Finance II Flashcards

Question

Fannie Mae – Federal National Mortgage Association (FNMA)

Answer 1

a shareholder-owned company that works to make sure mortgage money is available for people across the country. It does not lend money directly to home buyers, rather it works with lenders to make sure the lenders don’t run out of mortgage funds.

Answer 2

mortgage-backed security for conventional loans. Freddie Mac buys conventional loans from savings banks, commercial banks and mortgage companies, assembles the loans into a pool of mortgages and issues a security backed by the mortgages called a Participating Certificate or Guaranteed Mortgage Certificate. This provides stability, affordability and opportunity in the housing market.

Answer 3

was created to establish a secondary market for agricultural real estate and rural housing mortgage loans to increase the availability of long-term credit at steady interest rates to American farmers, ranchers and rural homeowners. They deal with agricultural loans the same way Fannie Mae and Freddie Mac deal with conventional and government loans.

Answer 4

place to help buyers make comparisons between loan fees and other charges. The law requires lenders to disclose to buyers the true cost of obtaining credit so that borrowers can compare the costs of various lenders.

Answer 5

prohibits lenders from discriminating against applicants on the basis of: race, color, religion, national origin, sex, marital status, age, dependency on public assistance. ECOA expects a lender to base lending decisions on an individual's income, net worth, job stability and credit rating.

Answer 6

was passed by Congress in 1977 to prevent redlining and to encourage banks and thrifts to help meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods. It expands and clarifies the expectation that banks will serve the convenience and needs of their local communities.

Answer 7

equires that lenders report statistical information each year to insure that lenders are not restricting loans to certain individuals or neighborhoods to exclude them from obtaining a mortgage (called "redlining"). End of Page

Answer 8

requires that lenders, keep all credit information confidential, obtain authorization from a consumer in order to seek the customer's credit information, reveal the sources of the credit information to the consumer

Answer 9

"A" paper. A less qualified borrower, perhaps one with credit problems, may have to take a loan at a higher rate of interest, referred to as "B" paper. More serious credit problems might lead to "C" paper and there is even a category of "D" paper for those with overwhelming credit problems. Borrowers who fall into the "below A" categories are referred to as sub-prime borrowers.

Answer 10

literally "preys" on the customers who may fall into the "B," "C" or "D" lending categories, particularly those who do not speak English, are poorly educated or are elderly. Predatory lending practices involve: Basing an unaffordable loan on the applicant’s assets rather than his or her ability to repay the loan. Encouraging a borrower to refinance a loan so that the lender can charge high points and fees for the new loan. Using fraud or deception to hide the true obligations of the loan from the borrower.

Answer 11

When lenders provide loans to unqualified homebuyers – those who have poor credit and whose ability to repay the loan is risky because of their income

Answer 12

generally refers to repeated refinancing of a mortgage loan within a short period of time with little or no tangible net benefit to the borrower.

Answer 13

crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth.