Ch. 11 Sources of Capital and Financing
GSEs.
"government-sponsored enterprises"
The principal operators in the secondary mortgage market include A) pension funds, insurance companies, corporate investors B) Fannie Mae, Freddie Mac, Ginnie Mae C) Fannie Mae, Sallie Mae, Ginnie Mae D) FHA, VA, USDA
B) Fannie Mae, Freddie Mac, Ginnie Mae
Mortgage assumptions are A) illegal B) attractive when rates are rising C) attractive when rates are falling D) permitted by all lenders
B) attractive when rates are rising
How is the FHA mortgage insurance program funded? A) by taxpayers B) by mortgage insurance premiums paid by borrowers C) by a combination of tax revenue and mortgage insurance premiums D) by a complex public-private partnership
B) by mortgage insurance premiums paid by borrowers
A mortgage loan that is not government-insured or guaranteed is considered a A) a VA mortgage B) conventional mortgage C) an FHA mortgage
B) conventional mortgage
The FHA mortgage insurance program is funded by A) taxpayers B) mortgage insurance premiums paid by borrowers C) both taxpayers and borrowers D) proceeds from the sales of foreclosure properties
B) mortgage insurance premiums paid by borrowers
A purchaser bought a property for $215,000, put 15% down and borrowed the rest at 6.75% interest for 25 years. The lender charged 2.5 points at the closing. How much was paid for the points? A) $2,150 B) $3,267.50 C) $4,568.75 D) $5,723.40
C) $4,568.75
A property has a first mortgage of $120,000, a second mortgage of $30,000, and a third mortgage of $15,000. It is foreclosed and sold for $155,000. The holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________. A) 0, $15,000 B) $15,000, $15,000 C) $5,000, $30,000 D) 0, $25,000
C) $5,000, $30,000
A point is ____ percent of the amount of the ___________. A) ½, mortgage loan B) ½, purchase price C) 1, mortgage loan D) 1, purchase price
C) 1, mortgage loan
"A pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions" is the definition of A) private mortgage insurance B) promissory note C) mortgage D) bargain and sale deed
C) mortgage
Which of these is NOT a primary participant in the secondary mortgage market? A) FHA B) Fannie Mae C) Freddie Mac D) Ginnie Mae
A) FHA
What type of purchase contract involves the purchaser making payments to the seller until the total purchase price is paid and then the seller delivers the deed? A) land contract B) contract for property C) trust deed D) standard purchase agreement
A) land contract
_______s can go up if key indicators rise such as the cost of living
ARM
___________________ rate mortgages (ARMs): "A debt secured by real estate with an interest rate that may move up or down following a specified schedule or in accordance with the movements of a standard or index to which the interest rate is tied."
Adjustable
The primary participants in the secondary mortgage market are A) FHA and VA B) Fannie Mae and FHA C) Freddie Mac, Ginnie Mae and HUD D) Fannie Mae, Freddie Mac, and Ginnie Mae
D) Fannie Mae, Freddie Mac, and Ginnie Mae
________ liens are liens placed on a property after a previous lien has been made and recorded. A) secondary B) tertiary C) subordinate D) junior
D) junior
Savings banks are __________ owned. A) jointly B) government C) foreign D) mutual or stockholder
D) mutual or stockholder
Most ___________ were chartered primarily to provide residential mortgages for the local areas. A) commercial B) housing associations C) savings banks D) savings & loans
D) savings & loans
Reverse annuity mortgages are primarily intended for what type of borrower? A) renters who wish to purchase B) underwater homeowners C) first-time homebuyers D) senior homeowners
D) senior homeowners
True or False? Fannie Mae and Freddie Mac are now defunct.
False
______________ Mae, ______________ _______, and Ginnie ________ are the principal operators in the ________________ mortgage market
Fannie Freddie Mac Mae secondary
_________________ ________ purchases ___________ family and __________family ________, _____ and _____________________ mortgages.
