Chapter 2R+
package loan
is one that finances the purchase of a home along with the purchase of personal items, such as a washer, a dryer, a refrigerator, an air conditioner, carpeting, draperies and furniture or other appliances.
zero percent-down mortgage
is that it can enable a person to purchase a home now instead of having to wait to save for a down payment, which could take years.
conventional loan
is the most common type of loan and is generally viewed as the most secure. Most conventional loans require the borrower to make a down payment of 20% or more, making the loan 80% or less of the property's sale price. Conventional loans are typically uninsured. The mortgage itself provides the only security for the loan. To protect its interests, the lender relies on the appraisal of the property and the borrower's ability to repay the loan, as indicated by the borrower's credit reports. Most conventional loans have traditionally been designed as fixed-rate loans. With this common type of mortgage program, the monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally the monthly payments will be very stable. Fixed rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. Even though most conventional loans require the borrower to make a down payment of 20% or more, a borrower can get a conventional loan with a lower down payment by insuring the loan through a private mortgage insurance program (PMI). A popular way to avoid having to pay private mortgage insurance is through the use of what's known as 80-10-10 financing. What this means is that the institutional lender provides the traditional 80-percent first mortgage. Then the borrower gets a 10-percent second mortgage and makes a 10-percent cash down payment.
Department of Housing and Urban Development (HUD)
is the principal federal agency responsible for programs concerned with America's housing needs, fair housing opportunities, and improvement and development of our communities. HUD programs include urban renewal, public housing, model cities, rehabilitation loans, FHA-subsidy programs and water and sewer grants.
Section 203(b)-Mortgage Insurance for One-Family to Four-Family Homes
lthough there are many different programs available under FHA insured financing, the most popular is the FHA 203(b) that covers loans on one-to-four-unit owner-occupied dwellings. This fixed-rate loan often works well for first time home buyers because it allows individuals to finance up to 97 percent of their home loan, which helps to keep down payments and closing costs at a minimum. The 203(b) home loan is also the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency.
Good Neighbor Next Door program
offers a discount of 50% from the list price of a home to law enforcement officers, pre-Kindergarten through 12th grade teachers, and firefighters/emergency medical technicians. In return, the buyer must commit to live in the property for 36 months as his or her sole residence.
The United States Treasury
plays a critical role in maintaining the economic balance of our country by managing the debt of the entire federal government.
hard money loan
is any mortgage loan that is given to a borrower in exchange for cash.
purchase money loan
is most commonly a technique in which the buyer borrows from the seller in addition to the lender.
Interstate Land Sales Full Disclosure Act
(Title XIV of the Housing and Urban Development Act of 1968) authorizes a nationwide program of registration of subdivisions marketed in interstate commerce. The Act requires submission of a statement of record describing a proposed subdivision in detail, accompanied by maps, contract documents and certifications designed to fully disclose relevant information about the subdivision.
Chapter 1
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Chapter 2
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Chapter 5- Lending Programs
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Chapter 6
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According to California law, a late payment penalty cannot exceed what amount?
10% of the principal and interest payment
FCA examines and regulates these service corporations:
AgVantis The Farm Credit Finance Corporation of Puerto Rico The Farm Credit Leasing Services Corporation Farm Credit Financial Partners, Inc., The FCS Building Association (FCSBA)
Section 251-Adjustable Rate Mortgage
As we said earlier, FHA's most popular home loan is the 203(b) loan. However, there are also many other programs available based on the 203(b) that have additional features. One of these is the Section 251 Adjustable Rate Mortgage program, which provides insurance for adjustable rate mortgages. When interest rates are high, adjustable rate mortgages keep the initial interest rate on a mortgage low, which allows borrowers to qualify for the financing they need. The Section 251 program works well with the other widely-used FHA single-family products we've already discussed: 203(b), 203(k) and 234(c). Even though the Section 251 program helps to keep mortgage interest rates and payments low, they may change over the life of the loan. The maximum amount of fluctuation in the interest rate in any given year cannot exceed 1 percentage point. And over the life of the loan, the interest rate cannot increase more than 5 percent from the initial rate. The terms of the adjustable rate mortgage will be disclosed to the borrower at the time of application. Should the interest rate increase, the borrower will be informed at least 25 days before any changes are made to the total monthly payment. As an additional benefit of the Section 251 program, an adjustable rate mortgage can be "streamline refinanced" to a fixed rate mortgage at any time. Streamline refinancing means that the documentation and underwriting is greatly reduced, but closing costs still apply. Aside from the adjustable rate aspect of the Section 251 loan, it is very similar to an FHA-insured, single-family loan. Because FHA insurance allows borrowers to finance up to 96.5 percent of the value of their home through their mortgage, down payments can be as little as 3.5 percent of the total value of the home.
