer 34

a three-digit number based on the information in your credit reports

Question 35

Ginnie Mae

Answer 35

sells certificates to investors (stocks)

gives a dividend as a return to hte investor

purchases low and moderate income homes, high risk loans

Question 36

Freddie Mac

Answer 36

lower risk loans, conventional mortgages

Question 37

APR

Answer 37

annual percentage rate

the interest rate for a whole year as applied to a loan

Question 38

creditor

Answer 38

one who extends consumer credit more than 25 times a year

Question 39

penalties for noncompliance with Regulation Z

Answer 39

1. violation of administrative order = $10000/day
2. engaging in deceptive practice = up to $10000

Question 40

Equal Credit Opportunity Act

Answer 40

prohibits lenders from discriminating against applicants on basis of race, color, religion, national origin, sex, age, marital status

Question 41

Real Estate Settlement Procedures Act

Answer 41

ensures buyer and seller in transaction with first mortgage loan have knowledge of all settlement costs

Question 42

TILA-RESPA Integrated Disclosure (TRID)

Answer 42

combines disclosures required by Truth-in lending act and RESPA

Question 43

intent to proceed

Answer 43

unofficial commitment to a lender

Question 44

ALIENS

Answer 44

required for a loan to be considered complete

Address of property
Loan amount requested
Income
Estimated property value
name
social security number

Question 45

secondary mortgage market

Answer 45

where home loans and servicing rights are bought and sold between lenders and investors

Question 46

when do TRID rules not apply?

Answer 46

1. HELOCS
2. mortgages for mobile homes
3. reverse mortgages
4. cash transactions
5. loans ofr commercial purposes

Question 47

three-day right of rescission

Answer 47

borrower has three business days to rescind the transaction for any reason