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Real Estate Finance
Terms in this set (94)
What type of loan is sold on the secondary market?
When was Fannie Mae established?
When was Freddie Mac established?
What is Fannie Mae?
Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, created in 1938 to establish a secondary market for mortgages insured by the Federal Housing Administration (FHA). Fannie Mae buys mortgages on the secondary market, pools them and sells them as mortgage-backed securities to investors on the open market. This secondary mortgage market helps to replenish the supply of lendable money for mortgages and ensures that money continues to be available for new home purchases. Freddie Mac makes money by charging a guarantee fee which is usually a small part of the interest payment of the loans they have securitized into bonds. (For example, Freddie Mac may purchase a loan with a rate of 5.19 percent and put it into a mortgage backed security (MBS) bond which has a 5.0 percent coupon, keeping 0.19 percent as the guarantee fee.)
What is Freddie Mac?
The Federal Home Loan Mortgage Corporation ("Freddie Mac") NYSE: FRE is a stockholder-owned, publicly-traded company chartered by the United States federal government in 1970 to purchase mortgages and related securities, and then issue securities and bonds in financial markets backed by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae is regulated by the Office of Federal Housing Enterprise Oversight (OFHEO) in the United States Department of Housing and Urban Development.
What is the bond that funds major capital investments?
What does the acronym FRESH CORN stand for?
Families with child
Who oversees the FHA and fair housing?
What does the acronym HUD stand for?
Department of Housing and Urban Development
What type of loan can a Texas Vet loan be paired with?
Claims, liens, and encroachments that affect and limit a persons enjoyment are called what?
Who is the mortgage?
lender (mortgagE gets the feE)
Who is the mortgagor?
borrower (borrowOR gets the doOR)
Anywhere a consumer can go to buy real estate?
What are some examples of primary market?
banks, lenders, buyers, sellers
What act prohibits red lining?
Community Reinvestment Act
When does the closing disclosure have to be provided to the consumer?
Within 3 business days before closing
If a lender takes a property to foreclosure and cannot collect all the money that is due, what can they do?
They can sue for deficiency of funds
If a lender collects more money than needed at foreclosure, what do they do with the extra money?
Give it to the lending holder
What is another term for a subordinate loan?
Who makes the loan decisions?
What is special about the promissory note?
It is the only document that states the terms
What type of loan is an in-house loan?
Who oversees affordable housing?
TDHCA - Texas Department of Housing and Community Affairs
When does a deed transfer?
When the last payment has been made and everything is fully funded
What is the term for a new loan?
How much of the annual taxes and insurance are collected with the payment?
1 / 12 - annual
1 / 6 - 6 months
What does FACTA stand for and what does it function for?
Fair and Accurate Credit Transaction Act (2003)
intended to primarily help consumers fight the growing crime of identity theft
Rights, given by law, to have debts paid out of property?
When did Texas Home Equity Loans become effective? What is a home equity loan?
Jan 1, 1998
collateralized by a non-purchase money mortgage or deed of trust on the borrower's principal residence
Up to what amount can veterans receive in a loan?
What does HELOC stand for?
Home Equity Lines of Credit
What is 1 point equal to in the loan amount?
1% and is considered a unit of measure and can be referring to a discount point or an origination fee (point)
An amortized loan:
the monthly payment is applied first to interest on the loan and any remaining amount is paid toward the outstanding loan balance
What is the monthly payment towards an amortized loan called?
P&I which means the principal and interest
Real Estate Settlement Procedures Act (RESPA) is no...
What does RESPA cover?
applicable to ANY federally related mortgage loan
1-4 unit Residential Property (owner occupied)
With an adjustable rate mortgage (arm), the loan is funded at an initial, lower qualifying interest rate which is good for a specific period of time. When is this initial rate changed?
Changed at certain intervals based on the length of the adjustment period
What is a right given by law to certain creditors to have debts paid out of the property of a defaulting debtor?
What is a voluntary lien?
one that is given freely, usually as collateral for a loan
What is a contract for deed?
land contract and is a sales contract between buyer and seller
What are some other ways a contract for deed is referred to as?
land contract, installment contract, and cash for deed
What is the name of the clause that gives the position to replace the primary loan without the subordinate position?
