Essentials of Real Estate Finance Unit 4

Factors that Determine Credit Scores: Credit factor/Not a credit factor - Outstanding debt - Marital status - Payment history - Credit inquiries - Receipt of public assistance - Race - Types of credit

- Credit factor - Not a credit factor - Credit factor - Credit factor - Not a credit factor - Not a credit factor - Credit factor

The Activities of Fannie Mae and Freddie Mac: Fannie Mae/Freddie Mac - Offers Home Possible® loans that have low-down-payment options for first-time and low-to-moderate-income homebuyers - Uses the Loan Prospector® automated underwriting system - Uses the Desktop Underwriter® (DU) and the Desktop Originator® (DO) automated underwriting systems - Provides a secondary mortgage market for loans originate by the savings associations and thrifts that are members of the Federal Home Loan Bank System - Provides a secondary mortgage market for the purchase of conventional loans, FHA-insured mortgages, and VA-guaranteed loans - Offers MyCommunityMortgage® loans that have more flexibility in qualifying guidelines and credit history

- Freddie Mac - Freddie Mac - Fannie Mae - Freddie Mac - Fannie Mae - Fannie Mae

The Secondary Mortgage Market Process: - Selling securities allow Fannie Mae/Freddie Mac to purchase more loan packages. - Fannie Mae/Freddie Mac sells mortgage-backed securities on the open market. - Primary market lenders provide mortgages to consumers. - Fannie Mae/Freddie Mac provides money to primary lenders to fund mortgage loans. - Primary market lenders sell loan packages to Fannie Mae and Freddie Mac.

1. Primary market lenders provide mortgages to consumers. 2. Primary market lenders sell loan packages to Fannie Mae and Freddie Mac. 3. Fannie Mae/Freddie Mac sells mortgage-backed securities on the open market. 4. Selling securities allow Fannie Mae/Freddie Mac to purchase more loan packages. 5. Fannie Mae/Freddie Mac provides money to primary lenders to fund mortgage loans.

The Federal Housing Finance Agency (FHFA) regulates all of the following EXCEPT A) U.S. Department of Housing and Urban Development (HUD). B) Freddie Mac. C) Federal Home Loan Banks. D) Fannie Mae.

A) U.S. Department of Housing and Urban Development (HUD). explanation: The Office of Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac, and the Federal Home Loan Banks—not HUD.

In 1954, Fannie Mae was rechartered as a national secondary mortgage market clearinghouse to be financed by A) private capital. B) commercial banks. C) insurance companies. D) the Federal Reserve.

A) private capital. explanation: The agency was empowered to sell its mortgages, as well as purchase new FHA and VA loans. Fannie Mae also created its own criteria for accepting mortgages that meet its standards for quality, yield, and risk.

As government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac enjoy all of the following benefits EXCEPT A) they have the full official backing by the federal government. B) they are allowed to carry a large line of credit with the U.S. Treasury Department. C) they are not required to register their securities with the Securities and Exchange Commission. D) they pay state and local corporate income tax.

A) they have the full official backing by the federal government. explanation: Fannie Mae and Freddie Mac were never officially backed by the federal government, although when the financial market collapsed, the federal government did have to step in to rescue them.

Freddie Mac's electronic underwriting system is known as A. Loan Prospector. B. Desktop Underwriter. C. Flex97. D. Participation Certificates.

A. Loan Prospector. - Freddie Mac provides its own automatic underwriting system, to participating lenders.

Which of the following statements regarding Fannie Mae guidelines is TRUE? A. Loans with a high-than-80%, LTV require private mortgage insurance. B. Maximum loan limits are set annually by each individual lender. C. The seller may contribute up to 6% toward the borrower's closing costs on all loans. D. Homebuyer education and counseling is require of all borrowers.

A. Loans with a high-than-80%, LTV require private mortgage insurance. - An LTV higher than 80% requires mortgage insurance.

Freddie Mac's Home Possible® mortgages offer a low down payment option for any of the following EXCEPT A) teachers and health care workers. B) jumbo loans. C) firefighters and law enforcement officers. D) first-time and low- to moderate-income homebuyers.

B) jumbo loans. explanation: Jumbo loans are those that are over the prescribed loan limits for conventional loans. The borrowers would not be eligible for a Home Possible® loan.

One aspect of the original QRM proposal that was of major concern to lenders was A) no burdensome down payment is permitted. B) loans that did not meet QRM standards required the lender to retain 5% of the loan amount. C) the debt-to-income ratio of 43%. D) points and fees are limited to 3% of the loan amount.

