Unit 15 - Real Estate Financing Practices Flashcards
The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth in Lending Act.
annual percentage rate (APR)
A mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from
the mortgage lien upon repayment of a definite portion of the debt.
blanket mortgage
A short-term loan to cover period between termination of one loan and the beginning of another loan; between interim construction loan and a permanent takeout loan; residential financing arrangement where
homeowner borrows money under a second mortgage on
buyer’s unsold current home to fund acquisition of a new
home.
bridge loan
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 to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time
buydown
A form indicating the appraised value of a property being financed
with a VA loan
certificate of reasonable value (CRV)
A standardized conventional loan that meets Fannie Mae’s or Freddie Mac’s purchase requirements.
conforming loan
A short-term loan usually made during the construction phase of a building project
construction loan AKA
interim financing
A federal agency created by the Dodd-Frank Act in 2010 to oversee consumer protection via financial regulations within seven federal agencies
Consumer Financial Protection Bureau (CFPB)
A loan that is not backed (made, insured, or guaranteed) by any government agency. Lender bears all the risk of borrower default.
conventional loan
A federal cabinet department active in national housing programs. Among its many programs are urban renewal, public housing, model cities, rehabilitation loans, FHA subsidies, fair housing enforcement, and water and sewer grants.
Department of Housing and Urban Development (HUD)
The federal law that prohibits discrimination in the extension of credit
because of race, color, religion, national origin, sex, age, or marital status.
Equal Credit Opportunity Act (ECOA)
Gives individuals the right to check their own credit reports and demand that mistakes be corrected.
Fair Credit Reporting Act
A quasi-government agency
established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders.
Fannie Mae (FNMA)
The country’s central banking system, which controls the nation’s monetary policy by
regulating the supply of money and interest rates.
Federal Reserve System
A loan insured by the Federal Housing Administration and made by an approved private lender in accordance with the FHA’s regulations
FHA-insured loan
A corporation established to purchase primarily conventional mortgage loans in the secondary
mortgage market.
Freddie Mac
A government agency under HUD that plays an important role in the secondary mortgage market. It sells mortgage-backed securities that are backed by pools of FHA and VA loans.
Ginnie Mae
A loan under which a property owners use their residence as collateral and can then draw funds up to a prearranged amount against the property
home equity loans AKA
line of credit
A residential mortgage loan in excess of acceptable loan amounts for purchase by Fannie Mae or Freddie Mac;
jumbo loan AKA
nonconforming loan
A crime in which the purpose is to misrepresent or omit information on a mortgage
application in order to obtain a loan or a larger loan than
could have been obtained had the lender known the truth
loan fraud
The relationship between
the amount of the mortgage loan and the value of the
real estate being pledged as collateral.
loan-to-value ratio (LTV)
A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan
being secured by the same original mortgage
open-end mortgages AKA
equity line mortgage
A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a furnished home that includes window coverings and major appliances.
package loan
Unscrupulous, sometimes fraudulent, lending practices usually intending to make repayment impossible; designed to take advantage of unwary borrowers that are frequently the low-income, uninformed, elderly, or non-English-speaking
Predatory Lending
The mortgage market
in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mortgage brokers.
primary mortgage market
Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.
private mortgage insurance (PMI)
A note secured by a
mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real
estate
purchase money mortgage
A guarantee from mortgage lenders that they will give mortgage loan applicants a certain interest rate, at a certain price, for a specific time period
rate lock
Federal law that ensures that residential buyers and sellers receive full disclosure of all settlement charges when a 1—4 family unit residence is financed by federally-related first mortgage loans. The Act mandates a HUD booklet
about closing costs, a loan estimate of closing costs, and a standardized closing statement. The Act, known as Regulation X, also prohibits kickbacks from lenders.
Real Estate Settlement Procedures (RESPA)
Implements the Truth in Lending Act requiring credit institutions to inform borrowers of the true cost of obtaining credit.
Regulation Z AKA
Truth in Lending Act
A loan under which the homeowner receives monthly payments based on the homeowner’s
accumulated equity rather than a lump sum. The loan
must be repaid at a prearranged date, upon the death of the owner, or the sale of the property
reverse mortgage
A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages
secondary mortgage market AKA
secondary money market
A written agreement
between holders of liens on a property that changes the
priority of mortgage, judgment, and other liens under certain circumstances
subordination agreement
A loan made to a borrower with a credit rating below what is required for regular loans creating greater risk liability for the lender that is countered by higher interest rates and fees; called B, C, or D paper.
subprime mortgage
If used, these specific terms make total financing disclosure mandatory. Include: downpayment, monthly payment, dollar amount of the finance charge and term of the loan
trigger terms
A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans
Affairs to limit the lenders possible loss
VA-guaranteed loan
- To impose restrictions and limitations on high-cost loans
- To revise the permissible fees and charges on certain loans
- To prohibit unfair or deceptive practices by mortgage brokers and lenders
- To provide for public education and counseling about predatory lenders
Predatory Lending Act
