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Real Estate Broker Course > Real Estate Finance > Flashcards

Real Estate Finance Flashcards

1
Q

Primary Mortgage Market

A

Process of originating, processing, underwriting, closing and funding mortgage loan

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2
Q

Secondary Mortgage Market

A

When lenders sell the mortgage to an investor to receive funds to that they can make additional mortgage loans to others

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3
Q

Commercial Banks

A

Financial institutions that provide a variety of financial services, including loans

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4
Q

Savings and loan associations (S&Ls) aka Thrifts

A

financial institutions that specialize in taking savings deposits and making mortgage loans

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5
Q

T/F

One purpose of the primary mortgage market is to buy loans to free up money to make more loans available.

A

False - that is secondary mortgage market

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6
Q

Mortgage Bankers

A

Persons or entities in the business of making mortgage loans - lenders of money

MUST BE LICENSED

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7
Q

Mortgage Brokers

A

Persons or entities in the business of soliciting, processing, placing, or negotiating mortgage loans for others

MUST BE REGISTERED WITH SUPERINTENDENT

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8
Q

Surety Bond for Mortgage Banker

A

$50,000 - $500,000

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9
Q

Surety Bond for Mortgage Broker

A

$10,000 - $100,000

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10
Q

Promissory Notes

A

Financing instruments that is evidence of a promise to pay a specific amount of money to a specific person within a specific time frame.

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11
Q

T/F

Borrower is mortgagor and the lender is mortgagee

A

True

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12
Q

T: Mortgages are the primary security instrument used in lien theory states

T:When property is pledged as security for a debt, but the borrower still holds legal title and possession, it is known as hypothecation

T: In a title theory state, the borrower has possession of the property, but until the debt is fully paid, the borrower has only equitable title.

A
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12
Q

T: Mortgages are the primary security instrument used in lien theory states

T:When property is pledged as security for a debt, but the borrower still holds legal title and possession, it is known as hypothecation

T: In a title theory state, the borrower has possession of the property, but until the debt is fully paid, the borrower has only equitable title.

A
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13
Q

Lien Priority

A

Refers to the different positions a mortgage and other liens may have and what that can mean to the lender.

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14
Q

T/F

Real estate tax liens always have the highest priority in the event of a foreclosure

A

True

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15
Q

First Mortgage (lien position when there are multiple mortgages)

A

a security instrument that has a first lien position. First mortgage holder is paid first if there is a foreclosure

16
Q

Second Mortgage (lien position when there are multiple mortgages)

A

security instrument in a second lien. more risky position because a first mortgage gets paid first out of foreclosure proceedings in the event there is a default. If there is nothing left, second mortgage holder gets nothing. Second mortgage may be used to help buy the property or it could be a home equity loan used for home improvements or repairs or to send a child to college

16
Q

T/F

In the event of a foreclosure, the mortgage holder in the second lien position has less risk than the holder in the first lien position

A

False - second lien holder has more risk.

17
Q

Conventional Loan

A

a mortgage loan NOT insured or guaranteed by a government entity, meaning FHA or VA

Can be conforming or nonconforming loans

18
Q

Conforming Loan

A

When a loan meets the criteria necessary to be sold in the secondary market

19
Q

T/F

Traditional conventional loans may be long term, fully amortized, and fixed rate

A

True

20
Q

Long Term loans generally have total paymebts spread out over how long?

A

25-30 years

21
Q

Balloon Payment

A

A final lump sum that pays any remaining principal and/or interest at the end of a loan term

22
Q

Fully Amortized Loans

A

apply payments to the principal and interest. Total payments over the life of loan will pay off entire balance of principal and interest due at the end of the term.

-even though the payment stays the same for the life of the loan, the amount applied to principal and amount applied to the interest are adjusted each month. If all payments are made on time, the loan will be paid off in full with the last scheduled payment

23
Q

Private Mortgage Insurance

A

offered by private companies to insure a lender against default on a loan by a borrower. PMI is required for 90% conventional loans

24
Q

Housing Expense Ratio

A

Total Housing Expense / Gross Monthly Income = Ratio %

25
Q

Predatory Lending

A

loans that take advantage of ill informed consumers through excessively high fees, misrepresented loan terms, frequent refinancing that does not benefit the borrower, and other prohibited acts

26
Q

What term best describes the process by which a borrower pledges property as security for a loan without giving up possession of it?

A

Hypothecation

27
Q

States in which title is conveyed to the mortgagee are referred to as…

A

Title theory states

28
Q

a home developer has an existing mortgage for the purchase of land. If the new lender of a second construction mortgage wants to ensure that the second construction mortgage takes priority over the existing first mortgage, what type of clause must be contained in the construction mortgage?

A

Subordination Clause

29
Q

T/F The VA lends money for mortgages only to veterans

A

False - it GUARANTEES the mortgage loans made by approved lenders to veterans

30
Q

Which element of an adjustable rate mortgage determines whether the interest rate goes up or down?

A

Index

31
Q

Package Mortgage

A

includes both real estate property and personal property

32
Q

Blanket Mortgage

A

covers two or more parcels or lots, usually to finance new subdivision developments

33
Q

Bridge Mortgage

A

occurs between the termination of one mortgage and the beginning of the next

34
Q

Wraparound Mortgage

A

Secondary financing arrangement in which a lender, who is often the seller, leaves the original loan intact and gives the borrower a second, larger loan

35
Q

What term would BEST describe the type of loan where a seller finances all or part of the sale of property for the buyer?

A

Purchase Money Mortgage

36
Q

When a loan balance for an adjustable rate mortgage grows because of deferred interest when payments are not covering the interest portion of the loan, this is known as….

A

Negative amortization

Real Estate Broker Course (22 decks)

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