B) loans that did not meet QRM standards required the lender to retain 5% of the loan amount. explanation: With the dropping of the 5% risk-retention requirement, it is hoped that the lending market will improve.

Case Study: Elizabeth and Mark have been married for five years and have managed to save $10,000 to put toward buying their first home. Elizabeth's parents have offered to match their funds, giving them a total of $20,000. Elizabeth and Mark have signed a Buyer Agency Agreement with Helen Jones and are ready to start looking for their new home. Of course, they realize that they will have to take out a mortgage, but they would be amazed to learn how much federal legislation is involved in the background as they apply for a $150,000 loan. Elizabeth and Mark meet with loan officer John Smith to discuss the process of obtaining a mortgage loan. John shows them how the lender pre-qualifies a borrower to determine the amount of the loan they will be able to afford. In many cases, a mortgage loan is then sold on the secondary market to Fannie Mae or Freddie Mac. These are both government-sponsored entities that purchase packages of loans that conform to their standards from local lenders. The Federal Housing Finance Agency (FHFA) sets the loan limits each year for conforming loans following baseline adjustments that were established by the Housing and Economic Recovery Act (HERA). The adjustments are based on a percentage of the FHA (Federal Housing Administration) median house prices for an area. The loan limit is much higher for what is referred to as a high-cost area. John also explains that within three days of making an application for a loan, Elizabeth and Mark will receive a Loan Estimate. This is a new form created by the Consumer Financial Protection Bureau (CFPB) under the TILA-RESPA Integrated Disclosure Act. The Loan Estimate replaced the former Good Faith Estimate and initial Truth-in-Lending disclosure. The Loan Estimate provides them with a summary of the terms of the loan and all estimated costs. The form must include the APR (annual percentage rate), a number that discloses the actual yield to a lender on a loan. A second form created by CFPB is the Closing Disclosure, which replaced the old HUD-1 Settlement Statement and the final TILA disclosure. Elizabeth and Mark should receive this form at least three days prior to settlement. The law is very strict on limiting the amount of any changes that may occur between the original estimate of costs and the final version. Changes that would require preparation of a new Closing Disclosure and a new three-day waiting period before settlement include -an increase of more than 1/8th percent of the APR (annual percentage rate); -a change to a different loan product from the one originally quoted; and -the addition of a pre-payment penalty if the loan is paid off early. Throughout the entire process of purchasing a home—from the first meeting with a real estate professional to the final closing of the contract—everyone involved in the transaction is subject to the federal Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or disability (handicap). Lenders are also subject to the federal Equal Credit Opportunity Act (ECOA), which prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or dependency on public assistance. - The Equal Credit Opportunity Act added all of the following protected classes from discrimination EXCEPT A) receipt of public assistance. B) sexual orientation. C) marital status. D) age.

B) sexual orientation. explanation: Although sex is a protected class (male or female), sexual orientation (bisexual, transsexual, homosexual) is not part of federal law. It is, however, included in the REALTOR® Code of Ethics.

The BEST description of a nonconforming loan is one that A. exceeds the loan limit set annually by Fannie Mae and Freddie Mac. B. does not meet Fannie Mae and Freddie Mac qualifying guidelines. C. is restricted to four-family units D. is limited to low-income housing.

B. does not meet Fannie Mae and Freddie Mac qualifying guidelines. - Any loan that does not meet Fannie Mae and Freddie Mac guidelines is nonconforming.

Freddie Mac buys mortgages and packages them into securities called A. platinum securities. B. participation certificates. C. loan possibles. D. collateralized mortgage obligations,

B. participation certificates. - Participation Certificates is Freddie Mac's name for mortgage-backed securities sold on the open market.

Ginnie Mae allows investors to combine MBS pools into a single security and receive a single payment each month instead of separate payments for individual pools with A. collateralized mortgage obligations. B. platinum securities. C. Treasury notes. D. gold securities.

B. platinum securities. - The advantage of platinum securities is the ease of use by only receiving a single payment, regardless of whether it is from a Ginnie Mae I or Ginnie Mae II pool.

Freddie Mac was originally chartered to A. compete with Fannie Mae. B. provide a secondary market for conventional loans (not FHA or VA). C. purchase government loans. D. provide mortgage loans for qualified applicants.

B. provide a secondary market for conventional loans (not FHA or VA). - Freddie Mac was chartered to purchase conventional loans from savings associations and thrifts, and now purchases both government and conventional loans.