What does a lender use to measure the fluctuation of the market?
What is an arm loan?
ties to an index plus a margin that is added on by the lender
partially amortized loan
Balloon payment when loan matures
An initial adjustment CAP means the arm is what?
Fixed for the first years of the loan and would have an initial adjustment CAP
Are borrowers on a fixed income who plan to remain in their homes for a long period of years, or who are adverse to taking risk, what is the best loan for them?
Fixed rate loan
What do balloon loans require?
Have to pay off the entire loan balance at the end of a shorter term
What is the lock-in clause?
a fee to be paid in first two years
prohibits prepayment of the loan prior to specific date
Prevents the borrower from transferring the property and stops the purchaser from assuming the loan without the consent of the buyer
A clause in which the holder of a mortgage permits a subsequent mortgage to take priority. Subordination is the act of yielding priority.
Raises the existing interest rate.
When are construction to permanent financing loans used?
When the buyer wants to purchase a residential property in need of repair or modernization
Collateral dependent loan
hard money - asset based financing in which a borrower receives funds secured by the value of the parcel of real estate
Which type of loan would most likely contain a release clause?
What is LTV (loan to value ratio)?
percentage of value the lender is willing to finance
What is private mortgage insurance (PMI)?
protects the lender in case of default in the loan payments
usually required whenever the LTV on the conventional loan is higher than 80%
What is churning?
Mortgage fraud scheme where lenders encourage excessive selling/lending activity, such as multiple refinances to generate fees and commissions for themselves
When was the federal housing administration created?
1934 as part of the department of housing and urban development
How does the FHA operate and how does it protect?
Mortgage insurance program that protects the lend from losses in the event of a default by the borrower
What are two advantages of FHA loans?
1. qualifying rations are more lenient making it easier for borrowers to qualify
2. LTVs are very high and allows buyers with little money for down payments to be able to purchase
Is the FHA a lender?
it insures the loan to protect the lenders against losses due to default by the borrower
Do FHA loans require an upfront mortgage insurance premium?
Yes - the premium that is paid at closing or added to the loan amount at funding
What addresses the question is a vet able to obtain a VA loan?
What is the minimum down payment for a VA loan?
What is a joint loan?
a loan made to a veteran and another person
Do VA loans require owner occupancy?
What type of living spaces can VA loans be used on?
single family homes, refinance/improve existing home, purchase one family residence in a condo
What is the maximum LTV ratio on a FHA loan?
All FHA loans require what?
What does the acronym DUST stand for?
What are the three approaches to value looked at by the lender?
sales comparison (best)
What is depreciation?
reduction in value of a property from physical deterioration, functional and obsolescence
GRM (Gross Rent Multiplier)
average sales price / average monthly rent in area
What does an appraiser look at regarding the age of a property?
Chronological (actual) and effective (maintained) age
What is market value?
Most probable price that the property will bring at a fair sale
What approach is the best indicator of value for existing properties?
what is a statutory foreclosure?
power of sale
total housing expense in relation to gross monthly income?
Max units to buy with a FHA loan?
up to 4
What is the most probably price?
Two mortgage insurance premiums on an FHA loan?
When is the upfront premium paid?
Two primary players on a secondary market?
Fannie Mae & Freddie Mac
Loan that covers several pieces of property?
If someone is on a budget, which program would be least likely recommend?
ARM (adjust rate mortgage)
Loan if you are building from the ground up or renovating?
Construction to Permit
What are the rates called when the consumer starts on an adjust rate mortgage?
What step does reconciliation fall in the appraisal process?
it is the final step where the appraiser weighs the estimates of value obtained by using the various approaches to value
What is a default?
breach or nonperformance of the terms of the note and when the borrower is in default
What is the eligibility needed for HAFA?
Home Affordable Foreclosure Alternatives
based on documented hardships, have not purchased a home in the last 12 months, not have been convicted of a felony in the last 10 years
who initiates foreclosure?
28% x gross monthly income = max monthly house payment
36% x gross monthly income = max PITI and debts per month
Other sets by this creator
Law of Contracts
Law of Agency
Principals of Real Estate 2