Fannie Mae single multi FHA VA conventional
______________ ________ is backed by the full faith and credit of the ____________________ government.
Ginnie Mae federal
________________ __________ also services a portfolio of mortgages owned by the __________________ government.
Ginnie Mae federal
_______________ _________ purchases ________________ loans, packages them into _________________, and sells them to ______________-
Ginnie Mae mortgage securities investors
_____________ ________ provides a ________________ market for ________ and ____________ loans.
Ginnie Mae, secondary, FHA, VA
____________________ loans: "mortgages in which a party other than the borrower assumes payment in the event of default."
Guaranteed
FHA is the name of the mortgage insurance program that is operated by the U.S. Department of Housing and Urban Development (_______).
HUD
(LTV)
Loan-to-Value
_________________: "A pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions."
Mortgage
The Federal National _______________ Association (FNMA) was created in __________ to purchase FHA insured loans.
Mortgage 1938
__________________-____________ _________________ (MBS).
Mortgage-Backed Securities
(PMI)
Private Mortgage Insurance
True or False? When mortgage rates are going up or in a state of flux, it may be attractive for a buyer to purchase a house and take over its existing mortgage, rather than getting a new one at a higher or less stable rate
TRUE
True or False? balloon mortgage is another example of creative financing
TRUE
True or False? Fannie Mae and Freddie Mac were known as GSE's
TRUE
Conventional Loan
a loan that is neither federally insured nor guaranteed - a private sector loan
Junior Lien: "A lien placed on property ___________ a previous lien has been made and recorded; a lien made subordinate to another by agreement; e.g., ____________ and third mortgages; also called second lien or third lien."
after, second
Reverse Mortgage: a loan ________________ the ___________ in the borrower's home
against, equity
A "wrap-around contract" is a variation of seller financing, and offers buyers an ____________________ to a new mortgage from a financial institution. The seller keeps the existing mortgage on behalf of the buyer, plus lends additional money to cover the price paid above the balance of the underlying loan.
alternative
Formal ________________ and underwriting, as we know it today, was not part of the mortgage process.
appraising
At the _____________________ of the loan period, almost ______ your payment goes towards _______________ and very little towards _________________
beginning, all, interest, principal
Commercial banks interests were usually short term, but they supplied loans for ____________________ and development.
construction
Decisions on lending were usually made by the board of ___________________ or loan committee of the lending institution at their ______________ meeting.
directors weekly
Reverse Mortgage: A loan based on the equity in a home, that provides ________________ homeowners with tax-free income and is paid back with interest when the home is sold or the homeowner dies.
elderly
default
failure to pay back a loan
Money could be borrowed from the Federal Reserve Bank, if the rates were ___________________.
favorable
Fixed Rate Loan: "A mortgage at a ___________ interest rate, with _____________ payments for each period over the length of the loan."
fixed, equal, each
The secondary mortgage market is: "A market created by __________________________ and private agencies for the purchase and sale of _____________ mortgages, which provides greater liquidity for mortgages."
government existing
Non-Conventional Mortgage:
guaranteed
Land Contract (contract for deed): "A contract in which a purchaser of real estate agrees to pay a small portion of the purchase price when the contract is signed and additional sums, at intervals and in amounts specified in the contract, until the total purchase price is paid and the seller delivers the deed; used primarily to protect the seller's interest in the unpaid balance because foreclosure can be exercised more quickly than it could be under a mortgage. Also known as _________________ (sale) contract."
installment
Savings and loan _______________ purpose was to receive savings, loan money at interest, and distribute dividends to depositors.
institutions
An example of an ____________ loan would be an ________ mortgage.
insured, FHA
Conventional: non-_____________, nor ___________________________
insured, guaranteed
Mutual savings banks invest __________ amounts of their depositor's money in ____________________ mortgages.
large residential
Discount Points: "A percentage of the loan amount that a lender charges a borrower for making a loan; may represent a payment for services rendered in issuing a loan or additional interest to the lender payable in advance; also called ___________ _______."
loan fee
Mutual savings banks are similar to savings and ___________
loans
If you wanted a mortgage, you went to the _________ bank or thrift and filed an application. A bank officer might drive by your house, and they would check your ___________________ record.