When Fannie Mae was reorganized in 1954 to include financing by private investors, mortgage loans could be purchased at A) par. B) face value. C) a discount. D) a premium.

C) a discount. explanation: In 1954, Fannie Mae was rechartered as a national secondary mortgage market clearinghouse to be financed by private capital. Fannie Mae was empowered to sell its mortgages, as well as purchase new FHA and VA loans. Fannie Mae's purchases were no longer made at par but at whatever discounted price would develop a reasonable rate of return.

Case Study: Elizabeth and Mark have been married for five years and have managed to save $10,000 to put toward buying their first home. Elizabeth's parents have offered to match their funds, giving them a total of $20,000. Elizabeth and Mark have signed a Buyer Agency Agreement with Helen Jones and are ready to start looking for their new home. Of course, they realize that they will have to take out a mortgage, but they would be amazed to learn how much federal legislation is involved in the background as they apply for a $150,000 loan. Elizabeth and Mark meet with loan officer John Smith to discuss the process of obtaining a mortgage loan. John shows them how the lender pre-qualifies a borrower to determine the amount of the loan they will be able to afford. In many cases, a mortgage loan is then sold on the secondary market to Fannie Mae or Freddie Mac. These are both government-sponsored entities that purchase packages of loans that conform to their standards from local lenders. The Federal Housing Finance Agency (FHFA) sets the loan limits each year for conforming loans following baseline adjustments that were established by the Housing and Economic Recovery Act (HERA). The adjustments are based on a percentage of the FHA (Federal Housing Administration) median house prices for an area. The loan limit is much higher for what is referred to as a high-cost area. John also explains that within three days of making an application for a loan, Elizabeth and Mark will receive a Loan Estimate. This is a new form created by the Consumer Financial Protection Bureau (CFPB) under the TILA-RESPA Integrated Disclosure Act. The Loan Estimate replaced the former Good Faith Estimate and initial Truth-in-Lending disclosure. The Loan Estimate provides them with a summary of the terms of the loan and all estimated costs. The form must include the APR (annual percentage rate), a number that discloses the actual yield to a lender on a loan. A second form created by CFPB is the Closing Disclosure, which replaced the old HUD-1 Settlement Statement and the final TILA disclosure. Elizabeth and Mark should receive this form at least three days prior to settlement. The law is very strict on limiting the amount of any changes that may occur between the original estimate of costs and the final version. Changes that would require preparation of a new Closing Disclosure and a new three-day waiting period before settlement include -an increase of more than 1/8th percent of the APR (annual percentage rate); -a change to a different loan product from the one originally quoted; and -the addition of a pre-payment penalty if the loan is paid off early. Throughout the entire process of purchasing a home—from the first meeting with a real estate professional to the final closing of the contract—everyone involved in the transaction is subject to the federal Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or disability (handicap). Lenders are also subject to the federal Equal Credit Opportunity Act (ECOA), which prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or dependency on public assistance. - Any of the following changes would require that a new Closing Disclosure form be provided to Elizabeth and Mark, along with a new three-day waiting period for settlement EXCEPT A) switch from conforming loan to an FHA-insured loan. B) increase in APR from 4.2 to 4.8. C) actual loan costs with minimal change. D) addition of 5% pre-payment penalty.

C) actual loan costs with minimal change. explanation: The Loan Estimate includes estimated loan costs but the actual costs must appear on the Closing Disclosure with minimal changes. As long as there are no significant changes, there is no requirement for a new disclosure or additional waiting period.

All of the following are government-sponsored enterprises EXCEPT A. Fannie Mae. B. Freddie Mac. C. Ginnie Mae. D. the Federal Home Loan Bank.

C. Ginnie Mae. - Ginnie Mae is administered by HUD and is not a GSE.

A major function of the Federal home Loan Bank System is to provide its members with A. platinum securities available for purchase. B. collateralized mortgage obligations. C. a national market for purchase of their loans. D. pass-through certificates for purchase.

C. a national market for purchase of their loans. - The FHLB purchases loans from its member banks providing competition in the secondary market.

The Tax Reform Act of 1986 established an entity that can issue multiclass securities. This entity, which has added to the activities of the secondary market, is called A. the REIT. B. the REMT. C. the REMIC. D. RESPA.

C. the REMIC. - A real estate mortgage investment conduit (REMIC) is made up of multiple classes of ownership interests in a single pass-through tax authority.

