Chapter 15 - Financing II: Primary and Secondary Markets Flashcards Preview

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Flashcards in Chapter 15 - Financing II: Primary and Secondary Markets Deck (23):
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Blanket mortgage

A mortgage covering more than one parcel of real estate.

1

Construction loan

Made to finance the construction of improvements on real estate under which the lender disburses the loan proceeds while the building is being constructed. Generally bears a higher interest rate because of the risk assumed by the lender.

2

Credit union

A cooperative organization for savers and borrowers.

3

Fannie Mae (formerly Federal Home LoanMortgage Company)

Sets standards and buys mortgages.

4

Freddie Mac

Warehouse packages of mortgages.

5

Ginnie Mae

Pools mortgages for investors.

6

Home equity loan

Additional borrowings for homeowner: type of second mortgage.

7

Interim financing

Bridge or swing loan to cover the gap between purchase of a new home and sale of the old one.

8

Jumbo loan

Loan for higher amount than those bought by the secondary market.

9

Mortgage banker

Institution set up to make loans. Use money borrowed from other institutions and funds of their own to make real estate loans that may later be sold to investors. Subject to considerably fewer restrictions than commercial banks.

10

Open-end mortgage

Frequently used to obtain additional funds to improve their property. The borrower opens the mortgage to increase the debt after it has been reduced by payments over a period of time. The lender is not obligated to advance the additional funds.

11

Package mortgage

Covers not only the real estate but also all fixtures, appliances and the premises. In recent years it has been used extensively in financing furnished condominium units.

12

Portfolio loan

Loan not intended for sale in the secondary market.

13

Primary mortgage market

Lenders who make individual loans directly to borrowers. In effect these lenders supply funds as an investment.

14

Qualifying ratio

Percentage of income a borrower is allowed to spend on mortgage payments.

15

Regulation Z

Implements the Truth-in Lending Act. requires lenders to inform borrowers of the true cost of obtaining credit so consumers can compare the costs various lenders and avoid uninformed use of credit. requires borrowers to inform of all charges, as well as true annual interest rate (APR), defines creditor as anyone who makes 25 loans a year, or more than 5 times if a dwelling is used as security, three-day right of rescission, and adverting restrictions based on triggering terms.

16

Reverse mortgage

Mortgage through which elderly homeowner can draw against equity, building up a gradual debt with no repayments until moving out.

17

Sale-leaseback

a transaction in which the owner sell their improved property and, as part of the same transaction, signs a long-term lease as to remin in possession of the premises.

18

Shared equity mortgage

A mortgage loan in which the lender, in exchange for a loan with a favorable interest rate, participates in the profits (if any) the mortgagor receives when the property is eventually sold.

19

Triggering terms

Applies to Regulation Z with respect to advertising in that is any one of the following triggering terms is used, three further items of information must be included: amount or percentage of down payment, number of payments or period of repayment, amount of any payment and amount of any finance charge. Any advertising must include the words "to a qualified borrower".

20

Truth-in-lending

The Truth-inLending Act is implemented by Regulation Z.

21

Underwriting

Process by which the lender investigates the application information, studies credit reports and appraisal of the property before deciding whether to grant the loan. The lenders acceptance is written in the form of a loan commitment.

22

Wraparound mortgage

An additional mortgage in which another lender refinances a borrower by lending an amount including the existing first mortgage amount without disturbing the existence of the first mortgage.