Unit 15 Goverment Involvement in Real Estate Financing Flashcards
Define buydown
A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or the seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time. 279
Define certificate of reasonable value (CRV)
A form indicating the appraised value of a property being financed with a VA loan. 275 (Kyle 522)
Define Community Reinvestment Act of 1977 (CRA)
Under the act, which was revised most recently in 2008, financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms. 282
Define construction loan
A short-term loan usually made during the construction phase of a building project (often referred to as a construction loan). 278
Define conventional loan
A loan that requires no federally sponsored insurance or guarantee. 270
Define Equal Credit Opportunity Act (ECOA)
The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, marital status, or receipt of public assistance. 281
Define Federal Deposit Insurance Corporation (FDIC)
An independent federal agency established by Congress to examine and supervise financial institutions, manage receiverships, and insure deposits (currently up to $250,000 per depositor per financial institution). 267
Define Federal Reserve System (Fed)
The country’s central banking system, which establishes the nation’s monetary policy by regulating the supply of money and interest rates. 266
Define government-sponsored enterprises (GSEs)
Organizations created by the federal government (Fannie Mae, Freddie Mac, Farmer Mac, Ginnie Mae) to help increase loan opportunities for homebuyers. 269
Define home equity loan
A loan under which a property owner uses the property as collateral and can then draw funds up to a prearranged amount against the property. Also called a home equity line of credit, or HELOC. 279
Define mortgage insurance premium (MIP)
The FHA insurance that is a percentage of the loan amount that the borrower is charged as a premium. 273
Define Office of the Comptroller of the Currency (OCC)
Government agency which sets standards and regulations for fiduciary lenders. 267
Define open-end loan
A mortgage loan that is expandable by increments up to a maximum dollar amount, with the full loan being secured by the same original mortgage. 278
Define 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. 277
Define private mortgage insurance (PMI)
Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. 272
Define Real Estate Settlement Procedures Act (RESPA)
The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees. 282
Define Regulation Z
Implements the Truth in Lending Act, requiring credit institutions to inform borrowers of the true cost of obtaining credit. 280
Define sale-and-leaseback
A transaction in which the owner sells improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises. 279
Define secondary mortgage market
A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages. Mortgages are first originated in the primary mortgage market. 268
Define triggering terms
Specific credit terms, such as down payment, monthly payment, and amount of finance charge or term of loan. 281
Define Truth in Lending Act (TILA)
Federal government regulates the lending practices of mortgage lenders through this act. 280
Define VA-guaranteed loan
A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the U.S. Department of Veterans Affairs in order to limit the lender’s possible loss. 274
Primary mortgage market vs secondary
Primary is for the Consumer and secondary is for Bank to Bank
Mortgage points are on the loan amount True of False
True
