Vocabulary Unit 3 Flashcards
buy down mortgage
a mortgage where the interest rate begins below the market rate. Subject to a buy down fee paid to the lender, similar to a loan discount fee which increases the yield by paying a portion of the interest up-front.
adjustable-rate mortgage
loans that originate at one rate of interest, but that adjusts over the term of the loan by an economic indicator.
primary mortgage market
lenders who supply funds to borrowers as an investment
mortgage-backed securities
real-estate related asset
uniform residential loan application
required loan application for loans secured by one-family to four-family properties.
computerized loan origination (CLO)
an electronic network for handling loan applications via remote terminals linked to several lenders’ computers.
automated underwriting
an electronic process of evaluating and approving/declining a loan application.
term loan
an interest-only loan that calls for periodic payment of interest with the principle due at the end of the loan term.
Mainly used for home-improvement, second mortgage, and investor loans.
flexible payment loan
a loan with low monthly payments over the first five years followed by increased monthly payments for the duration of the loan.
balloon payment
a partially amortized loan, a mortgage or deed of trust loan where the scheduled payments will not fully amortize the loan by the end of the term, at which time a final payment, larger than the others, is due.
Frequently used in seller-financing transactions.
loan origination fee
charge made by a lender for processing and closing a loan.
private mortgage insurance
protects a lender from borrower default or foreclosure. Required by the borrower he’s put less than 20% down and has an LTV higher than 80%.
discount points
a percentage by which the face amount of a loan is reduced, consequently adjusting the yield of a loan to be more competitive.
FHA loan
a loan secured by the Federal Housing Administration.
An FHA approved appraiser insures property meets proper standards. – Section 203(b) loans most popular type; 15-30yr fixed mortgages.
VA Loan
a loan guaranteed by the U.S. Department of Veterans’ Affairs. The VA does not issue loans.
The Farm Service Agency
offers both direct and guaranteed loans for purchasing farmland or to construct or repair buildings or fixtures.
Direct loans are made with government funds and serviced by the FSA.
Guaranteed loans are made by local lenders.
Rural Development Program
Provider and guaranteer of loans for purchase, construction of single-family-homes, the repair of existing homes, or the development of affordable rental housing.
Texas Veterans Land Board (VLB)
administers three programs to help Texas veterans purchase a principle residence and/or land, and in financing home improvements.
Veterans Housing Assistance Program
provides funds to purchase a primary residence.
Veterans Land Program
offers eligible Texan veterans the chance to buy at least one acre of land and finance up to $125,000 over a thirty year term with a minimum of 5% down.
Veterans Home Improvement Program
offers a loan up to $25,000 over twenty years to make substantial improvements.
purchase money mortgage
a note and deed-of-trust created at the time of purchase.
It can refer to any security instrument created at time of sale. It can also refer to a note taken by the seller in lieu of cash for the purchase price.
Basically, the seller is saying I’ll take a lien on your property for the amount you owe me.
Home equity line of credit
a line of credit opened against the equity in a home.
reverse mortgage
for homeowners over 62 years of age, a loan issued based on a home’s equity.
shared appreciation mortgage
a deed-of-trust loan originated at rate well below the market in exchange for a share of the profit if the house is sold.
packaged mortgage
a mortgage that includes in addition to real estate, all property and appliances installed on the premises.
blanket mortgage (deed of trust)
pledges more than one parcel or lot. Each lot can be earned back as certain payback milestones are met.
wraparound loan
enables a borrower to get a second loan without paying off the first. The second lender assumes the first loan and charges an increased rate.
open-end mortgage (deed of trust)
secures a note extended to the borrower by the lender, in addition to any future advances of money made by the lender to the borrower.
construction loan
a loan made to finance the construction of real estate. The full amount of the loan is disbursed according to milestones.
sale-and-leaseback agreement
arrangement by which a seller sells the property to a buyer who allows the seller to remain on the property through a lease.
Used for financing large commercial or industrial projects.
contract for deed (installment)
when mortgage financing in unavailable/too expensive, or when a downpayment amount is insufficient, title to property does not transfer until loan has been paid in full.
The Federal Reserve System
the nation’s central bank. Controls interest rates and the money flow of the country through setting reserve requirements and discount rates. Divided into twelve districts.
The Reserve
The amount of assets banks are required to keep on hand, thus limiting the amount of money they can lend. Affects interest rates.
Discount rates
The interest rate charged by district banks for the use of their money by other banks.
Open Market operations
The movement of cash into and out of commercial banks through the buying and selling of government bonds.
secondary mortgage market
the market for loans after they have been closed and funded in the primary lending markets.
warehousing agencies
agencies that purchase a large number of mortgage loans and assemble them into investment packages called “pools”.
Fannie Mae
a government sponsored enterprise created to help increase the the availability of and affordability of home for low, moderate, and middle-class Americans.
Provides a secondary market for conventional, FHA, or VA loans. Buys pools of mortgages in exchanged for mortgaged backed securities.
Freddie Mac
A government sponsored enterprise that buys mortgages, pools them, and sells bonds into the open market with the pools as security. It guarantees the mortgages too.
Ginnie Mae
a whole owned corporation within HUD. It guarantees securities issued by private institutions and backed by pools of Federal insured or guaranteed loans.
All for the purpose of helping low or moderate-income level homeowners.
Farmer Mac
government sponsored enterprise that provides a secondary market for first-mortgage agricultural real estate loans. It purchases US dept of agriculture guaranteed loans from agricultural lenders, pooling them, and issuing mortgage backed securities.
Regulation Z (Truth in Lending)
requires credit institutions to inform consumers the true costs of obtaining credit.
mortgagor
someone who borrows money by putting up land as a security
mortgagee
someone who lends money in exchange for land as security
lien theory
the belief that mortgage property is the property of the borrower and that a mortgage is just a lien on real property.
title theory
ownership is subject to defeat on full payment of debt or obligation of performance.
promissory note
agreement to repay a note in definite installments with interest.
mortgage
the document that creates the lien on property which provides security for the lender that the debt will be repaid.
deed of trust
The document generally used in Texas to secure payment of a debt.
hypothecation
pledging of property as security for payment of a loan without giving up possession of property.
acceleration clause
allows the lender to demand payment immediately if borrower misses a payment.
alienation clause
allows lender to demand payment in full or allow the original borrower to assume the outstanding loan on a property at current market interest rates.
This is when a borrower want to let a third party assume the outstanding loan on a property.
foreclosure
legal process by which a property is sold to satisfy a debt