tax-increment financing
CRA projects are funded to a great degree with tax-increment financing (TIF). TIF is a tool to use future gains in taxes to finance the current improvements that will create those gains.
Indian Housing Loan Guarantee Program
Congress established the Section 184 Indian Housing Loan Guarantee Program to offer home ownership, property rehabilitation, and new construction opportunities for eligible tribes, Indian Housing Authorities and Native American individuals and families wanting to own a home on trust land or land located in an approved Indian or Alaska Native area.
What does ECOA prohibit?
Discrimination against applicants on the basis of race, color, religion, national origin, sex, marital status, age or dependency on public assistance
In California, there are several agencies that regulate the savings and loan associations, banks, insurance companies, credit unions and mortgage companies that operate in the state.
Division of Financial Institutions (DFI) California Housing Finance Agency (CalHFA) Department of Business Oversight (DBO) Division of Corporations (DOC) Division of Financial Institutions (DOFI) California Department of Insurance (CDI) California Bureau of Real Estate (CalBRE) Office of Real Estate Appraisers (OREA)
Section 234(c)-Mortgage Insurance for Condominium Units
FHA Condominium Loans are designed to encourage lenders to offer affordable mortgage credit to those who have non-conventional forms of ownership. The Section 234(c) program insures a loan for 30 years to purchase a unit in a condominium building. The building must have at least four dwelling units and can be made up of detached and semidetached units, row houses, walkups or an elevator structure.
Over the years the federal government and California State government have passed legislation to prevent discrimination in both housing and lending practices. It's important to know about these laws. This legislation includes:
Federal Fair Housing Law Unruh Civil Rights Act Fair Employment and Housing Act Housing Financial Discrimination Act Equal Credit Opportunity Act Community Reinvestment Act Home Mortgage Disclosure Act Truth in Lending Act Real Estate Settlement Procedures Act Several states have established agencies to give financial assistance to communities for real estate developments. Some agencies help communities to attract new industry, while others work to improve citizen housing.
What does federal law say about the termination of private mortgage insurance?
Federal law requires that any loans originated after July 1999 must have the PMI terminated after the borrower has accumulated 22% of equity in the property (loan-to-value ratio is 78%) and is current with all loan payments. However, the law also states that a borrower whose equity equals 20% of the purchase price or appraised value may request that the lender cancel the PMI.
What are four ways that fixed-rate loans can be structured?
Fully amortized loan Term loan Growing equity mortgage Graduated payment mortgage
conventional loans and government-backed loans.
Government-backed loans include those loans offered by: The Federal Housing Administration (FHA) The Department of Veterans Affairs (DVA) - sometimes simply referred to as VA The California Department of Veterans Affairs (Cal-Vet) Other state, county or city-backed subsidized loan programs
Additional FHA Facts
Here are additional facts to know about FHA loans: FHA requires that the monthly amounts the borrower pays toward taxes, insurance and MMI be deposited into an escrow or impound account. The lender can charge points and either the borrower or the seller (or both) can pay them. Note: Both interest rates and discount points are fully negotiable between borrower and lender. Loans are assumable, but the rules for assumptions vary depending upon when the loan originated, the type of property, and the specific FHA program under which the original loan was given. The mortgaged real estate must be appraised by an approved FHA appraiser. These appraisals are called "conditional commitments and are good for six months on existing property and one year on new construction. There is no maximum on what the purchase price of the property can be. The borrower can pay more than the appraisal; but the loan will be based on the appraisal amount or the agreed upon sales price, whichever is less. The property must meet the FHA standards for type and construction. FHA also has standards about the quality of the neighborhood. These loans are available for one-to-four family residences and some condominium units. The borrower must occupy the property. FHA requires evidence from a recognized structural pest inspection company that an existing property has no pest infestation. FHA loans are also available to help residents or investors repair or rehabilitate single-family properties. There are no prepayment penalties on FHA loans on one-to-four-family residences. However, the borrower must give 30 days' written notice to pay a loan in full before it is due. There is no due-on-sale clause. Original terms of the loan stay the same and cannot change because of a sale.
