Section 5 - Chapter 16

Question 1

federal reserve system:

Answer 1

maintain sound credit conditions, help counteract inflation/deflation, create favorable economic climate

Question 2

reserve requirments:

Answer 2

go up and down to increase/decrease money in supply and interest rates

Question 3

discount rate

Answer 3

% charged by fed to member banks

Question 4

primary mortgage market:

Answer 4

those lenders that originate loans: thrifts, savings associations, commercial banks, insurance companies, credit unions, pension funds, etc.

Question 5

secondary mortgage market:

Answer 5

where loans are bought and sold after they’re funded

Question 6

fannie mae:

Answer 6

provides secondary market for mortgage loans; conventional, fha, and va loans

Question 7

ginnie mae

Answer 7

special assistance programs, guarantees mortgages backed using fha and va loans

Question 8

freddie mac

Answer 8

secondary market primarily for conventional loans

Question 9

straight loan is an:

Answer 9

interest only loan

Question 10

amortized loan is:

Answer 10

a loan that pays principal and interest together in installments

Question 11

adjustable rate mortgages

Answer 11

interest rate fluctuates

Question 12

balloon payment

Answer 12

lots of principal still owed at end of term

Question 13

growing equity mortgage

Answer 13

fixed interest, but principal paid increases on a schedule

Question 14

reverse mortgage

Answer 14

borrow money against equity in the home

Question 15

nonrecourse loan:

Answer 15

borrower not held personally liable for the loan

Question 16

LTV, loan to value ratio

Answer 16

ratio of debt to value of property where value is sale price or apraisal value, whichever is less (high down payment, small loan = low LTV) - loan divided by value = LTV %

Question 17

conventional loan

Answer 17

most secure because LTV is often low, typically 20% down payment for LTV of 80% or lower

Question 18

PMI - private mortgage insurance

Answer 18

with low down payment, borrower purchase insurance to provide lender with funds in case of default - typically protects top 20-30% of loan

Question 19

federal housing administration does:

Answer 19

not lend money or build homes; they insure loans when provided by approved lenders

Question 20

va-guaranteed loans

Answer 20

va loans for qualifiying veterans

Question 21

purchase-money mortgages

Answer 21

basically seller financing where borrower pays seller directly

Question 22

package loans:

Answer 22

includes real and personal property

Question 23

blanket loans:

Answer 23

covers more than one parcel or lot

Question 24

wraparound loans

Answer 24

enables borrower with an existing mortgage to get additional financing from second lender without paying off first mortgage

Question 25

open-end loans

Answer 25

like a home-improvement loan

Question 26

construction loan

Answer 26

made to finance construction of improvements on real estate

Question 27

sale-leaseback:

Answer 27

seller sells then leases back the property

Question 28

buydown:

Answer 28

a way to temporarily or permanently lower interest rate, usually by putting a large amount down

Question 29

home equity loans:

Answer 29

source of funds using equity built up in a home

Question 30

regulation Z and truth in lending act:

Answer 30

lending institutions must inform borrowers of true cost of obtaining credit

Question 31

equal credit opportunity act

Answer 31

prohibits lenders from discriminating