FIN 3353 Test 2
Uniform Settlement Statement
A standard form required by HUD that stipulates the fees and charges to be paid by the buyer and seller at a loan closing
Real Estate Mortgage Investment Conduit
A type of mortgage backed security that allows for income to be taxed only to the holders of the bond and not to the entity holding the mortgages
Adjustable Rate Mortgage
A type of mortgage in which the interest rate adjusts periodically according to a prescheduled index, such as Treasury Bill rates, and a margin. This adjustment results in the mortgage payment either increasing or decreasing. Limits can be set on the amount by which interest rates or payments can change.
Credit Default Swap
An instrument that insures a bondholder against a loss in the value of those bonds
Interest Rate Caps
A provision in an adjustable rate mortgage that limits the increase in the rate of interest at each anniversary date of the rate change
Index
A rate of interest, such as a T-Bill rate, used to measure periodic interest rate adjustments for an adjustable rate mortgage
Mortgage Backed Bonds
A bond or debt instrument that is backed by a pool of mortgages and for which the cash flow of the mortgages serves as the source of repayment
Adjustment Rate Cap
A cap (usually one or two percent) on the change in the interest rate on an adjustable rate mortgage
Title Plant
A duplicate set of public records maintained by a title company
Home Mortgage Disclosure Act
A federal act passed in 1975 that requires disclosure of an institution's loans by census tract or by zip code
Federal Housing Administration
A federal agency whose main activity is the insuring of residential mortgage loans made by private lenders. It is a division of HUD which sets standards for construction and underwriting and charges a fee, generally 3.8 percent of loan amount
Equal Credit Opportunity Act
A federal law that requires lenders to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assurance programs. Also known as Regulation B
Judicial Procedure Foreclosure
A foreclosure process that involves court proceedings
HUD-1
A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction.
Constant Maturity Treasury Indexes
A hypothetical US Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to 10.
Moral Hazard
A situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost.
Graduated Payment Mortgage
A residential mortgage designed to overcome the "tilt" effect. The monthly mortgage payments that start at a level below that on a FRM and increase at a predetermined rate with later payments above that on a FRM. They may level off at some predetermined point
Title Search
A search of public records to discover any liens or other impediments to a transfer of an unencumbered title
Uniform Residential Appraisal Report
A standard form for reporting the appraisal of a dwelling.
Mortgage Backed Securities
A security purchased by investors that are secured by mortgages. Such securities are also known as pass-through securities since the debt service paid by the borrower is passed through to the purchaser of the security
Co-Insurance
A sharing of insurance risk between insurer and owner depending on the relation of the amount of the policy and a specified percentage of the actual value of the property insured at the time of loss
Deficiency Judgement
A judgment levied against the borrower personally (personal assets) for the difference between the mortgage debt (including payments in arrears) and the liquidation value of the property
Lien
A legally recognized hold or claim of one person on the property of another as security for a debt, duty, or obligation
Review Appraiser
A lender's appraiser who reviews an appraisal for acceptility
Negative Amortization
A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal
Secondary Mortgage Market
A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are originated
Full Coverage
A mortgage insurance program where all losses to the lender under a default are covered
American Land Title Association
A national association whose job it is to guarantee the safe, efficient transfer of real property and to provide protection for consumers and lenders alike
Federal Home Loan Mortgage Corporation (Freddie Mac)
A private corporation authorized by Congress with an independent board of directors to provide secondary mortgage market support for conventional mortgages. It also sells participation certificates secured by pools of conventional mortgage loans
Federal National Mortgage Association (Fannie Mae)
A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages
Power-Of-Sale Foreclosure
A process of foreclosure that allows the lender to avoid court costs by presenting evidence to a trustee who holds the title to the property and receives title in return
Government Sponsored Enterprises
Agencies that are not official departments of the US government, but were originated through federal legislation
Convertible
An ARM that, within a given period of time, can be converted to a fixed rate mortgage
Direct Endorsement Program
An FHA program whereby qualified lenders are authorized to approve borrowers prior to all infromation being provided to the FHA
Community Reinvestment Act
An act passed by Congress in 1978 that requires federally insured thrifts to adopt a community reinvestment statement that defines the community in which the institution makes loans and maintains a file of loans for public inspection
Homeowners Protection Act
An act passed by Congress in 1998 that sets rules for the elimination of mortgage insurance as a function of the paydown in the principal of the loan
Cost Approach
An appraisal technique used to establish value by first estimating the cost to reproduce the facility, then deducting for depreciation and finally adding the value of the land
London InterBank Offered Rate
An average of daily lending rates from several major London banks, used as a common international interest rate index
Appraisal
An estimate or opinion of value supported by factual data by a qualified person. Also, the process by which the estimate is obtained
Good Faith Estimate
An estimate that includes an itemized list of fees and costs associated with a loan that must be provided by lenders to customers
Initial Period Discount
An initial contract rate on a loan that is less than the index plus the margin at the time
Desk Review
Appraisal review takes place in the office
Section 8 Housing
Authorizes payment of rental assistance to private landlords on behalf of low income tenants
Market Approach
Based on the premise that transaction prices of similar properties in the neighborhood are good indicators of value
Coverage Ratio
For private mortgage insurance, that portion of the exposure (potential loss) that is covered by the insurance and for which the lender will be indemnified
Community Development Block Grants
Grants from the Department of Housing and Urban Development to allow communities to carry out a wide range of community development projects
Frequency of Rate Changes
How frequently the rate of interest on an adjustable rate mortgage can change
Loan Processing
Includes several steps, namely, property appraisal, analysis of application, submission for credit approval, and closing
Mortgage Insurance
Insurance policy that pays off the remaining balance of the insured person's mortgage at death.