Department of Veterans Affairs (DVA)
In order to make this loan acceptable to lenders, the DVA agreed to guarantee the top portion of the loan. Since lenders were now protected in the event of a default by the borrower, lenders agreed to loan four times the current DVA Entitlement. The basic entitlement of a DVA loan is $36,000. For properties valued at more than $180,000, the entitlement may be higher, up to a maximum of $60,000. The DVA-guaranteed amount is calculated as 25 percent of the current Freddie Mac conforming loan limit for a single family home. Each year, if the Freddie Mac conforming loan amount increases, the DVA guarantee to a lender also increases. As an example, in January 2016, the Freddie Mac conforming loan was $417,000, so the maximum guarantee at that time would have been $104,250. $417,000 x .25 = $104,250 Most lenders require that a combination of the guarantee entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less.
"subject to"
In some circumstances, a buyer may purchase a property "subject to" the existing mortgage. In this situation, the buyer takes possession of the property, while the seller retains legal title until the buyer pays off the loan. The buyer is not liable to the lender for the payment of the note; however, if the seller defaults on the note, the buyer can lose all his or her equity in the property in a foreclosure sale.
Conventional Loans
Interest only PLUSSM - Offers up to 100% financing and allows borrowers to pay only the interest for the first five years of a 35-year term. After that, borrowers pay principal and interest at the same low, fixed interest rate for the remaining 30 years. 40-Year Fixed Mortgage - Offers up to 100% financing with a 40-year term and a below-market, fixed interest rate. 30-Year Fixed Mortgage - Offers up to 100% financing with a 30-year term and a below-market, fixed interest rate.
The Federal Deposit Insurance Corporation (FDIC) has three major activities:
It insures bank and thrift institution deposits for at least $250,000. It identifies, monitors and addresses risks to the deposit insurance funds. It limits the effect a bank or thrift institution failure has on our nation's economy and the financial system.
Conventional loans have several advantages over government-backed loans.
Processing a conventional loan usually takes less time. Loan approval from a conventional lender can take 30 days or less, while approval on a government-backed loan seldom, if ever, can be done in less than 30 days. Conventional loans typically have fewer forms, and processing can be more flexible than government-backed loans. There is usually no legal limit on loan amounts with conventional loans; however, government-backed loans have dollar limits that vary by agency. In the event of a loan refusal, borrowers have other lenders that they can make application to. There is only one of each government agency type, so if the loan is refused by a particular agency, there are no alternative lenders available. Conventional lenders are much more flexible. Many offer a variety of loans with attractive provision
Explain the difference between "points" and "discount points" on a loan.
Points are a one-time service charge to the borrower for making the loan. Points represent prepaid interest, and the lender charges them to get additional income on the loan. Points are paid at closing and are usually equal to 1 percent of the loan amount. Discount points are designed to offset any losses the lender might suffer when selling the loan to the secondary mortgage market. Discount points are a means of raising the effective interest rate of the loan. The rule of thumb is 1/8 percent for each discount point.
List two advantages of conventional loans over government-backed loans. (See other correct answers on Screen 3.)
Processing a conventional loan usually takes less time. Loan approval from a conventional lender can take 30 days or less, while approval on a government-backed loan seldom, if ever, can be done in less than 30 days. There is usually no legal limit on loan amounts with conventional loans; however, government-backed loans have dollar limits that vary by agency.
HUD's activities include, but are not limited to, the following:
Regulating interstate land sales. Supervising the Federal Housing Administration. Regulating Ginnie Mae. Overseeing (but nor regulating) the operations of Freddie Mac and Fannie Mae. Administering the Community Development Block grant. Administering the Lower-Income Rental Assistance program. Overseeing the Indian Housing Block Grant program.
