Unit 13 - Government Involvement in Real Estate Financing

Question 1

What is the role fo the Federal Reserve System

Answer 1

Used to maintain sound credit conditions (interest rates)

Question 2

What is the primary mortgage market

Answer 2

made up of the lenders that originate mortgage loans that make money available directly to borrowers

Question 3

How is income from a loan realized

Answer 3

• finance charges collected at closing (origination fees and points)
• recurring income, the interest collected during the term of loan

Question 4

What are examples of major lenders of home mortgage and commercial property loans

Answer 4

Savings Associations and commercial banks, Insurance companies, credit unions, pension funds, endowment funds, investment group financing, mortgage banking compaines, mortgage brokers.

Question 5

What is the secondary mortgage market

Answer 5

loans are bought and sold after the have been closed.

Question 6

Key players in secondary market were created by federal government, what are they called

Answer 6

Governmen=sponsored enterprises (GSE’s)

Question 7

What are the Government Sponsored Enterprises (GSE’s) and what are their functions

Answer 7

• Fannie Mae: conventional, FHA insured, VA guaranteed loans
• Freddie Mae: conventional loans
• Ginnie Mae: special assistance loans (HUD)

Question 8

How are mortgage loans classified

Answer 8

based on loan-to-value (LTV). Lower the ratio of debt to value, the higher the down payment.

Question 9

How are conventional loans viewed

Answer 9

Most secure, require 20% down.

Question 10

What is Private Mortgage Insurance (PMI)

Answer 10

Borrower can obtain conventional loan with a down payment less than 20% of purchase price by obtaining this insurance. Stays on loan for entire term.

Question 11

What does FHA loan mean

Answer 11

They neither build or lend money. Refers to a loan tha is INSURED by the agency. All FHA loans are charged a mortgage insurance premium (MIP). No more than 6 discount points, may assume existing FHA loan.

Question 12

VA loan information

Answer 12

-Veteran must apply for certificate of eligibility
-Issued a certificate of reasonable value (CRV) for property being
purchased, based on current market appraisal
-Not allowed to pay for termite report
-seller allowed to pay closing cost, up to 4% of loan amount

Question 13

What is a Package Loan

Answer 13

Includes real and personal property

Question 14

What is a blanket loan

Answer 14

covers more than one parcel or lot. Used by develoer in subdivision

Question 15

What is an Open-End loan

Answer 15

provides a security interest when a note is executed by the borrower to the lender, but also secures any future advances of funds made by the lender to the borrower. (Home Improvement Loan)

Question 16

What is a Construction Loan

Answer 16

made to finance the construction of imprements on real estate such as homes, apartments, and office buildings. Commits to full amount of the loan but disburses the funds in payments during the construction. Payments are called draws.

Question 17

What is a sale-and-leaseback

Answer 17

Land use dby the seller is sold to an investor and then leased back to the seller, who continues to conduct business on the property as a tenant

Question 18

What is a buydown

Answer 18

a temporary or permanet way to lower the interest rate on a mortgage by reducing the interest rate by 1% or 2% over the first one or two years of the loan

Question 19

What is a home equity loan

Answer 19

source of funds that takes advantage of the equity built up in a home. It is a junior lien to the original mortagage lien.

Question 20

What is a HELOC

Answer 20

Home Equity Line of Credit, lender extends a line of credit the borrower can use at will.

Question 21

What is the Truth in Lending Act (TILA)

Answer 21

requires credit institutions inform borrowers of th true cost of obtaining credit.

Question 22

What is considered a creditor

Answer 22

any person who extends consumer credit more than 25 times a year or more than 5 times each year if the transactions involve dwellings as security

Question 23

What is a three business day right of rescission

Answer 23

borrower has three days to rescind (cancel) the transaction by notifying the lender.

Question 24

What are triggering terms

Answer 24

specific credit terms such as down payment, monthly payment, dollar amount of the finance charge or term of the loan…used in advertising

Question 25

What are the penalties for a TILA violation

Answer 25

creditor may be liable to a consumer for twice the amount of the finance charge, at a minimum of $400 and a max of $4,000, plus court costs, attorney’s fees, and any actual damages

Question 26

What does the Equal Credit Opportunity Act (ECOA) prohibit

Answer 26

prohibits discrimination in granting credit based on:
race, color, religion, national origin, sex, marital status, age, ,and receipt of public assistance

Question 27

What does the Real Estate Settlement Procedures Act (RESPA) ensure

Answer 27

It applies to any residential real estate transaction involving a new first mortgage loan to ensure the buyer and the seller are both fully informed of all costs related to the closing transaction

Question 28

What does automated underwriting and scoring accomplish

Answer 28

can shorten loan approvals from weeks to minutes. and tends to lower the cost of loan application and approval by reducing the lender’s time spend on the approval process by as much as 60%.