Unit 13 Flashcards
Federal Reserve System
Consists of 12 reserve district banks. The Fed regulates the flow of money and interest rates
Primary Mortgage Market
Loans are bought and sold after being funded
Fannie Mae
Has shareholders but is under the conservatorship of the Federal Housing Finance Agency (FHFA). Creates mortgage-backed securities using pool of mortgages as collateral. Deals in conventional, FHA, and VA loans
Freddie Mac
Has shareholders and is under the conservatorship of FHFA and had authority to purchase mortgages, pool them, and use them as a security for bonds sold on the open market
Ginnie Mae (Government National Mortgage Association)
Entirely a government agency, a division of the Department of Housing and Urban Development (HUD), organized as a corporation but without corporate stock, that administers special- assistance programs, and guarantees mortgage- backed securities using FHA and VA loans as collateral
Conventional loans
Most secure loans. Lowest LTV, usually 80% but can be 100%
Non conforming loans
Must be retained in lender’s investment portfolio
Private Mortgage Insurance (PMI)
May be required for LTV higher than 80%. Automatically terminate if borrower accumulated 22% equity (based on purchase price or original appraised value, which ever is less) and is current on mortgage payment
FHA loans
Backed by Federal Housing Administration, part of HUD. Does not make loans but insures loans made by an FHA approved lending institution
FHA Mortgage Insurance Premium (MIP)
Has an upfront fee along with monthly installments
VA-guaranteed loans
Backed by the US Department of Veterans Affairs and are available to eligible veterans and spouses
Farm Service Agency (FSA)
(formerly Farmers Housing Administration FmHA) Part of the Department of Agriculture and has programs to help families purchase or operate family farms, including the Rural Housing and Community Development Service (RHCDS) and the Farm Credit System
Package loan
Includes all personal property and appliances as well as real estate
Blanket Loan
Covers more than one parcel, and a Partial Release Clause allows a borrower to pay off part of a loan to remove the liens from one parcel at a time
Open-end loan
Secures the current loan to the borrower and future advances made by the lender to the borrower
Construction Loans
used to finance construction of property improvements
Sale-and-Leaseback
Arrangement can be used to finance large commercial or industrial properties
Buydown
a payment made at closing to reduce the interest rate on the loan
Home Equity Line of Credit loan (HELOC)
junior to the original lien
Truth in Lending Act
implemented by Regulation Z, enforced by the Consumer Financial Protection Bureau, requires that when a loan is secured by a residence, lender must inform the borrower of the true cost of obtaining credit. Borrower has a 3-business-day right of rescission.
Equal Credit Opportunity Act (ECOA)
Prohibits discrimination in granting or arranging credit based on basis on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance
Fair Credit Reporting Act (FCRA)
Requires that reasons for a loan application rejection be provided to applicant within 30 days and be given the right to a free copy of any credit report that was considered in the loan application process
Community Reinvestment Act (CRA)
Requires financial institutions to help meet the need for affordable housing in their communities