Fannie Mae's automated underwriting system for independent mortgage broker-agents is called A) Desktop Underwriter® (DU). B) Loan Prospector® (LP). C) Loan Originator® (LO). D) Desktop Originator® (DO).

D) Desktop Originator® (DO). explanation: Fannie Mae has two versions of its automated underwriting system—the DO is for independent mortgage broker-agents, and the DU is for lender servicers. Lenders access Fannie Mae's loan analysis system through software offered to customers.

All of the following are the major players in the mortgage secondary market EXCEPT A) Fannie Mae. B) Ginnie Mae. C) Freddie Mac. D) Federal Housing Administration.

D) Federal Housing Administration. explanation: The Federal Housing Administration (FHA) is part of the primary market.

Case Study: Elizabeth and Mark have been married for five years and have managed to save $10,000 to put toward buying their first home. Elizabeth's parents have offered to match their funds, giving them a total of $20,000. Elizabeth and Mark have signed a Buyer Agency Agreement with Helen Jones and are ready to start looking for their new home. Of course, they realize that they will have to take out a mortgage, but they would be amazed to learn how much federal legislation is involved in the background as they apply for a $150,000 loan. Elizabeth and Mark meet with loan officer John Smith to discuss the process of obtaining a mortgage loan. John shows them how the lender pre-qualifies a borrower to determine the amount of the loan they will be able to afford. In many cases, a mortgage loan is then sold on the secondary market to Fannie Mae or Freddie Mac. These are both government-sponsored entities that purchase packages of loans that conform to their standards from local lenders. The Federal Housing Finance Agency (FHFA) sets the loan limits each year for conforming loans following baseline adjustments that were established by the Housing and Economic Recovery Act (HERA). The adjustments are based on a percentage of the FHA (Federal Housing Administration) median house prices for an area. The loan limit is much higher for what is referred to as a high-cost area. John also explains that within three days of making an application for a loan, Elizabeth and Mark will receive a Loan Estimate. This is a new form created by the Consumer Financial Protection Bureau (CFPB) under the TILA-RESPA Integrated Disclosure Act. The Loan Estimate replaced the former Good Faith Estimate and initial Truth-in-Lending disclosure. The Loan Estimate provides them with a summary of the terms of the loan and all estimated costs. The form must include the APR (annual percentage rate), a number that discloses the actual yield to a lender on a loan. A second form created by CFPB is the Closing Disclosure, which replaced the old HUD-1 Settlement Statement and the final TILA disclosure. Elizabeth and Mark should receive this form at least three days prior to settlement. The law is very strict on limiting the amount of any changes that may occur between the original estimate of costs and the final version. Changes that would require preparation of a new Closing Disclosure and a new three-day waiting period before settlement include -an increase of more than 1/8th percent of the APR (annual percentage rate); -a change to a different loan product from the one originally quoted; and -the addition of a pre-payment penalty if the loan is paid off early. Throughout the entire process of purchasing a home—from the first meeting with a real estate professional to the final closing of the contract—everyone involved in the transaction is subject to the federal Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or disability (handicap). Lenders are also subject to the federal Equal Credit Opportunity Act (ECOA), which prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or dependency on public assistance. - Elizabeth and Mark need to borrow $150,000. This will be well within the loan limit established for their geographic area by the A) Consumer Financial Protection Bureau. B) FHA. C) Fannie Mae. D) Federal Housing Finance Agency.

D) Federal Housing Finance Agency. explanation: The Federal Housing Finance Agency (FHFA) sets the loan limits each year based on a percentage of the FHA median house prices for an area.

