Real Estate National Test Ch 13 Flashcards
D: Discount Rate
The rate that the feds charge member banks for loans.
D: Prime Rate
AKA: Base rate
What banks charge for credit card loans, small business loans, and other forms of financing.
D: Primary Mortgage Market
The mortgage market in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mutual savings banks.
How is income realized how from loans.
- Finance charges collected at closing, such as loan origination fees and discount points.
- Recurring income, the interest collected during the term of the loan.
Servicing a loan involves what?
- Collecting payments
- Accounting
- Bookkeeping
- Preparing insurance and tax records
- Processing payments of taxes and insurance
- Following up a loan payment and delinquency
D: Savings Associations
AKA: Thrifts, Commercial Banks,
These institutions are known as fiduciary lenders because of their fiduciary obligations to protect and preserve their depositors’ funds.
Mortgage loans are perceived as secure investments for generating income and enable these institutions to pay interest to their depositors.
Fiduciary lenders are subject to the standards and regulations established by the Office of the Comptroller of the Currency (OCC), www.occ.gov.
Deposits in insured institutions are covered up to the specified limit, currently $250,000 per depositor, per account, by the Federal Deposit Insurance Corporation (FDIC), www.fdic.gov.
D: Credit Unions
These institutions are known as fiduciary lenders because of their fiduciary obligations to protect and preserve their depositors’ funds.
Mortgage loans are perceived as secure investments for generating income and enable these institutions to pay interest to their depositors.
Fiduciary lenders are subject to the standards and regulations established by the Office of the Comptroller of the Currency (OCC), www.occ.gov. Deposits in insured institutions are covered up to the specified limit, currently $250,000 per depositor, per account, by the Federal Deposit Insurance Corporation (FDIC), www.fdic.gov.
List the lenders of home mortgage and commercial property loans.
- Savings Associations
- Insurance companies
- Credit unions
- Pension Funds
- Endowment Funds
- Investment Group Financing
- Mortgage Banking Companies
- Mortgage Brokers
D: The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)
Requires states to license mortgage loan originators according to national standards and also requires all state agencies to participate in the Nationwide Mortgage Licensing System and Registry (NMLS).
All mortgage loan originators (MLOs) must register annually and meet other requirements. NMLS is the sole system of licensure for mortgage companies for 57 state agencies and the sole system of licensure for MLOs for 59 state and territorial agencies.
D: Secondary Mortgage Market
In which loans are bought and sold only after they have been funded (closed).
The secondary mortgage market thus helps lenders raise capital to make additional mortgage loans and is especially useful when money is in short supply.
By freeing capital for additional loans, the secondary market stimulates both the housing construction market and the mortgage market.
The lender benefits, not only by raising additional capital, but also by avoiding interest rate risks on adjustable rate loans when interest rates fall, as well as on fixed rate loans if interest rates rise, and by making a profit on the sale.
In addition, the lender may continue to service the loan and collect a fee for that service.
In the secondary market, a number of mortgage loans are assembled into blocks called pools.
D: Mortgage Pools
The mortgages can be pooled by the lender who sells them or, more frequently, by the organization that purchases them.
Securities that represent shares in these pooled mortgages are then sold to investors or other organizations.
The key players in the secondary mortgage market were created by the federal government in the decades following the Great Depression and World war II to help increase loan opportunities for homebuyers.
They are referred to collectively as government-sponsored enterprises (GSEs). (See Government-Sponsored Enterprises (GSEs).
D: Fannie Mae
Originally the Federal National Mortgage Association.
Was created as a government agency in 1938.
It became a completely private shareholder-owned corporation in 1968, although it is still under congressional supervision.
Fannie Mae buys from a lender a block or pool of mortgages that may then be used as collateral for mortgage-backed securities that are sold on the global market.
The housing collapse that was felt around the country starting in 2006 brought into question the value a great many of the mortgages that Fannie Mae had purchased and resold to investors.
In September 2008, Fannie Mae was placed into the conservatorship of the Federal Housing Finance Agency (FHFA), www.fhfa.gov.
Fannie Mae continues to operate and provide a secondary market for mortgage loans, although with massive federal investment to protect its investors.
Fannie Mae deals in conventional as well as FHA-insured and VA-guaranteed loans.
One of the most important features of the GSEs has been their development of standardized loan application, credit report, appraisal and other forms that are required for loans they purchase, as well as detailed guidelines for the lending process.
Fannie Mae has a consumer-oriented site at www.fanniemae.com, and a site for lenders that provides access to its forms and guides at www.fanniemae.com/singlefamily.
List of Government-Sponsored Enterprises (GSEs). And what they do.
Fannie Mae : Conventional, FHA-Insured, VA-guaranteed loans.
Freddie Mac: Mostly conventional loans
Ginnie Mae: Special assistance loans
Farmer Mac
D: Freddie Mac
Originally called the Federal Home Loan Mortgage Corporation.
Was created in 1970 as a privately owned corporation but is also now under government conservatorship.
Freddie Mac continues to provide a secondary market for mortgage loans, primarily conventional loans.
Many lenders use the standardized forms and follow the guidelines issued by Fannie Mae and Freddie Mac.
D: Farmer Mac
The Federal Agricultural Mortgage Corporation (Farmer Mac) is privately owned and publicly traded, and was established by Congress in 1988 to create a secondary market for agricultural mortgage and rural utilities loans and the portions of agricultural and rural development loans guaranteed by the U.S. Department of Agriculture (USDA).
