Unit 15 - part 1 Flashcards
conventional and direct federal involvement loans
A mortgage that has no direct federal involvement is called a conventional loan.
Loans that have direct federal involvement include those insured by the Federal Housing Administration (FHA) or guaranteed by the U.S. Department of Veterans Affairs (VA).
Federal Reserve System (the Fed)
The role of the Federal Reserve System (the Fed) is to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate.
The Fed regulates the flow of money and interest rates in the marketplace through its member banks by controlling the rate charged for loans it makes to those banks.
The Primary Mortgage Market
The primary mortgage market is made up of the lenders that originate mortgage loans. These lenders make money available directly to borrowers.
Lenders can sell mortgage loans, which produces income to make more loans, and some lenders derive income from servicing loans for investors who have purchased the loans, or servicing loans made by other mortgage lenders.
Major lenders of home mortgage and commercial property loans include the following:
- Savings associations (thrifts) and commercial banks
- Federal Deposit Insurance Corporation (FDIC)
- Credit unions
- Pension funds
- Endowment funds
- Investment group financing
- Mortgage banking companies
- Mortgage broker
Endowment funds
- non-profit organizations have endowment funds for financial reserve and to earn money
- handed by Commercial banks and mortgage bankers
secondary mortgage market
In addition to the primary mortgage market, where loans are originated, there is a secondary mortgage market in which loans are bought and sold only after they have been funded.
The secondary mortgage market thus helps lenders raise capital to make additional mortgage loans.
govemment-sponsored enterprises (GSEs)
The key players in the secondary mortgage market were created by the federal government to help increase loan opportunities for homebuyers.
They are referred to collectively as govemment-sponsored enterprises (GSEs).
govemment-sponsored enterprises (GSEs) include:
Fannie Mae - Federal National Mortgage Association
Freddie Mac - Federal Home Loan Mortgage Corporation
Farmer Mac - Federal Agricultural Mortgage Corporation
Ginnie Mae - Government National Mortgage Association