Section 245(a)-Growing Equity Mortgage
Section 245(a) enables those who currently have a limited income but expect their monthly earnings to increase to purchase a home with the help of a Growing Equity Mortgage. With this program, payments start small and increase gradually over time. As the mortgage payments grow, the additional payment is applied toward the principal on the loan, thus reducing the mortgage term. Growing Equity Mortgages also allow homeowners who are interested in further reducing the term of their mortgage to apply scheduled increases in their monthly payments to the outstanding principal balance.
pension funds
Since mortgage-backed securities have become available, pension funds have begun to play a role in the real estate market by purchasing existing real estate loans in the secondary market. In addition, some funds are now developing their own programs that allow the fund contributors to use pension funds to purchase homes.
mobile home loans
Since the depreciation on mobile homes in the first few years is pretty steep, many lenders prefer to give mobile home loans with a 15-year term instead of the typical 30-year term.
The FCA also examines and regulates the following members of the Farm Credit System:
The Federal Farm Credit Banks Funding Corporation The Farm Credit System Financial Assistance Corporation The Federal Agricultural Mortgage Corporation, also known as Farmer Mac
Government-backed loans include those loans offered by:
The Federal Housing Administration (FHA) The Department of Veterans Affairs (DVA) - sometimes simply referred to as VA The California Department of Veterans Affairs (Cal-Vet) Other state, county or city-backed subsidized loan programs The FHA provides low-down-payment loans to qualified buyers. The Department of Housing and Urban Development (HUD) oversees the FHA. The loans FHA provides are high loan-to-value ratio loans, so FHA insures the loans in order to make them available to higher risk individuals. Although there are many different programs available under FHA insured financing, the most popular is the FHA 203(b) that covers loans on one-to-four-unit owner-occupied dwellings. This fixed-rate loan often works well for first time home buyers because it allows individuals to finance up to 97 percent of their home loan, which helps to keep down payments and closing costs at a minimum. The 203(b) home loan is also the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency. Other popular FHA programs include: Section 234(c)-Mortgage Insurance for Condominium Units Section 245(a)-Growing Equity Mortgage Section 203(k)-Rehabilitation Home Loan The Section 251 - Adjustable Rate Mortgage program provides insurance for adjustable rate mortgages. This program works well with the other widely-used FHA single-family products: 203(b), 203(k) and 234(c).
FHA
The Federal Housing Administration (FHA) was established in 1934 during the great depression to stimulate the housing market in the United States. The FHA provides low-down-payment loans to qualified buyers. The Department of Housing and Urban Development (HUD) oversees the FHA. The loans FHA provides are high loan-to-value ratio loans, so FHA insures the loans in order to make them available to higher risk individuals. Important Note: FHA does not build homes or loan money directly. They insure loans made by approved lending institutions, including qualified mortgage companies, savings and loan associations and commercial banks. FHA-insured loans protect lenders against any loss they would suffer from a borrower's default. The following items are important to know about FHA loans: FHA loans can be either fixed-rate 15- or 30-year mortgages or adjustable-rate 30-year mortgages. The rate for FHA adjustable-rate mortgages (ARMs) adjusts annually. The maximum loan term is 30 years or 75 percent of the remaining economic life of the property, whichever is less. Down payments are low. However, the borrower must have cash for a down payment and closing costs. These items cannot be added to the sales price and become part of the loan repayment. The maximum loan fee is 1 percent of the loan amount and is typically paid by the buyer.
What is the right to rescind and what is not covered by this rule?
The borrower has a right to cancel the transaction by notifying the lender within three days. This does not apply to residential first mortgage loans
mortgage revenue bonds
The issue of tax-exempt mortgage revenue bonds is another source of funding for some CRS projects. Communities use bond proceeds to make below-market-interest-rate loans to developers in the project area.
Total Fixed payment to Effective Income
The lender will add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, the lender will divide that amount by the borrower's gross monthly income. The maximum ratio to qualify is 43%.
Borrower Qualifications: Mortgage Payment Expense to Effective Income
The lender will take the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and divide that amount by the borrower's gross monthly income. The maximum ratio to qualify is 31%.
Loan brokers also have some restrictions to follow. They are limited in what they can charge for commissions and expenses associated with securing a loan.
