22. Primary and Secondary Markets and Financing

What's a participation certificate

A mortgage-backed security issued by Freddie Mac

In which of the following situations is a lender prohibited from enforcing an alienation clause

A transfer between parent and child

Which of the following types of properties may be eligible for purchase by Freddie Mac

A triplex purchased as a primary residence

Georgette and Elise are buying a home together, and have taken out a loan with a private loan company. They'll pay a bit more interest, and larger fees, but they feel it's worth it to have the home they've always dreamed of. What else might the private loan company require

Collateral

What's the primary source of funds for commercial banks

Demand deposits

Of the institutions listed, which of these is viewed only as a secondary mortgage market player

Fannie Mae

Which statement most accurately describes the role and function of Ginnie Mae in the secondary mortgage market

Ginnie Mae insures MBSs made up of government-insured or -guaranteed loans.

Commercial banks fall into which of the following category of lenders

Institutional lenders

Ginnie Mae only guarantees mortgage-backed securities that contain loans ______.

Insured or guaranteed by U.S. government agencies

Construction loans are a type of ______ financing.

Interim

Private loan companies may place a ______ on the property for which the loan is being taken.

Lien

Life insurance companies are more concerned with long-term stability of investments than they are ___________.

Liquidity

Who originates their own loans

Mortgage bankers

What entity insures credit union national deposits

National Credit Union Share Insurance Fund

While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ______.

Only total debt-to-income

Several actions take place on the secondary mortgage market. Which of these is a common activity

Packaging loans into mortgage-backed securities

In which market do lenders that originate real estate loans operate

Primary mortgage market

Which of the following is one of the desired outcomes of Freddie Mac's activities

Provide stability in the U.S. housing market

What type of arrangement allows the buyer to retain title to the property, but places a security interest in the property on behalf of the seller

Purchase money mortgage

With a land contract, who retains the title to the property

Seller

How is a loan assumption documented

The buyer and seller both sign an assumption agreement.

The secondary mortgage market serves a very important role in real estate finance. Which of these statements best describes that role

The secondary market purchases loans from primary lenders and helps keep credit available to loan originators. The secondary mortgage market helps to keep credit flowing to loan originators in the primary market so they can keep credit flowing to consumers.

Which of the following is a true statement about credit unions

They have nonprofit status.

The mortgage industry is made up of the primary and secondary markets. What's the role of the primary mortgage market

To originate and fund mortgage loans to consumers The primary mortgage market is made up of lenders that originate and fund mortgage loans to consumers.

What's the role of the primary mortgage market

To work with borrowers in originating and funding mortgage loans

Victor bought a property from Yolanda for $200,000. Under the terms of a land contract, Victor agreed to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title

Yolanda

If Freddie Mac didn't exist, which of the following would be a likely effect

A decrease in the amount of credit available to loan originators

Freddie Mac is ______.

A government-sponsored enterprise

When a buyer takes over the seller's original loan with the lender's permission, this is called ______.

An assumption

Mary is assuming Tom's loan. She wants to be sure she has an accurate loan payoff amount. What document will the lender prepare for her

An estoppel certificate

The secondary mortgage market buys loans from the primary market. How does this aid the lending market

Ensure funds are available to borrowers

How does Ginnie Mae function differently than Fannie Mae and Freddie Mac

It doesn't buy loans or issue mortgage-backed securities.

Which of the following statements about Freddie Mac is correct

It sells participation certificates to investors to raise funds to purchase additional loans from lenders. Freddie Mac sells MBSs, called participation certificates, to investors to raise funds to purchase additional loans from loan originators.

Which of the following is a characteristic of the primary mortgage market

It works directly with borrowers to fund loans.

What could be a consequence if there were no secondary mortgage market

Lenders might not have funds available to make new loans to the public.

Which of the following loan types can be packaged into a mortgage-backed security eligible for guarantee by Ginnie Mae

Loans insured or guaranteed by U.S. government agencies

Maggie has a neighbor, Jim, who is facing foreclosure. She likes Jim and wants to help him out, so they agree to do a "subject to" purchase. What does this mean

Maggie will take over Jim's loan payments without telling his lender she's doing so. When the new buyer makes the payments on a loan as if nothing has changed, this is called a "subject to" purchase.

Life insurance companies participate in real estate in the ______ arena.

Mortgage blocks from secondary mortgage market

Which person or entity works with many different lenders to find the best loan for the customer

Mortgage broker Mortgage brokers work with many different lenders to find the best loan. They don't originate their own loans.

The Hendersons don't have enough money to make the full 20% down payment their lender requires. To close the sale, the seller is willing to finance a loan for the gap between their down payment and the amount the institutional lender is willing to loan. What's this type of financing called

Purchase money mortgage A purchase money mortgage is the term for seller financing typically used to bridge the gap between the buyer's available down payment and the institutional loan, though it can also be used to finance the entire purchase price.

Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement

Request a novation

Who needs to obtain a mortgage loan originator endorsement and register with the Nationwide Mortgage Licensing System and Registry

Anyone who acts as a mortgage loan originator

A local company wants to build a new office building. What type of loan will it most likely be seeking from its commercial bank

Construction loan

Which outcome would be likely if the secondary mortgage market didn't exist

Loan originators would have fewer funds available for lending.

While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ______.

Only total debt-to-income Fannie Mae looks at a borrower's total debt-to-income as well as the housing debt-to-income. Freddie Mac focuses on the total debt-to-income ratio.