Chapter 13 - Overview of Real Estate Finance Flashcards Preview

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Flashcards in Chapter 13 - Overview of Real Estate Finance Deck (26)
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1
Q

Amortized loans

A

Reduction of the balance of the loan by paying back principal owed on a regular basis.

2
Q

Buydown

A

Additional funds (discount points) are paid to lender at the beginning of a loan to lower the interest rate/monthly payments. Permanent or temporary.

3
Q

Conforming loans

A

Loan that meets Fannie Mae and Freddie Mac requirements and thus can be sold on the secondary market.

4
Q

Conventional loan

A

Any loan not insured or guaranteed by a government agency. They are secured by government sponsored entities (GSEs) - Fannie Mae, Freddie Mac, Ginnie Mae.

5
Q

Discount points

A

Funds paid by lendee to lender when buying mortgage in exchange for lower interest rates/monthly payments. Each point is 1% of the loan cost.

6
Q

Fannie Mae

A

Federal National Mortgage Association provides place for banks and lenders to sell FHA insured loans.

7
Q

Finance Instruments

A

Legal documents establishing rights and duties of all parties in a transaction.

8
Q

Freddie Mac

A

Federal Home Loan Mortgage Corporation - helps savings and loan associations acquire funds for lending. Sells mortgages from its portfolio.

9
Q

Ginnie Mae

A

Government National Mortgage Association - promote investment by guaranteeing payment on FHA and VA mortgages.

10
Q

Grace Period

A

Flexibility in payment schedule.

11
Q

Home Ownership and Equity Protection Act

A

HOEPA was enacted to amend TILA to prohibit predatory lending.

12
Q

Hypothecate

A

Debtor can pledge property as security for debt without giving up possession. Failure to repay debt could result in loss of possession.

13
Q

Loan to Value Ratio

A

Amont of money borrowed compared to value of property. EX: conventional 80% on $80,000 home is $64,000.

14
Q

Mortgage

A

Security instrument allowed debtor/mortgagor to pledge property as security for debt on that property.

15
Q

Mortgage Insurance Premium

A

Added to monthly payment or sometimes lump sum at closing.

16
Q

Mortgagee

A

Lender

17
Q

Mortgagor

A

The personal making a mortgage - the one who needs it, BUYER.

18
Q

Negative Amortization

A

Loan balance grows because payments do not cover the interest on the loans.

19
Q

Point

A

1% of the loan amount, used to pay administrative costs in processing a loan.

20
Q

Predatory Lending

A

Taking advantage of ill informed customers through excessively high fees, misrepresented terms, frequent refinancing, etc.

21
Q

Private Mortgage Insurance (PMI)

A

Offered by private companies to insure lender against a borrower’s default.

22
Q

Primary Mortgage Market

A

Lenders who make loans directly to borrowers - banks, mortgage companies, credit unions, savings and loan associations, etc.

23
Q

Promissory Note

A

Written promise to pay. Maker - mortgagor, payee - mortgagee.

  • date
  • names of parties
  • $ debt
  • how/when to be paid
  • what happens if default
  • signature
24
Q

Secondary Mortgage Market

A

Private investors and government agencies that buy and sell real estate mortgages - Fannie Mae, Freddie Mac, Ginnie Mae, etc.

25
Q

Securitization

A

Pooling mortgages and then selling them as mortgage backed securities - Fannie Mae!

26
Q

Nonconforming loan

A

Loans that do not meet Fannie Mae and Freddie Mac standards - classified due to size of loan and credit of the borrower.