UNIT 10 - REAL ESTATE FINANCE: LENDING INSTITUTIONS Flashcards
Board of Governors (BOG)
seven member board of the federal reserve system, which is a network of 12 federal reserve banks.
Federal Open Market Committee
responsible for developing polices to promote economic growth, full employmet, and stable prices.
reserve requirements
all member banks must set aside a certain percentage of their deposits as a reserve. The banks cannot lend this.. The BOG sets the reserve requirements.
discount rate
the rate a bank borrows directly from the federal reserve bank.
open market operations
the fed buys and sells gov securities (typically existing bonds). When the fed buys, then bank’s cash (money supply) increases which lowers interest.
tight money market
when the money supply is tightened up, causing increase interest rates. (done by FOMC)
Glass-Steagall Act
prohibits commercial banks from collaborating with full service brokerage firms or participating in investment banking activies.
deregulation
a process whereby regulatory restraints are gradually relaxed.
disintermediation
reduction in the use of intermediaries between producers and consumers, for example by investing directly in the securities market rather than through a bank.
Depository Institutions Deregulation and Monetary Control Act
sweeping changes in 1980s.
- raise deposit insurance from 40k to 100k
- permits savings and loans (S&L) to offer a much wider range of services. (enter commercial lending, trust services, and non-mortgage consumer lending)
Garn-St. Germain Depository Institutions Act
1982 - completed the process of giving expanded powers to federally chartered S&Ls.
Alternative Mortgage Transaction Parity Act
1982 - allowed lenders to originate adjustable-rate mortgages and mortgages with balloon payments and negative amortization.
Financial Institutions Reform, Recovery, and Enforcement Act
1989 - Officer of Thrift Supervision and Housing Finance Board were authorized to oversee the S&L regulation. Now the FDIC insurces 250k.
Gramm-Leach-Bliley Act
1999 - repealed part of the Glass-Steagall Act. Allowed commercial banks, investment banks, insurance companies, and securities firms to consolidate. Create a new “financial holding company” that could engage in insurance and securities underwriting activities.
Housing and Economic Recovery Act
2008 - established the federal housing financ agency.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Established the Consumer Financial Protection Bureau (CFPB), which regulates consumer finance products and services.
primairy mortgage market
market in which lenders make mortgage loans by lending directly to borrowers
financial intermediary (process is called intermediation)
The liasison between supplies and users of credit. combines funds from many sources, and adapts them into loans for the consumer.
depository institution
accepts deposits in the form of savings accts. makes loans using their depositors’ monies.
institutional lender
accepts deposits that are then pooled to be invested.
mortgage yield
interest + origination fees + points
commercial banks
all purpose lenders whose real estate loans represents only a portion of their overall activity
compensating balance
a borrower deposits funds with the bank in order to induce the lender into making a loan.
thirft institution
largest single resource for residential mortgage credit. S&Ls, savings banks, and mutual savings banks. can be owned as a mutual organization or as a stock institution. insured by FDIC
mutual ownership
all depositors share ownership in the savings and loan or bank, which is managed by a board of trustees. the depositors are paid dividends on their share of the earnings.
savings banks
distinctive type of thrift institution
mutual savings banks
established to encourage savings by people who did not have a large amt of disposable income
credit unions
association whose members usually have the same type of occupation. Supervised by the national credit union association board. deposits are insured by the federally insured national credit union share insurance fund.
insurance companies
supplies money for large commercial loans to developers and builders. usually don’t do residential, but can buy loans from mortgage companies and invest in Ginnie Mae gov insured or guaranteed loans.
non-institutional lenders
do not take deposits. they are private lenders that invest their own or borrowed funds.
private individuals (sellers)
most common way to create a junior loan is by sellers carrying back a trust deed on the sale of their own home.
mortgage companies (mortgage banker)
company whose principal business is the origination, closing, funding, selling, and servicing of loans secured by real property. they lend their own money or borrowed from warehouse lenders.
warehouse line
revolving line of credit extended to a mortgage company from a warehouse lender to make loans to borrowers
mortgage broker
(not to be confused with mortgage bankers). a third party originator – not a lender. They coordinate the loan process between the borrower and lender and charge an origination fee.
REIT
company that owns operates income producing real estate, or engages in financing real estate.
non-financial institutions
i.e. pension funds, universities, trust departments of banks, title companies
secondary mortgage market
buying and selling existing mortgages
debt instrument (mortgage backed security)
collat by the mortgages that have been bought in the secondary mortgage market
government sponsored enterprise
financial services corp created by congress
housing GSE
fannie mae, freddie mac, federal home loan banks
federal housing finance agency
established 2007, sets limit of the size of the conforming loan
ginnie mae
gov corp within HUD, created in 1968 when the federal national mortgage association was split into fannie mae and ginnie mae. It supports FHA, VA, and other loans. doesnt issue MBS, instead guarantees investors timley payments
Consumer Credit Protection Act
1968 - launched truth in lending disclosures.
Real Estate Procedures Act
protects consumers by mandating a series of disclosures that prevent unethical practices by mortgage lenders
Home Mortgage Disclosure Act
requires mortgage lenders gather data from borrowers to determine whether lenders are serving their communities.
redlining
illegal lending policy of denying real estate loans on properties in older changing urban areas, usually with large minority populations, bc of alleged higher lending risks without due consideration being given to the individual loan applicant
prohibited by Housing Financial Discrimination Act of 1977
Holden Act
increase lending in neighborhoods where in the past financing has been unavailable.
Mortgage Loan Disclosure Statement
must be disclosed if a real estate broker negotiates the loans on behalf of the borrowers or lenders
arranger of credit
required by cali for seller financing to find a person not a party to the transaction to arrange the credit.
finance charge
the dollar amt the credit will cost.
