Principles Unit 9: Government Sponsored and Other Financing

conventional loans

A loan secured by a mortgage or trust deed that is made without without governmental underwriting (FHA-insured or VA-guaranteed).

conforming loan

A loan that meets the requirements established for purchase by Fannie Mae.

sale-leaseback

A transaction in which at the time of the sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser.

purchase-money mortgage

A trust deed or mortgage given as part or all of the purchase consideration for real property.

purchase-money trust deed

A trust deed or mortgage given as part or all of the purchase consideration for real property.

Q5. The credit extended by seller to buyer is a A. purchase money mortgage. B. mechanic's lien. C. conventional loan. D. secondary market loan.

A. purchase money mortgage.

creative financing

Alternative (noninstitutional) financing that makes use of a seller carryback or other loan; useful when interest rates on institutional loans are relatively high or when borrower cannot qualify for a loan from a depository institution based on income or credit rating.

veteran's entitlement

Amount of loan guarantee available to eligible veteran.

Q3. On default of a VA-guaranteed loan, the VA will pay the A. property's market value. B. lender's loss on the amount guaranteed. C. remaining mortgage balance. D. down payment.

B. lender's loss on the amount guaranteed.

Q6. A payment to FHA at closing is the A. escrow fee. B. mortgage insurance premium. C. loan interest rate. D. recording fee.

B. mortgage insurance premium.

Q7. Which of the following documents is used with a CalVet loan? A. Trust deed B. Sheriff's deed C. Land contract D. Grant deed

C. Land contract

Q4. RESPA requirements do NOT apply to A. conventional loans. B. VA-guaranteed loans. C. commercial loans. D. FHA-insured loans.

C. commercial loans.

Q8. An installment sales contract is also called a A. voidable contract. B. terminable contract. C. land contract. D. temporary contract.

C. land contract.

Q2. The Federal Housing Administration insures payments of A. a discount. B. loan points for the lender. C. loan principal. D. a broker's commission.

C. loan principal.

Q10. The transfer of existing mortgage between investors is the A. primary mortgage market. B. extended credit program. C. secondary mortgage market. D. growing equity program.

C. secondary mortgage market.

California Housing Finance Agency (CalHFA)

Chartered in 1975 as a self-supported affordable housing bank to make low-interest loans funded by the sale of tax-exempt bonds. CalHFA bonds are repaid by mortgage loan revenue.

California Veterans Farm and Home Purchase Program (CalVet)

Created in 1921 to assist California veterans in acquiring home or farm property.

Federal Housing Administration (FHA)

Created in 1934 to provide mortgage insurance on loans made by FHA-approved lenders throughout the United States.

Q9. Which of the following generally does NOT require a down payment? A. Loan from a conventional lender B. CalVet loan C. FHA-insured loan. D. VA-guaranteed loan

D. VA-guaranteed loan

Q1. The interest rate on CalVet loans A. changes monthly. B. depends on the CPI. C. never changes. D. may change annually.

D. may change annually.

mortgage-backed securities

Debt instruments that consist of blocks or pools or mortgage on real estate.

Electronic Signatures in Global and National Commerce Act

Enacted by Congress in 2000 to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically.

Federal Housing Finance Agency (FHFA)

Federal agency created following the merger of the Federal Housing Finance Board (FHFB) and the Office of Federal Housing Enterprise Oversight (OFHEO).

Department of Housing and Urban Development (HUD)

Federal agency that carries out the purposes of the National Housing Act by, among other things, enforcing fair housing laws and supervising the activities of the Federal Housing Administration (FHA), which insures home mortgage loans.

mortgage insurance premium

Fee paid by borrower in exchange for lender's protection in the event of borrower's default in payment of mortgage debt.

Freddie Mac

Formerly the Federal Home Loan Mortgage Association; private corporation under federal supervision created by Congress in 1970 to provide a secondary market for conventional residential mortgage loans.

Fannie Mae

Formerly the Federal National Mortgage Association; created in 1938 to provide a secondary mortgage market for federally related mortgage loans; now also purchase conventional mortgage loans.

Ginnie Mae

Formerly the Government National Mortgage Association; created from the Federal National Mortgage Association (now known as Fannie Mae) in 1968 to provide a secondary market for federally backed residential mortgage loans.

secondary mortgage market

Investment opportunities involving real property securities, other than direct loans from lender to borrower; loans may be bought, sold, or pooled to form the basis for mortgage-backed securities.

certificate of eligibility

Issued by the Department of Veterans Affairs (VA) to a veteran who qualifies for a loan guaranteed by the VA.

wraparound mortgage

Overriding or all-inclusive trust deed; a financing device in which a lender assumes payments on an existing debt and takes from the borrower a junior lien with a face value in an amount equal to the amount outstanding on the old instrument and the additional amount of money borrowed.

wraparound trust deed

Overriding or all-inclusive trust deed; a financing device in which a lender assumes payments on an existing debt and takes from the borrower a junior lien with a face value in an amount equal to the amount outstanding on the old instrument and the additional amount of money borrowed.

