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Real Estate - Exam 2

Ch 10 and 11

TermDefinition
Alt-A loan A home loan for borrowers who fall short of qualifying for a standard (prime) home loan. Roughly, it refers to loans better than subprime, but below prime in borrower qualifications and loan terms. Most differ from prime loans by the abscense of fulldoc
Conforming conventional loan A conventional loan that meets the standards required for purchase in the secondary market by Fannie Mae or Freddie Mac
Conventional mortgage loan Mortgage loans that do not enjoy government backing in the form of FHA insurance or a Veterans Affairs
Fannie Mae GSE one of the largest purchasers of residential mortgages in the secondary market
Federal Housing Administaration (FHA) A government-sponsored housing finance agency that operates in the primary market by providing a default insurance program, as well as other housing programs and initiatives
FHA mortgage insurance Government sponsored mortgage insurance that protects lenders from any loss after foreclosure and conveyance of title to the property to the US Department of Housing and Urban Development (HUD). Insurance premium is paid by the mortgage borrower
Freddie Mac A GSE and, one of the largest purchasers of residential mortgages in the secondary market
Government-sponsored enterprise (GSE) A term that refers Fannie and Freddie, and some other less important gov enterprises created by acts of Congress to promote an active secondary market for home mortgages
Home equity loans Second mortgages, used to finance home improvements and other purchases, where homeowners can borrow against the accumulated equity in the home
Hybrid ARM An adjustable rate mortgage loan that provides for an initial period of fixed interest charges, hence fixed payments, before the interest rate period typically ranges from three to ten years
Ginnie Mae guarantees the timely payment of principal and interest payments on residential mortgage-backed securities (MBS) to institutional investors worldwide.
Veterans affairs A U.S. government Department whose purpose is to help veterans readjust to civilian life
Mortgage insurance premium (MIP) Upfront insurance premium required by FHA insured loans
Closed-end loan Generally, any loan in which the amount advanced, plus any finance charges, is expected to be repaid in full by a specified date. Most real estate and automobile loans are closed-end agreements.
Open‐End Line of Credit A pre-approved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. Also refered to as a "line of credit" or "revolving line of credit".
Option ARM An adjustable rate mortgage loan that offered the borrower a variety of payment choices. The choices typically included a payment to fully amortize the loan in 15 years, one to fully amortize the loan 30 yars, an interest-only payment, and a payment at.
Primary Mortgage Market The loan origination market where borrowers and lenders negotiate mortgage terms
Secondary Mortgage Market The market where mortgage originators can divest their holdings, and existing mortgages are resold
Purchase‐money Mortgage A mortgage created simultaneously with conveyance of ownership. Typically, where the seller lends part of the purchase price of a property to the purchaser, but also used to refer to any mortgage used to finance a purchase
Thrifts Depository institutions that evolved primarily to collect and invest household savings. Usually the term encompasses saving and loan associations and savings banks, but not credit unions. Until about 1980 were the backbone of home mortgage finance in US
Warehousing The provision by commercial banks of short-term funds to mortgage banking companies to enable them to originate and fund mortgage loans until they can be sold in the secondary mortgage market
Warehouse Credit Lines a credit line used by mortgage bankers. It is a short-term revolving credit facility extended by a financial institution to a mortgage loan originator for the funding of mortgage loans.
Portfolio Lenders Financial institutions such as banks that fund motgage loans and then hold the loans as investments
Mortgage Brokers An intermediary between those who demand mortgage funds and those who supply the funds. Arrange mortgage loans for a fee, but do not originate or service the loans
Mortgage Bankers Full-service mortgage companies that process, close, provide funding, and sell the loans they originate in the secondary mortgage market, and service loans for loan investors
Mortgage Pipeline An originating lender's approved, but currently unfunded, loan commitments plus loans funded but unsold
Pipeline Risk The time between making a loan commitment and selling the loan. The mortgage banker is exposed to considerable risk during this period
Loan Servicing All actions and activities associated with administering a mortgage loan, including collection of payments, monitoring insurance and tax obligations, and notification of delinquent borrowers.
Created by: drewmad5