local employment
ARMs start at a ___________ initial rate than ____________ rate mortgages.
lower, fixed
Credit unions primarily loaned to their ________________. Later, many credit unions opened their doors to _____ borrowers.
members all
Savings banks are either ____________ or stockholder ___________.
mutual owned
Conventional mortgages: "mortgages that are _______________ insured nor guaranteed by an agency of the government, although they may be privately insured."
neither
Insured Loan is a _____________________________
non-conventional mortgage
HUD/FHA does _________ lend money;
not
With a wrap-around contract, the original mortgage is ________ paid off.
not
Balloon Mortgage: A mortgage that is ______ fully amortized at maturity, and thus requires a lump sum, or balloon, payment of the _____________________ balance.
not, outstanding
In a first mortgage scenario, the original mortgage is _________ off.
paid
Both a Land Contract and a Seller financed Note and Trust Deed transaction are considered "Installment Sales" because the seller receives ________________ over time rather than all cash at the original closing of the sale
payments
The ________________ sources of __________________ capital were: State or federally __________________ savings banks Savings and loan ________________________ Commercial ___________ ___________ unions
primary, mortgage, chartered, institutions, banks, Credit
First Mortgage: "A mortgage that has ____________ over all other mortgage liens on a property."
priority
No matter what type of loan it is, the ______________ of the mortgage is __________________.
priority, important
Commercial banks are ____________________ owned institutions that were obviously oriented towards business loans but dabbled in residential loans.
privately
Graduated payment mortgage: "A debt secured by real estate in which mortgage payments are matched to _____________________ increases in the borrower's income. The periodic payments start out low and gradually increase
projected
Amortization: the ____________________ of a loan balance through ________________ made over a period of time
reduction, payments
Lenders were ___________________, had limits on the number of branches, and had ________________ requirements.
regulated reserve
Over the last 30 years or so, the ____________________ market has grown tremendously in importance and has _____________________ the mortgage lending process.
secondary revolutionized
Once lenders ________ mortgages to FNMA, they could ________________ the funds by writing ______ mortgages
sold reinvest new
They had to ________ to replenish the money supply as money ____________ trickled in from deposits and repayment of existing loans.
wait slowly
From the _______s through the _________s, mortgage lending was done primarily at the ____________ level.
1930 1960 local
In _________, FNMA started purchasing _____ loans. In _________, FNMA started purchasing _________________ mortgages.
1948, VA 1970, conventional
In ___________, FNMA was split into _________ organizations: _________________ _______; a federally chartered corporation owned by ____________ shareholders and Government National Mortgage Association (____________ _________), a government agency under the oversight of the Department of ________________ and ___________ Development (HUD)
1968, two Fannie Mae, private Ginnie Mae Housing, Urban
Mortgages with varying payment amounts appeared during the _________s when we were faced with unprecedented high interest rates
1970
In _________, Congress created the Federal Home Loan Mortgage Corporation (____________ ______) to provide a secondary market for __________________ mortgages,
1970 Freddie Mac conventional
Annual sales of mortgages to Fannie Mae, Freddie Mac and Ginnie Mae rose from $___ billion in _______ to over $_____ billion by _______.
69, 1980 700, 2000
Many high loan-to-value conventional loans do have private mortgage insurance (PMI) covering the part of the loan that exceeds ____% LTV.
80
If banks wanted to loan out funds for mortgages, the sources were limited to: _______________ors Sale of ___________ or shares of ownership in the bank or thrift _____________ment of existing mortgages ___________________ of funds from the Federal Reserve
Deposit, stock, Repay, Borrowing
_______________ _______ and _____________ _______ were private shareholder-owned corporations
Fannie Mae, Freddie Mac
FHFA stands for:
Federal Housing Finance Agency
True or False? Points are another example of creative financing that originated in the __________s
True 1980
An example of guaranteed loans are loans that are guaranteed by the Veterans Administration (_____). In the event of a default, the VA would reimburse the lender for any losses.
VA
(VA)
Veterans Administration
