Understanding Real Estate Finance: Mortgage Brokers, Bankers, and More, Exams of Business Fundamentals

Download Understanding Real Estate Finance: Mortgage Brokers, Bankers, and More and more Exams Business Fundamentals in PDF only on Docsity! Real Estate Finance Champions-with 100% verified solutions Tutor verified mortgage Broker Functions as a middleman between the borrower and the lender, negotiating, selling or arranging loans to be delivered to large investors Mortgage Banker Provide their own funds for the purpose of providing mortgage financing Correspondent Lender Smaller in scale then mortgage bankers or brokers, these lenders typically extended loans with their own funds at their own risk Origination The process of creating a new mortgage loan Underwriting Detailed process of evaluating a borrowers loan application to determine the risk involved for the lender Closing/Settlement Consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then distributed by the lender Funding The process of transferring funds into a title or escrow company for disbursement Housing and Economic Recovery Act of 2008 (HERA) Designed to assist with recovery and revitalization of America's residential housing market SAFE Act (Secure & Fair Enforement of Mortgage Licensing Act) Sets a minimum standard for licensing and registering mortgage loan originators. M1 Sum of currency held by the public and transaction deposits at depository institutions M2 M1 plus savings accounts, certificates of deposit, and other liquid assets monetary policy Maintenance of a stable money supply that provides for growth in the economy while keeping inflation in check. Federal reserve is responsible for monetary policy fiscal policy Federal government spending. The Federal Reserve The central banking system of the United States Monetary inflation Equal Credit Opportunity Act (ECOA) 1974 Ensures all consumers are given an equal chance to obtain credit Secondary mortgages Second dairy Lien or junior liens home equity loan using your home as collateral to borrow money home improvement loan Can hold 1st or 2nd lien position devoted to home repairs and renovations Property tax lien lenders Used to pay delinquent taxes on real property Texas veterans land loan Borrow up to $125,000 5% down secondary market For the purchase and sale of existing mortgages investors Fannie Mae A private institution in the secondary mortgage market that buys and sells mortgages. 1968 Freddie Mac Federal Home Loan Mortgage Corporation 1970 Ginnie Mae Government-backed securities program designed to facilitate the flow of capital into the housing industry 1968 Farmer Mac 1 Purchases qualified agricultural or rural housing loans Farmer mac 2 Purchases portions of qualified loans Farm Credit Administration (FCA) Oversight of farmer Mac Farmer Mac An agency that operates similarly to Fannie Mae and Freddie, but for agricultural loans. front ratio Is used to qualify a borrower for a loan based upon the proposed house payment and their gross monthly income. back ratio The ratio of the borrower's total recurring monthly debts Conventional Loan Loan made with real estate as security and does not involve government participation in the form of insuring or guaranteeing the loan Portfolio loan Loan not intended for resale on the secondary market Primary Mortgage Market where lenders and borrowers come together and negotiate loan terms Savings and loans Locally owned & privately managed State or federally chartered Lock in clause Condition of a mortgage loan which prohibits pre-payment of the loan prior to a certain date Alienation Clause Due on sale clause states balance is due if sold w/o mortgagee's approval Release Clause -Defeasance clause may require lender to execute a satisfaction of mortgage if portion of loan is paid Subordination Clause Is a calls in which a holder of a mortgage permits a subsequent mortgage to take priority exculpatory clause Is used to limit the bar is personal liability in the event of a default on a loan Nonrecourse clause Protect the seller of the security from liability in the event of a default by the borrower Acceleration Clause in the state of default whole amt of principal is due Escalation Clause allows lender to raise existing interest rate Assumption clause Allows the new borrower to take over the payments on an existing loan underspecified terms and conditions Interest Is money paid at a particular rate for the use of money loan to a person for entity it is the cost of borrowing money Interim Interest/ per diem buyer pays from and including day of closing to the end of closing month on Part A Points 1 point = 1% of loan amount Discount points pre-paid interest on a loan amortizing loan The monthly payment includes an amount that is applied first 2 inches that is due with the remainder of the loan payment being applied to the outstanding loan balance Index Is what the wind or uses as an instrument for measuring changes in interest rates Margin The percent added to the index in order to calculate the payment interest- rate Fully indexed rate Equal to the margin plus the index and is usually to the nearest 1/8 of a percent Lifetime cap Limits the interest rate increases over the life of the loan Advantages of arm loans Lower interest rate higher loans falling right Disadvantage of arm Loan To Value Ratio (LTV) Is the percentage of the lesser of the appraised value or sales price that the lender will lend Ballon payments Arrange so that after making a certain number of regular payments the borrower must pay off the remaining loan balance and it's entirety Negative Amortization Payments do not cover interest annual premium Insurance cost based on the loan-to-value ratio Tenure Equal monthly payments as long as at least one borrow lives and continues to occupy the property as a principal residence Term Equal monthly payments for a fixed period of months Selected Line of credit Unscheduled payments or installation at times and in an amount of your choosing into the line of credit is exhausted Modified tenure Combination of line of credit and scheduled monthly payments for as long as you remain in the home Modified term Combination of line of credit plus monthly payments for a fixed period of months so I could buy the borrower