12 Real Estate Financing

Question 1

Annual percentage rate (APR)

Answer 1

The relative cost of credit as determined in accordance with regulation Z of the Board of Governors of the federal reserve system for implementing the federal truth in lending act.

Question 2

Blanket mortgage

Answer 2

A loan covering more than one property

Question 3

CalVet loan

Answer 3

Home or farm loan procured through the California Veterans farm and home purchase program.

Question 4

Conforming loan

Answer 4

Loan that meets Fannie Mae and Freddie Mac purchase criteria

Question 5

Conventional loan

Answer 5

A loan secured by a mortgage or trust deed that is made without governmental underwriting (FHA-insured or VA-guaranteed)

Question 6

Direct endorsement

Answer 6

A lender who is authorized to determine if a loan qualifies for FHA insurance

Question 7

Discount rate

Answer 7

Interest rate charged member banks by federal reserve banks

Question 8

Dodd-Frank Act

Answer 8

The Dodd-Frank Wall Street reform and consumer protection act signed into law in 2010

Question 9

Due-on-sale clause

Answer 9

An acceleration clause in a real estate financing instrument granting the lender the right to demand full payment of the remaining indebtedness on a sale of the property.

Question 10

Equal credit opportunity act

Answer 10

Act that prohibits lender discrimination against a borrower based on the fact that the source of income is public assistance.

Question 11

Fannie Mae (federal national mortgage corporation)

Answer 11

Now a private corporation dealing in the secondary mortgage market.

Question 12

Farmer Mac (Federal National mortgage association)

Answer 12

Now a private corporation providing a secondary mortgage for farms and rural housing.

Question 13

Freddie Mac (Federal Home Mortgage Corporation)

Answer 13

Now a private secondary mortgage corporation

Question 14

Ginnie Mae (Government National Mortgage Association)

Answer 14

A government corporation that provides assistance to federally related housing projects. Funds are raised by selling securities backed by pools of mortgages.

Question 15

Hard money loans

Answer 15

Cash loans made by individual investors

Question 16

Institutional lenders

Answer 16

A financial intermediary or depository, such as a savings association, commercial bank, or life insurance company, that pools the money of its depositors and then invests funds in various ways, including trust deeds and mortgage loans.

Question 17

Loan estimate

Answer 17

New form mandated by the TILA-RESPA rule that helps consumers to understand the key features, costs, and risks of a mortgage loan. It must be provided to consumers no later than three business days after they submit a loan application.

Question 18

Mortgage loan disclosure statement

Answer 18

The statement on a form approved by the real estate commissioner that is required by law to be furnished by a mortgage loan broker to the prospective borrower of a loan of a statutorily prescribed amount before the borrower becomes obligated to complete the loan.

Question 19

Option ARM

Answer 19

Adjustable-rate Mortgage where the buyer has the option of making a minimum payment.

Question 20

Participation loan

Answer 20

A loan where the lender takes an equity position in the property, as well as interest for the loan.

Question 21

Points

Answer 21

• One point represents one percentage point of a loan amount

- May be charged by lenders at the time of loan funding to increase the loan’s effective interest rate.

Question 22

Predatory lending

Answer 22

Making loans without regard to payment ability of borrower in order to obtain the security foreclosure.

Question 23

Primary mortgage market

Answer 23

Composed of lenders that deal directly with borrowers

Question 24

Private mortgage insurance (PMI)

Answer 24

Mortgage guaranty insurance available to conventional lenders on the high-risk portion of a loan, with payment included in the borrower’s loan installments.

Question 25

Qualified mortgage

Answer 25

Loans that meet standards for HUD insurance

Question 26

Real estate investment trust (REIT)

Answer 26

Way for investors to pool funds for investments in real estate and mortgages, with profits taxed to individual investors rather than to th corporation.

Question 27

Reverse mortgage

Answer 27

Mortgage where the borrower receives payments and does not repay loan until the property is sold or the borrower dies.

Question 28

Secondary financing

Answer 28

A loan secured by a second ( or subsequent) mortgage or trust deed on real property

Question 29

Secondary mortgage market

Answer 29

- Investment opportunities involving real property securities, other than direct loans from lender to borrower - loans may be bought, sold, or pooled to form the basis for mortgage backed securities

Question 30

Subprime lender

Answer 30

A lender who will take out loans that are considered too risky by other lenders. Subprime loans bear a higher rate of interest.

Question 31

Take-Out loan

Answer 31

- The loan arranged by the owner or builder developer for a buyer - the permanent financing that pays off and replaces the interim loan used during construction.

Question 32

Third-party originator

Answer 32

A party who prepares loan applications for borrowers and submits the loan package to lenders.

Question 33

Truth in lending act

Answer 33

Federal act requiring loan term disclosures, as well as advertising disclosures.

Question 34

Wraparound Mortgage or trust deed

Answer 34

- Overriding or all-inclusive trust deed - a financing device in which a lender assumes payments on an existing mortgage or trust deed and takes from the borrower a junior mortgage or trust deed with a face value in an amount equal to the amount outstanding on the old instrument and the additional amount of money borrowed.