Department of Veteran Affairs (VA)

Presently authorizes first mortgage loans as well as second-mortgage loans of less than 40% of property value. The VA guarantees payment of the remaining mortgage indebtedness, up to a maximum amount.

Direct Endorsement Plan

Program that allows lenders to qualify to make FHA-insured loans without prior HUD review, except for construction projects.

Farmer Mac

Provides financing of agricultural real estate and rural housing loans and liquidity to agricultural and rural housing lenders

Economic Stimulus Act of 2008

Raised the limits on both conforming loans and FHA insured or guaranteed by VA in hopes that the market will stabilize and borrowers would be able to refinance existing loans and also make new purchases.

discount points

See points. One point represents one percentage of a loan amount; may be charged by lenders at the time of loan funding to increase the loan's effective interest rate.

leaseback

See sale-leaseback A transaction in which at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser.

installment sales contract

See sales contract. Land contract; installment sales contract; a contract used in a sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid, but no earlier than one year from the date of possession.

land contract

See sales contract. Land contract; installment sales contract; a contract used in a sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid, but no earlier than one year from the date of possession.

all-inclusive trust deed (AITD)

See wraparound mortgage or trust deed. Overriding or all-inclusive trust deed; a financing device in which a lender assumes payments on an existing debt and takes from the borrower a junior lien with a face value in an amount equal to the amount outstanding on the old instrument and the additional amount of money borrowed.

overriding trust deed

See wraparound mortgage or trust deed. Overriding or all-including trust deed; a financing device in which a lender assumes payments on an existing debt and takes from the borrower a junior lien with a face value in an amount equal to the amount outstanding on the old instrument and the additional amount of money borrowed.

interest rate reduction refinancing loan (IRRRL)

Type of VA-guaranteed loan that can be used for a loan refinancing.

R3. In addition to a monthly charge, FHA mortgage insurance includes one-time payment on a purchase loan that is a. 1.75% of the loan amount. b. variable. c. negotiable. d. determined by the lender.

a. 1.75% of the loan amount.

R1. A California veteran might have a home loan insured by a. FHA. b. VA. c. CalVet. d. Fannie Mae.

a. FHA.

R8. Five different graduated payment mortgages are approved by a. FHA. b. VA. c. CalVet. d. Ginnie Mae.

a. FHA.

R5. One discount point will increase a lender's effective yield by approximately a. 1/4% b. 1/8% c. 1/2% d. 1%

b. 1/8%

R9. A veteran can have a home loan guaranteed by a. FHA. b. VA. c. CalVet. d. Ginnie Mae

b. VA.

R15. Many self-financed purchases are examples of a. institutional lending. b. creative financing. c. mortgage-backed securities. d. blended-rate mortgages.

b. creative financing.

R2. FHA appraisal value is used to set the upper limit of a. the purchase price. b. the loan amount. c. the construction cost. d. the seller contributions.

b. the loan amount.

R6. Four discount points will increase a lender's effective yield by approximately a. 1/4%. b. 1/8%. c. 1/2%. d. 4%.

c. 1/2%.

R4. For an existing structure, the maximum FHA mortgage loan term is a. 15 years and 32 days. b. 25 years. c. 30 years. d. 40 years.

c. 30 years.

R12. A veteran can be given a home loan on property owned by a. FHA. b. VA. c. CalVet. d. Fannie Mae

c. CalVet.

R11. Using the benefits of the GI Bill, a veteran cannot buy a. a house. b. a condominium. c. a farm. d. a manufactured home.

c. a farm.

R16. An installment sales contract also is called a. a GEM. b. a GPM. c. a land contract. d. a bill of sale.

c. a land contract.

R13. A CalVet purchase loan must be applied for a. within one year of property purchase. b. before closing. c. before a contract of sale is signed. d. before talking to a property seller.

c. before a contract of sale is signed.

R17. In a sale-leaseback a. land is never sold. b. buildings are always sold. c. both land and buildings can be sold. d. only a leasehold interest is sold.

c. both land and buildings can be sold.

R18. The secondary mortgage market does NOT deal in a. primary mortgage market instruments. b. junior liens. c. issuing loans. d. mortgage-backed securities.

c. issuing loans.

R10. The notice of value sets the upper limit of value for a. the purchase price. b. the loan. c. the guarantee. d. none of the above.

c. the guarantee.

R7. On FHA loans, seller contributions, including discounts and closing costs, cannot excel a. $5,000. b. 4%. c. five points. d. 6% of acquisition cost.

d. 6% of acquisition cost.

R20. Ginnie Mae securities are NOT backed by a. FHA-insured loans. b. VA-guaranteed loans. c. Farmer Mac-guaranteed loans. d. CalVet loans.

d. CalVet loans.

R19. Which is NOT a part of the primary mortgage market? a. FHA b. VA c. CalVet d. Fannie Mae

d. Fannie Mae

R14. CalVet loans are NOT available for a. single-family homes. b. manufactured homes. c. working farms. d. commercial property.

d. commercial property.