Flashcards in chapter 16 Deck (33)
what is the primary mortgage market?
is made up of the lender the originate mortgage
what is finance charges?
collection at closing, such as loan origination fees and discount points
what is recurring income?
the interest collect during the term of the loan
what is mortgage banking comp?
mortgage banking companies originate mortgage loans with money
what is mortgage broker?
they are not lenders. they are intermediaries who bring borrowers and lend together
what is the secondary mortgage market?
the secondary helps raise capital to continue making mortgage loans. they is especially useful when money is in short supply. It stimulates both the housing construction market and the mortgage market by expanding the types loans available
who is fannie may?
in sept 2008, the federal national mortgage association became a government owned enterprise
who is ginnie mae?
the government national marriage association has always been a government agency
who is freddie mac?
the federal home loan mortgage corp is also now a government owned enterprise
it provides a secondary market primarily for conventional loans
what is straight loans, interest loans or term loan?
is non amortized loan that essentially divides the loan into two amount to be paid off separately. the borrower make periodic of interest only followed by the payment of the principal in full at the end of the term
what is amortized loan?
partially pays off both principal and all interest. most mortgage and red of trust loans are amortized loans. regular periodic payments are made over the term of years, generally 15-30 years
At the end of term,the full amount of the principal and all interest due is reduce to zero
what is adjustable rate mortgage?
generally originate at one rate of interest the fluctuate up or down during the loan term based on some objective economic indicator. because the interest rate on ARMSs amy chafe the mortgagor's loan repayment also may change detail of how and when the ingest rate will charge are included in the note.
what is common components of an ARM contract?
1. the index is an undeterminable economic indicator that is used to adjust the interest rate in the loan. most indexes are tied to the US treasury
2. usually the ingest rates the interest rates is the inters is the index rate plus a premium, called the margin. the margin represents the lender's cost of doing business
3. rate caps limit the amount the interest rate may change. most ARMs have two types of rate caps- period and aggregate. a periodic rate cap limits the amount the rate may increase at any one time. An aggregate rate limits amount the may increase over the entire life of the loan
4. the mortgagor is protected from unaffordable individual payment by the payment cap the payment cap sets a max amount for payments
5. lenders may offer a conversion option, which permits the mortgage convert from an adjustable rate to fixed rate loan at certain intervals during the live of the mortgage.
what is private mortgage insurance?
one way a borrower can obtain a mortgage loan with a lower down payment
what is the private mortgage insurance program?
in this program, the borrower purchase an insurance policy that provides the lender with funds in the event the borrower default on the on loan. this allows the lender to assume more risk so that the loan to value remains higher than for other conventional loan
what is does program for private mortgage insurance protects?
this protects the top 20 to 30 percent of the loan against borrower default. the borrower pays the monthly fee
what is homeowner protection act of 1998?
implemented in 1999, the PMI must terminate automatically when the borrower reaches a 22 percent equity position based on the original value of the property at the time the loan was originated with no allowances for appreciation or depression if the loan was written after July 29, 1999 and the borrower is current on mortgage payments
what is FHA-insured loans
the federal housing administration which operates under HUD, neither builds homes for lend money. the term FHA LOAN refers to loan that is insured by the agency. these loans must be made FHA approved lending institution. they insurance provides security to the lender. in addition the era estates, as with private mortgage insurance, they insure lenders against loss from the borrower default
why is title 2 section 203 the most popular for FHA?
fixed inter rate loan for 10 to 30 years one to hour family residence
rates are competitive with other loans, even though they are big LTV loans
according to FHA web site (in 2010), the borrower is eligible for approximately 96.5 financing for one to four unit structure
what are the requirements for FHA loans?
1. the borrower must pay a down payment of at 3.5 of the purchase price, but not of the closing cost and fees can included in the loan
2. the borrower is charred a mortgage insurance premium (MIP) for all FHA loans. the up front premium is charged at closing and can be financed into the mortgage loan. the borrower is also responsible is charge on all FHA loans, except this for the purchase of condo, that require only a monthly MIP
3. the mortgage real estate must be appraised by an approved FHA appraiser
4. the FHA sets max mortgage limits for various regions for the country
5. the borrower must meet standard FHA credit qualification
6. financing for manufactured home and factory built housing is also available both for those who won the land that the home is on and also for manufactured home that are or will be located on another plot of land
what is VA Guaranteed loans?
the department of verbenas affairs (VA) is authorized to guarantee loan to purchase or construct home for eligible vets and their spouses
the VA also guarantee loans to purchase mobile home and plots on which to place them
what is eligibility for VA loan?
vet who served on active duty and have some form of honorable discharge after a minimum of 90 days of service during wartime and a minimum of 181 continuous day in time of peace.
two years are required for vets who enlisted and began service after Sept 7, 1980 or officers who began service after Oct 16, 1981
Six years are required for reservist and member of the national guard. these are specific rules regarding the eligibility of surviving spouse
what is certificate of reasonable value (CRV) from the VA?
for the property being purchase. the CRV states the property current markets value based on a VA appraisal
they place a ceiling not the amount of VA loans allowed for the property. the purchase price is greater than the amount cited in the CVR, the vet may pay the difference in cash.
CRV is based on appraisal New VA rules allow only one active VA loan at a time
VA benefits will never expire as long as the previous benefits is use has been paid
what is prepayment privileges?
As with the FHA loan, the borrower under VA loan can prepay the dept at any time without penalty
what is assumptions rule for VA?
VA loans made before march 1 1988 are freely assumable although an assumption processing free will be charged. For loan make on or after march 1 1988, the VA must approve the buyer and assumption agreement. The original vet borrower remains personally liable for repayment of the loan unless the VA approves release of liability. the release of liability will be issued by the VA only if
1. the buyer assumes all of the vets liabilities on the loan
2. the VA or lender approves both buyer and the assumption agreement
what is VA legislation?
the veteran millennium health car and benefits act of 1999 public law 106-117 authorized the VA to restore the home loan eligibility, including that of person who are not otherwise eligible and how have completed a total of at least six years of honorable service in the selected including the national guard, is available on the VA's internet loans information site
what is purchase money mortgage or PMM?
is note and mortgage created at the time of purchase when the seller agree to finance all or party the purchase price consists of a first or junior lien depending on whether prior mortgage liens exist
A PMM is often used when the buyer doesn't for a typical lender loan
payment are made to the seller, according to the terms of the notes if the buyer stops making payment, the seller has recourse of foreclose on the property
What is package loans?
includes real and personal property. in recent years, these kinds of loans have been very popular with developers and purchase of unfurnished condo
package loans usually include furniture and appliance as part of the sales price of the home
what is blanket loan?
covers more than one parcel or lot it usually used to finance subdivision development
it can be used to finance the purchase of improved properties or to consolidate loans
it usually includes a provision known as partial release clause permits the borrower to obtain the release of any one lot one lot or parcel from the lien by repaying amount of the loan