These limits apply only to first trust deeds of under $30,000 or second trust deeds of under $20,000. The maximum commission amounts allowed for the loan amounts indicated above are: First mortgages - 5 percent of the principal amount of the loan where the term of the loan is a period of less than three years and 10 percent where the term is a period of three years or more. Second mortgages - 5% of the principal for loans of less than 2 years; 10% for loans of more than 2 years but less than 3; 15% for loans of 3 years or more.
In 1989, the government passed the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
This legislation provided government funds to insolvent savings and loan associations and mandated massive changes in the examination and supervision of savings and loans.
According to California Community Redevelopment Law, what is the fundamental purpose of redevelopment?
To expand the supply of low- and moderate-income housing. To expand employment opportunities for jobless, underemployed, and low-income persons. To provide an environment for the social, economic, and psychological growth and well-being of all citizens.
Why did Congress pass the Community Reinvestment Act?
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.
Conventional loans also have their disadvantages.
Typically conventional loans require higher down payments than government-backed loans require. Some conventional loans carry prepayment penalties, while government-backed loans do not. End of Page
Federal Farm Loan Act
United States federal law which established 12 regional Farm Loan Banks to serve members of Farm Loan Associations. Farmers could borrow up to 50% of the value of their land and 20% of the value of their improvements.
deed of trust
a legal document which transfers title to a property to a third-party trustee as security for an obligation owed by the trustor (the borrower) to the beneficiary (the lender).
Real Estate Investment Trusts (REITs)
allow small investors to combine their resources with others to raise venture capital for real estate transactions. REITs are exempt from corporate tax if they invest at least 75 percent of their assets in real estate and distribute 90 percent or more of their annual real estate income to their investors.
Life insurance companies
are a major source of credit for shopping centers, office buildings, hotels and motels, industrial buildings and large apartment complexes. These companies typically invest up to a third of their assets in real estate loans.
Industrial development agencies
are empowered to purchase and improve land for industrial and office parks. The funds for the purchase and improvement are usually provided by revenue bonds, but may also come from voluntary citizen contributions. Community Redevelopment Agencies are public entities created by a city or county to implement the community redevelopment activities outlined under the Community Redevelopment Act. A CRA is established by the local government and functions within that local government.
Syndicates
are groups of two or more people who unite their resources for the purpose of making and operating an investment. They can use the pooled capital to finance a real estate transaction or to purchase a piece of property.
Mortgage bankers
are managers of real estate loans. They can receive a fee for originating, processing and closing the loan. In some cases they may also collect payments, periodically inspect the property and supervise a foreclosure, if that becomes necessary.
Credit unions
are nonprofit financial institutions. They pay no income tax, so they can pay higher interest rates on deposits than other savings institutions. They also offer a wide variety of loans at far lower interest rates than their competitors. This makes credit union membership very attractive.
endowment funds
are permanent, they offer a good source of mortgage financing for commercial and industrial properties. Many commercial banks and mortgage companies handle investments for endowment funds.
Real estate bonds
are popular financing instruments, which can be in the form of either corporation bonds or municipal bonds. General obligation (GO) bonds, a common form of the municipal bond, are used to raise capital for community development projects, such as parks and schools. In California, Cal-Vet loans are funded through the sales of tax-exempt real estate bonds.
Non institutional lenders
are those entities who make real estate loans but who are not so strictly regulated by state or federal government agencies. These include private parties (individuals), mortgage brokers, mortgage bankers, real estate trusts, syndications, real estate bonds, endowment funds, private loan companies, pension and endowment funds and credit unions.
The Office of the Comptroller of the Currency (OCC)
charters, regulates, and supervises all national banks.
Subordination
clause is an agreement to reduce the priority of an existing loan to a new loan that will be recorded in the future.
Exculpatory
clause is inserted in a financing document when the lender agrees to waive the right to a deficiency judgment.
Release
clause is often used when two or more properties are pledged as collateral for a single loan, as developers often do. As the developer sells off each lot, a portion of the money from the sale is used to pay part of the mortgage. In return, the lender executes and records a release of the lot that was sold.
blanket loan
covers more than one parcel of real estate, owned by the same buyer, as collateral for the same mortgage.