Farmer Mac is part of the Farm Credit System and is regulated by the Farm Credit Administration.
Farmer Mac guarantees payment of principal and interest on the loans it purchases and pools those loans for sale.
Farmer Mac has not had the financial difficulties that have plagued Fannie Mae and Freddie Mac in recent years, primarily because market values in rural areas have not gone through the wide swings that most urban areas have experienced.
D: Ginnie Mac
The Federal Agricultural Mortgage Corporation (Farmer Mac) is privately owned and publicly traded, and was established by Congress in 1988 to create a secondary market for agricultural mortgage and rural utilities loans and the portions of agricultural and rural development loans guaranteed by the U.S. Department of Agriculture (USDA).
Farmer Mac is part of the Farm Credit System and is regulated by the Farm Credit Administration.
Farmer Mac guarantees payment of principal and interest on the loans it purchases and pools those loans for sale.
Farmer Mac has not had the financial difficulties that have plagued Fannie Mae and Freddie Mac in recent years, primarily because market values in rural areas have not gone through the wide swings that most urban areas have experienced.
D: Conventional Loans
Are viewed as the most secure loans because their loan-to-value ratios are often lowest.
The ratio may be 80% of the value of the property or less because the borrower may make a down payment of at least 20%.
Because the payment of the debt rests on the ability of the borrower to pay, the lender carefully evaluates both the property and the prospective borrower.
In determining the amount of the loan, the lender relies primarily on its appraisal of the property.
To decide the buyer’s willingness and ability to pay, information from credit reports, the buyer’s credit score, and other factors, such as qualifying ratios and work history, are very important.
Usually with a 20% down payment and a conventional loan, no additional insurance or guarantee on the loan is necessary to protect the lender’s interest.
A loan with less than a 20% down payment usually will require private mortgage insurance.
A conventional loan is not government insured or guaranteed, unlike FHA-insured and VA-guaranteed loans.
D: PMI
Private Mortgage Insurance.
Is purchased by the borrower to protect the lender in the even that the loan defaults.
This only applies to loans that a LTV above 80%.
PMI covers a portion of the shortfall between the amount obtained through the REO sale and the outstanding mortgage debt.
D: FHA-Insured Loan
A loan insured by the Federal Housing Administration and made by an approved lender in accordance with FHA regulations.
The most popular FHA program covers fixed-rate loans for 10 to 30 years on one- to four-family residences.
FHA does not set interest rates, but it does limit lender fees and specifies how closing costs and down payment may be paid and by whom, and regulates rate increases and caps on adjustable-rate loans.
FHA-insured loans are competitive with other types of loans, often because an FHA-insured loan can be made even when the borrower makes a relatively low down payment, resulting in a high LTV.
The maximum loan amounts that FHA will insure, by state and county, are available by going to www.hud.gov and entering “FHA mortgage limits” in the search box. By law, FHA loans cannot charge prepayment penalties.
What counts as a veteran.
- 90 days of active service for service people currently on active duty and veterans of at least 90 days of active service during World War II, the Korean War, the Vietnam conflict, and the Gulf War (which extends to the present time).
- A minimum of 181 days of active service during interconflict periods between July 26, 1947, and September 6, 1980.
- Two full years of service during any peacetime period since 1980 (since 1981 for officers) or the full period (at least 181 days) for which the veteran was called or ordered to active duty.
- Six or more years of continuous duty as a reservist in the Army, Navy, Air Force, Marine Corps, or Coast Guard, or as a member of the Army or Air National Guard.
D: Certificate of Reasonable (CRV)
A form indicating the appraised value of a property being financed with a VA loan.
VA loans do not charge a funding fee for?
- A veteran who is receiving VA compensation for a service-connected disability
- A veteran who would be entitled to receive compensation for a service-connected disability if the veteran did not receive retirement or active duty pay
- The surviving spouse of a veteran who died in service or from a service-connected disability.
D: The farm Service Agency (FSA)
The Farm Service Agency (FSA) is a federal agency of the Department of Agriculture.
The FSA offers programs to help families purchase or operate family farms and has taken over the functions of the former Farmers Home Administration (FmHA).
Through the Rural Housing and Community Development Service (RHCDS), FSA also provides loans to help families purchase or improve single-family homes in rural areas (generally areas with populations of fewer than 10,000 people).
The FSA loans fall into what two categories?
- Guaranteed Loans that are made and serviced by private lenders. Guaranteed for a specific percentage by the FSA.
- Loans made directly by the FSA.
D: The Farm Credit System
Provides loans to farmers, ranchers, rural homeowners, agricultural cooperatives, rural utility systems, and agribusinesses.
Unlike commercial banks, Farm Credit banks and associations do not take deposits.
Instead, loanable funds are raised through the system-wide sale of bonds and notes in capital markets.
True or False.
The lender of an FHA-insured loan may not charge discount points in addition to a loan origination fee.
False
D: Package Loan
A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances.
D: Blanket Loan
Covers more than one parcel or lot.
It is usually used by a developer to finance a subdivision, but it can also be used to finance the purchase of improved properties or to consolidate multiple loans on a single property.
A blanket loan usually includes a provision known as a partial release clause.
The release form from the lender will include a provision that the lien will continue to cover all other unreleased lots.
In this way, the lender retains a security interest in the unsold property for the remaining development loan balance, yet each purchaser of an improved or unimproved lot can obtain secured financing on that parcel.
