Principles 9

Question 1

Conventional Loans

Answer 1

Loans that do not involve government cooperation

Question 2

Unconventional Loans

Answer 2

Loans that are created or financed with the help of a government source

Question 3

National housing act

Answer 3

Passed in 1934 in response to the numerous foreclosures brought by the depression and has been amended many times.

Question 4

Federal Housing Administration (FHA)

Answer 4

• a division of the department of housing and urban development (HUD)
• FHA does not make loans, but it insures loans made by lending institutions such as thrifts, banks, life insurance companies, mortgage companies and others
• for 60 years, FHA has been a major force in determining how lending practices are carried out.
• insures payment of loan principal

Question 5

Department of veterans affairs (VA)

Answer 5

• Presently authorizes first mortgage loans as well as second-mortgage loans of less than 40% of property value.
• The VA guarantees payment of the remaining mortgage indebtedness, up to a maximum amount.

Question 6

Fixed-term

Answer 6

Is a fully amortized mortgage for up to 30 years and 32 days.

Question 7

Growing equity mortgage (GEM)

Answer 7

• Increases in payments with the increases applied to the principal balance.
• The GEM is a formalized way of making additional principal payments, which increases the accumulation of equity and shortens the overall loan term.

Question 8

Graduated payment mortgage (GPM)

Answer 8

• Provides for Lower initial monthly payments, increasing at a rate of 7% annually for the first five years.
• From the 6th year to the end of the loan term, the payments remain the same.
• Unlike FHA, which allows 4 other variations of the GPM, the VA allows only this one form of graduated payment.

Question 9

California Veterans Farms and Home purchase program (CalVet)

Answer 9

• created in 1921
• To assist California veterans in acquiring home or farm property
• uses land contract document
• interest rate may change annually

Question 10

CalVet loans can be used to?

Answer 10

• purchase an existing home
• finance a lot purchase and new construction
• rehabilitate a home purchased “as-is”
• Make home improvements

Question 11

California Housing Finance Agency (CalHFA)

Answer 11

-Was chattered in 1975 as a self-supported affordable housing bank to make low-interest loans funded by the sale of tax-exempt bonds.

Question 12

Purchase-money trust deed or purchase-money mortgage

Answer 12

Is given by buyer to seller at the time of purchase to secure all or part of the purchase price.

Question 13

Land contract

Answer 13

• aka “Contract If deed” or “installment sales contract”
• is a form of seller financing in which the buyer takes possession of property and makes payments on its purchase but does not receive legal title to the property for at least 1 year from the date of possession.
• an alternative for a buyer who does not qualify for a regular mortgage loan.

Question 14

Wraparound or wraparound trust deed

Answer 14

• Aka overriding trust deed or all-inclusive trust deed (AITD)
• is a way to take advantage of a seller’s existing loan with a relatively low rate of interest.

Question 15

Sale-leaseback or leaseback

Answer 15

-a method of property transfer

Question 16

Fannie Mae (formerly the federal national mortgage association)

Answer 16

• was created in 1938 as a subsidiary of the reconstruction finance corporation.
• authorized by National Housing Act of 1934
• issues it’s own stock, and it also obtains capital from borrowing, selling notes and debentures, selling mortgage-backed securities, and money earned from its own mortgage portfolio.

Question 17

Ginnie Mae

Answer 17

• created as the Government National Mortgage Association
• offering high-yield, risk-free, guaranteed securities.
• guarantees securities issued by FHA-approved home mortgage lenders.

Question 18

Freddie Mac

Answer 18

• created in 1970 in direct response to the scarcity of mortgage funds.
• provides a secondary market for residential conventional mortgage loans by buying such loans and reselling them to individual investors and financial institutions.

Question 19

Mortgage insurance premium (MIP)

Answer 19

-what is paid to FHA at closing

Question 20

Purchase money mortgage

Answer 20

Credit extended by seller to buyer

Question 21

Secondary mortgage market

Answer 21

Transfer of existing mortgages between investors