Private loan companies
deal mostly in junior financing - second deeds of trust that allow borrowers to pull out some of the equity in their property to use for other purchases. Some of these private loan companies deal with financing for consumer goods other than real estate, but there are others who deal exclusively in real estate financing. They can make loans from their own or borrowed funds, they can act as brokers between borrowers and lenders, and they can buy and sell junior financing instruments.
commercial bank
designed to act as a depository for funds and as a lender for commercial activities - usually short-term loans. Commercial banks are very active in the home equity loan market.
Mortgage Loan Disclosure Statement
details the total costs of a loan to the borrower, including data regarding interest rate, balloon payments, security documents, and costs and commissions to the loan broker.
institutional lender
is any financial institution whose loans and lending practices are regulated by law. These institutions pool the funds of their depositors and invest the funds in real estate loans, making them financial intermediaries. In California, institutional lenders include: Commercial banks Savings and loan associations Life insurance companies
Fees
for making the loan (such as appraisals, title charges, recording fees, etc.) cannot exceed 5% of the principal or $390, whichever is greater. Regardless of the size of the loan, the broker may charge the borrower only the actual costs and expenses paid, not to exceed $700.
Private party lenders
have no formal structure. They have very few laws or regulations to deal with in regard to their lending practices. However, private party lenders are not exempt from usury laws.
Section 203(k)-Rehabilitation Home Loan
he FHA 203(k) loan provides funds for both the purchase and the rehabilitation of a house through one mortgage. The value of the property is determined by whichever is less: The value before rehab plus the cost of rehab 110 percent of the appraised value after rehab The maximum loan must stay within the mortgage limit for the particular geographic area. A portion of the loan goes to pay the seller at settlement. The remaining funds are retained in escrow and distributed as the rehabilitation work is completed, similar to "draws" on a construction loan. Most of the rules and restrictions for the FHA 203(b) loan also apply for a 203(k) loan. The property may be a single-family, detached townhouse or a condominium unit located in an FHA or VA-approved condominium. The following are some additional guidelines: The home must be at least one year old. The home must require a minimum of $5,000 in rehabilitation cost. During six months of rehab, the borrower pays only taxes and insurance. Potential additional fees include supplemental origination fee, fee for preparation of architectural documents and review of rehabilitation plan, and a higher appraisal fee. No upfront mortgage premium is required. These loan funds can be used for: Structural alterations Modernization of functioning systems Elimination of health and/or safety hazards Changes to improve appearance or eliminate obsolescence Replacement of roof, gutters, downspouts Addition or replacement of floors and/or floor treatments Major landscape work and site improvements Accessibility improvements or additions for a disabled person Energy conservation improvement HUD requires that basic energy efficiency and structural standards be met under this program. Luxury items or improvements that are a not a permanent addition to the property are not eligible. A handbook entitled "Rehab a Home with HUD's 203(k)" is available from HUD by mail.
Mortgage brokers
help borrowers obtain property financing. Finding a suitable lender and arranging the loan entitles the broker to a commission or fee, which is paid by the borrower. In California, mortgage brokers, also called loan brokers, must follow certain requirements and restrictions as outlined in the real property Loan law.
US Department of Agriculture Rural Development Program (USDA Rural Development)
helps rural individuals, communities and businesses obtain financial and technical assistance to address their diverse and unique needs. USDA Rural Development programs support such essential public facilities and services as water and sewer systems, housing, health clinics, emergency service facilities and electric and telephone service.
growing equity mortgage (GEM)
is a fixed-rate mortgage whose payments increase by a fixed amount over a given schedule for an established period of time, often the entire term of the loan.
Community Development Block Grant Program (CDBG)
is a flexible program that provides communities with resources to address a wide range of unique community development needs. Begun in 1974, the CDBG program is one of the longest continuously run programs at HUD. The CDBG program provides annual grants on a formula basis to general units of local government and States.