Case Study: Elizabeth and Mark have been married for five years and have managed to save $10,000 to put toward buying their first home. Elizabeth's parents have offered to match their funds, giving them a total of $20,000. Elizabeth and Mark have signed a Buyer Agency Agreement with Helen Jones and are ready to start looking for their new home. Of course, they realize that they will have to take out a mortgage, but they would be amazed to learn how much federal legislation is involved in the background as they apply for a $150,000 loan. Elizabeth and Mark meet with loan officer John Smith to discuss the process of obtaining a mortgage loan. John shows them how the lender pre-qualifies a borrower to determine the amount of the loan they will be able to afford. In many cases, a mortgage loan is then sold on the secondary market to Fannie Mae or Freddie Mac. These are both government-sponsored entities that purchase packages of loans that conform to their standards from local lenders. The Federal Housing Finance Agency (FHFA) sets the loan limits each year for conforming loans following baseline adjustments that were established by the Housing and Economic Recovery Act (HERA). The adjustments are based on a percentage of the FHA (Federal Housing Administration) median house prices for an area. The loan limit is much higher for what is referred to as a high-cost area. John also explains that within three days of making an application for a loan, Elizabeth and Mark will receive a Loan Estimate. This is a new form created by the Consumer Financial Protection Bureau (CFPB) under the TILA-RESPA Integrated Disclosure Act. The Loan Estimate replaced the former Good Faith Estimate and initial Truth-in-Lending disclosure. The Loan Estimate provides them with a summary of the terms of the loan and all estimated costs. The form must include the APR (annual percentage rate), a number that discloses the actual yield to a lender on a loan. A second form created by CFPB is the Closing Disclosure, which replaced the old HUD-1 Settlement Statement and the final TILA disclosure. Elizabeth and Mark should receive this form at least three days prior to settlement. The law is very strict on limiting the amount of any changes that may occur between the original estimate of costs and the final version. Changes that would require preparation of a new Closing Disclosure and a new three-day waiting period before settlement include -an increase of more than 1/8th percent of the APR (annual percentage rate); -a change to a different loan product from the one originally quoted; and -the addition of a pre-payment penalty if the loan is paid off early. Throughout the entire process of purchasing a home—from the first meeting with a real estate professional to the final closing of the contract—everyone involved in the transaction is subject to the federal Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or disability (handicap). Lenders are also subject to the federal Equal Credit Opportunity Act (ECOA), which prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or dependency on public assistance. - All of the following federal legislative acts would directly impact Elizabeth and Mark as they apply for a mortgage EXCEPT A) Fair Housing Act. B) Equal Credit Opportunity Act. C) RESPA-TILA Integrated Disclosure Act. D) Housing and Economic Recovery Act.

D) Housing and Economic Recovery Act. explanation: HERA developed the method for making baseline adjustments used for determining conforming loan limits; that is, loans to be purchased by Fannie Mae or Freddie Mac on the secondary market

The final version of the qualified residential mortgage (QRM) has all of the following features EXCEPT A) points and fees paid by the consumer may not exceed 3% of the loan amount. B) the debt-to-income ratio may not exceed 43%. C) no prepayment penalties are allowed. D) a down payment of 20% is required.

D) a down payment of 20% is required. explanation: The original QRM proposal did require a 20% down payment. This met with extreme objections by lenders and consumers, and was dropped.

Case Study: Elizabeth and Mark have been married for five years and have managed to save $10,000 to put toward buying their first home. Elizabeth's parents have offered to match their funds, giving them a total of $20,000. Elizabeth and Mark have signed a Buyer Agency Agreement with Helen Jones and are ready to start looking for their new home. Of course, they realize that they will have to take out a mortgage, but they would be amazed to learn how much federal legislation is involved in the background as they apply for a $150,000 loan. Elizabeth and Mark meet with loan officer John Smith to discuss the process of obtaining a mortgage loan. John shows them how the lender pre-qualifies a borrower to determine the amount of the loan they will be able to afford. In many cases, a mortgage loan is then sold on the secondary market to Fannie Mae or Freddie Mac. These are both government-sponsored entities that purchase packages of loans that conform to their standards from local lenders. The Federal Housing Finance Agency (FHFA) sets the loan limits each year for conforming loans following baseline adjustments that were established by the Housing and Economic Recovery Act (HERA). The adjustments are based on a percentage of the FHA (Federal Housing Administration) median house prices for an area. The loan limit is much higher for what is referred to as a high-cost area. John also explains that within three days of making an application for a loan, Elizabeth and Mark will receive a Loan Estimate. This is a new form created by the Consumer Financial Protection Bureau (CFPB) under the TILA-RESPA Integrated Disclosure Act. The Loan Estimate replaced the former Good Faith Estimate and initial Truth-in-Lending disclosure. The Loan Estimate provides them with a summary of the terms of the loan and all estimated costs. The form must include the APR (annual percentage rate), a number that discloses the actual yield to a lender on a loan. A second form created by CFPB is the Closing Disclosure, which replaced the old HUD-1 Settlement Statement and the final TILA disclosure. Elizabeth and Mark should receive this form at least three days prior to settlement. The law is very strict on limiting the amount of any changes that may occur between the original estimate of costs and the final version. Changes that would require preparation of a new Closing Disclosure and a new three-day waiting period before settlement include -an increase of more than 1/8th percent of the APR (annual percentage rate); -a change to a different loan product from the one originally quoted; and -the addition of a pre-payment penalty if the loan is paid off early. Throughout the entire process of purchasing a home—from the first meeting with a real estate professional to the final closing of the contract—everyone involved in the transaction is subject to the federal Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or disability (handicap). Lenders are also subject to the federal Equal Credit Opportunity Act (ECOA), which prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or dependency on public assistance. - The Loan Estimate form provided to Elizabeth and Mark within three days of their application for a loan will include all of the following information EXCEPT A) estimated loan costs. B) summary of loan terms. C) disclosure of APR. D) actual settlement costs.

