Chapter Fifteen

Question 0

a loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan. 243-244

Answer 0

amortized loan

Question 1

a loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index. 244

Answer 1

adjustable-rate-mortgage

Question 2

a final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized. 243

Answer 2

balloon payment

Question 3

a mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien upon repayment of a definite portion of the debt. 253-254

Answer 3

blanket loan

Question 4

a financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, this reducing the monthly payments for a set time. 255

Answer 4

buydown

Question 5

a form indicating the appraised value of a property being financed with a VA loan. 252

Answer 5

certificate of reasonable value (CRV)

Question 6

Under the act, financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in loa=cal community development and rehabilitation projects; and participate in loan programs for housing, small businesses and small farms. 258

Answer 6

Community Reinvestment Act of 1977 (CRA)

Question 7

an electronic network for handling loan applications through remote computer terminals linked to various lenders’ computers. 258-259

Answer 7

computerized loan origination (CLO)

Question 8

a short-term loan usually made during the construction phase of a building project. 255

Answer 8

interim financing/construction loan

Question 9

a loan that requires no insurance or guarantee. 247-248

Answer 9

conventional loan

Question 10

The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status. 257-258

Answer 10

Equal Credit Opportunity Act (ECOA)

Question 11

A government-sponsored enterprise established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders. 248

Answer 11

Fannie Mae

Question 12

an independent federal agency that insures deposits in commercial banks. 240

Answer 12

Federal Deposit Insurance Corporation (FDIC)

Question 13

The country’s central banking system, which is responsible for the nation’s monetary policy by regulating the supply of money and interest rates. 239

Answer 13

Federal Reserve System (Fed)

Question 14

a loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHS’s regulations. 261

Answer 14

FHA loan

Question 15

a government-sponsored enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market. 260

Answer 15

Freddie Mac

Question 16

a government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA and VA loans as collateral. 260

Answer 16

Ginnie Mae

Question 17

a loan in which the monthly payments increase annually, with the increased amount being used to reduce directly the principal balance outstanding and thus shorten the overall term of the loan.. 245

Answer 17

growing-equity mortgage

Question 18

a loan (sometimes called a line of credit) under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property. 255-256

Answer 18

home equity loan

Question 19

an objective economic indicator to which the interest rate for an adjustable-rate mortgage is tied. 244

Answer 19

index

Question 20

a mortgage that only requires the payment of interest for a stated period of time with the principal due at the end of the term. 242

Answer 20

interest-only mortgage

Question 21

the relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral. 247

Answer 21

loan-to-value (LTV) ratio

Question 22

a premium added to the index rate representing the lender’s cost of doing business. 7-10

Answer 22

margin

Question 23

The FHA insurance that the borrower is charged with a percentage of the loan as a premium. 259

Answer 23

mortgage insurance premium (MIP)

Question 24

a mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage. 254

Answer 24

open-end loan

Question 25

a real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances. 253

Answer 25

package loan

Question 26

the mortgage market in which loans are originated and consisting of lenders such as commercial banks, savings associations, and mutual savings banks. 239-241

Answer 26

primary mortgage market

Question 27

Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. 261

Answer 27

private mortgage insurance (PMI)

Question 28

a note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate. 253

Answer 28

purchase-money mortgage (PMM)

Question 29

The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees. 406-406

Answer 29

Real Estate Settlement Procedures Act (RESPA)

Question 30

Implements the Truth in Lending Act requiring credit institutions to inform borrowers of the true cost of obtaining credit. 262

Answer 30

Regulation Z

Question 31

a loan under which the homeowner receives monthly payments based on his or her accumulated equity rather than a lump sum. The loan mst be repaid at a prearranged date, upn the death of the owner, or upon the sale of the property. 247

Answer 31

reverse mortgage

Question 32

a transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises. 280

Answer 32

sale-and-leaseback

Question 33

a market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called the secondary money market. Mortgages are first originated in the primary mortgage market. 241

Answer 33

secondary mortgage market

Question 34

a loan in which only interest is paid during the term of the loan, with the entire principal principal amount due with the final interest payment. 242

Answer 34

straight (term) loan

Question 35

specific credit terms, such as down payment, monthly payment, and amount of finance charge or term of loan. 257

Answer 35

trigger terms

Question 36

Federal government regulates the lending practices of mortgage lenders through this act. 256-257

Answer 36

Truth in Lending Act (TIL)

Question 37

a mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs in order to limit the lender's possible loss. 261

Answer 37

VA loan

Question 38

a method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount without disturbing the existence of the first mortgage. 254

Answer 38

wraparound loan

Question 39

Primary Mortgage Market 240

Answer 39

Thrifts, Savings associations, Commercial banks, Insurance companies, Credit unions, Pension funds, Endowment funds, Investing group financing, Mortgage banking companies.

Question 40

the legal process that results in the tenant's being physically removed from the leased premises. 281

Answer 40

actual eviction