Mutual Mortgage Insurance (MMI)
is a monthly premium that is paid with the monthly principal, interest, taxes and insurance payment. This is often referred to as PITI + MMI. MMI premiums may be dropped when the remaining loan balance is 80 percent loan-to-value ratio or less.
shared appreciation mortgage (SAM)
is a mortgage in which the lender agrees to an interest rate lower than the prevailing market rate, in exchange for a share of the appreciated value of the collateral property.
pledged account mortgage (PAM)
is a type of graduated payment mortgage under which the owner/borrower contributes a sum of money into an account that is pledged to the lender.
construction loan
is a type of open-end mortgage, also known as interim financing. A construction loan finances the cost of labor and materials as they are needed and used throughout a building project.
two-step mortgage
is an ARM loan program in which the interest rate is adjusted only one time - usually five or seven years after the loan is originated.
open-end loan
is an expandable loan in which the lender gives the borrower a limit up to which he or she may borrow. Each advance the borrower takes is secured by the same mortgage. This loan is also known as a mortgage or deed of trust for future advances.
Farm Credit Administration (FCA)
is an independent federal agency responsible for regulating and examining the banks, associations, and related entities of the Farm Credit System (FCS).
renegotiable rate mortgage (RRM)
is another type of variable rate mortgage. This mortgage is amortized over 30 years but must be renewed at three-, four-, or five-year intervals.
granting clause
pledges the mortgagor's rights. The use of the words "grant, bargain, sell and convey" transfers a form of ownership to the mortgagee, which creates a lien on the property. The lien will be released when the loan is satisfied or allow action to be taken in the case of a default.
savings and loan association's
primary function is to promote thrift and home ownership. These institutions often offer their depositors a higher rate of interest on their deposits than commercial banks offer.
California Housing Finance Agency (CalHFA)
program offers below-market interest rate first mortgage programs and a variety of down payment assistance programs to eligible first-time home buyers.
Public Housing Development program
provides Federal grants to local public housing authorities (PHAs) to develop housing for low-income families that cannot afford housing in the private market.
Loan assumability
stipulates under what conditions, if any, a borrower may substitute another person to assume the responsibility for the remaining loan payments. If assumption is allowed, the note will indicate whether or not the original borrower remains liable or is released from liability when the new borrower assumes the loan.
bi-weekly payment mortgage
the borrower pays half of the monthly mortgage payment every two weeks, rather than the full payment once a month.
Under the terms of the land contract
the buyer gets possession of the property and equitable title, while the seller holds legal title to the property and continues to be primarily liable for payment of any existing mortgage.
Adjustable-rate mortgage (ARM)
the interest rate is linked to an economic index. The loan starts at one rate of interest, but then it fluctuates up or down over the life of the loan as the index changes. The loan agreement describes how the interest rate will change and when. The interest rate the borrower pays is usually the index rate plus a margin. An adjustment period establishes how often the lender can change the rate - monthly, quarterly or annually. Interest rate caps limit the amount of interest the borrower can be charged. A payment cap limits how much the monthly payment can increase. Sometimes lenders offer conversion options. This would allow the borrower to convert the ARM to a fixed-rate loan at certain times during the life of the loan.
reverse annuity mortgage
the lender is making payments to the borrower. The RAM allows older property owners to receive regular monthly payments from the equity in their paid-off property without having to sell. There are three basic types of reverse mortgage. Single-purpose reverse mortgages Federally-insured reverse mortgages Proprietary reverse mortgages
buy down
the lump sum payment that is made to the lender at closing usually comes from a builder as an incentive to the buyer or from a family member trying to help out.
graduated payment mortgage (GPM)
the monthly payment for principal and interest gradually increases by a certain percentage each year for a certain number of years and then it levels off for the remaining term of the mortgage. The FHA-245 program is a popular graduated payment mortgage program.
Farm Credit System (FCS)
was inaugurated under the Federal Farm Loan Act. It is designed to serve the unique financial needs of farmers, ranchers, producers and harvesters of agricultural products. It also assists rural homeowners and owners of some types of farm-related businesses. The banks in the FCS provide loans for real estate, operating costs and rural homes. They also offer credit-related life insurance and crop insurance.
The Federal Home Loan Bank System (FHLB)
was structured in 1932 to bring stability to savings and loan associations and to renew the public's confidence in these associations. Its mission was to establish rules and regulations for the member savings associations.
Mortgage Insurance Premium (MIP)
which is a percentage of the loan amount. The borrower can pay this one-time premium at closing or the charge could be financed with the loan. This premium could be paid by some other party, such as the seller.
According to California law, the broker must make certain that the borrower receives a completed loan disclosure statement
within three business days of receiving a completed loan application or prior to the signing of any loan documents.