D) actual settlement costs. explanation: The actual settlement costs will be included on the Closing Disclosure form. Under the new CFPB rules, there are strict limitations on the amount of change allowed from the original Loan Estimate and the actual Closing Disclosure figures.

The Ginnie Mae Type I MBS requires all mortgages in the pool of mortgages to A) remain insured only by the FHA. B) allow for more geographic dispersal. C) have the first payment date within 12 months of issue. D) be all of the same type (e.g., single-family).

D) be all of the same type (e.g., single-family). explanation: The Ginnie Mae Type II MBS provides for multiple-issue pools that allow for more geographic dispersal.

Fannie Mae and Freddie Mac remain in conservatorship today under A) the FHA. B) the FDIC. C) the Federal Open Market Committee (FOMC). D) the Federal Housing Finance Agency (FHFA).

D) the Federal Housing Finance Agency (FHFA). explanation: When the housing market crashed, Fannie Mae and Freddie Mac were in serious trouble. They were both placed in conservatorship under the FHFA in 2008.

The MOST important role played by Ginnie Mae today is A. originating FHA loans. B. purchasing VA loans. C. overseeing Fannie Mae and Freddie Mac. D. guaranteeing FHA and VA mortgage-backed-securities

D. guaranteeing FHA and VA mortgage-backed-securities - Ginnie Mae guarantees payment to investors on FHA and VA mortgage-backed securities.

The action taken by the Federal Housing Finance Agency (FHFA) to stabilize Fannie Mae and Freddie Mac was to A. consolidate both agencies into one. B. dissolve both agencies. C. merge Fannie Mae and Freddie Mac with Ginnie Mae. D. place Fannie Mae and Freddie Mac into conservatorship.

D. place Fannie Mae and Freddie Mac into conservatorship. - Fannie Mae and Freddie Mac were in deep trouble due to large proportion of high-risk subprime loans.

Fannie Mae and Freddie Mac are able to replenish their own funds, enabling them to purchase loans from primary lenders by A. borrowing from the Federal Reserve Bank. B. borrowing from each other. C. requesting grant funds through HUD. D. selling mortgage-backed securities.

D. selling mortgage-backed securities. - The sale of mortgage-backed securities using loan packages as collateral provides funds.

The duties of the FHFA include all of the following EXCEPT A. establishing conforming loan limits. B. setting the percentage of loans to be made to low-and moderate-income borrowers. C. regulating Fannie Mae and Freddie Mac. D. supervising the FHA.

D. supervising the FHA. - The FHA comes under the supervision of HUD, not the FHFA.

The agency established to ensure the financial safety and soundness of Fannie Mae and Freddie Mac is A. the Federal Deposit Insurance Corporation (FDIC). B. the Office of Thrift Supervision (OTS). C. the Federal Reserve System (the Fed). D. the Federal Housing Finance Agency (FHFA).

D. the Federal Housing Finance Agency (FHFA). - As part of the Economic and Housing Recovery Act of 2008, Freddie Mac came under the supervision of the FHFA--and in September 2008, was placed in conservatorship along with Fannie Mae.

Lenders, may order either a mandatory or standby commitment to sell loans to Fannie Mae through A. the federal open market. B. the stock exchange. C. the free market auction. D. the administered price system.

D. the administered price system. - The administered price system replaced the free market auction system.

Ginnie Mae

Guarantees investors the timely payment of principal and interest on mortgage-backed securities backed by FHA or VA loans

Real Estate Mortgage Investment Conduit (REMIC)

Holds pools of mortgages that back up securities collateralized by the mortgage cash flows

Federal Home Loan Bank (FHLB) system

Provides cost-effective funding to member banks for use in housing and community development

Farmer Mac

Provides long-term credit at stable interest rates by purchasing loans from agricultural mortgage lenders