Chapter 3: Important Points Flashcards
IP Purpose of Loan Process
To verify all data the borrower presents in the loan application. Loan underwriting reviews the loan documentation and evaluates the borrower’s ability and willingness to pay.
IP Commercial Mortgages Dependent On…
Financial strength of the borrower and may include personal guarantees as well as a large down payment.
IP Gap Financing
Usually a short-term loan used until more permanent financing is in place. Bridge loans and swing loans are examples of this.
IP Wraparound Mortgage
A subordinate mortgage that includes the same principal obligation secured by a superior mortgage against the same property.
IP A provision in a convertible mortgage
Gives the lender the option of converting the outstanding balance into an agreed-upon percentage of property ownership.
IP Home Equity Loan
Not necessarily a second mortgage. The amount of a home equity loan cannot exceed the original purchase price of the house.
IP Construction Loan
Form of interim financing. The mortgage made to a developer is disbursed in progressive installments to finance each part of the project completed.
IP Sale Leaseback
A transaction in which a property owner sells a property to an investor and the investor agrees to lease back the property immediately to the seller.
IP Long-term Lease
A way of controlling property without buying it.
IP Capital-Short Market
Occurs when lenders do not have funds for underwriting mortgages. The secondary mortgage market, which purchases mortgages from lenders, frees up capital so that lenders have money available for mortgages.
IP FHA
An agency of the US Department of Housing and Urban Development (HUD). Licensees should keep abreast of all FHA changes and procedures.
IP What helps free up capital for mortgages?
The sale and purchase of mortgages between lending institutions, Fannie Mae incentives, and private investors.
IP Regulation Z of the Truth-in-Lending Act
Provides for disclosure by lenders and truth in advertising.
IP Real Estate Market
Subject to cyclical changes in the economy and is often the first industry to feel the adverse effects of depressed conditions.
IP What affects changes in market activity?
Employment levels, interest rates, the stock market, seller valuation of property, buyer’s ability to afford property, etc.