Private Mortgage Insurance
Insurance written by a private company protecting the mortgage lender against loss caused by a mortgage default or foreclosure
Periodic Adjustment Rate Cap
Limits how much the contract rate can change at each date of adjustment
Housing for Older Persons Act
Makes it legal for communities to market themselves as designed solely for the elderly (55 and up)
Entitlement
Maximum loan amount under VA insurance
Collateralized Mortgage Obligations
Multiple class, pay-through bonds, first issued by the FHLMC in 1983. They are secured by a pool of mortgages or a portfolio of pass-through securities. The CMO provides a type of call protection and pays principal and interest semianually rather than monthly, as a pass-through security does
Reconciliation Phase
Portion of the appraisal where the appraiser considers all the estimates of value and arrives at a final estimate
Self-Insurance
Process of the individual providing personal insurance against losses
Fair Housing Act
Prohibits discrimination in the sale or rental of residential dwellings on the basis of race, color, religion, or national origin
Reverse Mortgage
Refers to a mortgage with falling equity, rising debt, in which the lender makes payments to the borrower for a stipulated time
Double Taxation
Refers to the taxation of a C-corporation at the corporate level and then taxation of the dividends and capital gains to the stockholders of the same corporation
Partial Coverage
Refers, usually, to mortgage insurance where the insurer will reimburse the lender for only a portion of the debt. VA insurance is an example
Federal Housing Finance Agency
Regulates Fannie Mae and Freddie Mac and the 12 Federal Home Loan Banks
Truth-in-Lending Act
Requires lenders to provide full information about any loan they grant to a customer
Underwriter
Reviews the loan application for acceptability
Income Approach
Says that the value of the property is a function of the income that accrues to it
Pass-Through Securities
Securities issued by the Government National Mortgage Association which provides for the interest and principal to pass through to the holder of the security
Warehousing Loans
Short term loans from commercial banks
HOME Program
Structured around a loan arrangement whereby the federal government sets up a local home Investment Trust Fund that can be drawn from to increase the supply of low-income housing
HOPE Program
Structured as a a grant that can be used by local jurisdictions to rehabilitate public housing (and relocate tenants during the rehabilitation) and to acquire public housing for the purpose of transferring ownership to eligible families
Mortgage Insurance Premium
The charge paid by a mortgagor for mortgage insurance either to FHA or to a private mortgage insurance company. On an FHA loan, the payment is 3.8%
Equitable Right of Redemption
The common law right to redeem property during the foreclosure period by paying past due amounts. In some states the mortgagor has a statutory right to redeem property after a foreclosure sale. This is limited to several months or a year
Incurable
The cost to remedy is greater than the value added by making the repair
Curable
The cost to remedy is not greater than the value added by making the repair
Marketing Rate Difference
The difference between the amount a mortgage banker sells a loan for and the amount originated. A source of revenue for mortgage bankers
Warehousing Rate Difference
The difference between the interest rate on a mortgage (revenue) and the rate on a warehouse loan (cost) for a mortgage banker. A source of funds for the mortgage banker
Blockbusting
The illegal practice of inducing panic selling in a neighborhood for financial gain
Teaser Rate
The initial rate discount is sometimes referred to as this
Foreclosure
The legal process by which the property that serves as collateral on a loan is sold
Life of Loan Cap
The maximum rate of interest allowed under the terms of an adjustable rate mortgage
Margin
The number of basis points a lender adds to an index to determine the interest rate of an adjustable rate mortgage
Mortgage Banking
The origination, servicing, and sale of mortgage loans by a firm or individual
FHAing
The practice by lenders of making only FHA loans in certain risky or transitional neighborhoods. Lenders suffer no loss with FHA insurance as they may with private mortgage insurance
Redlining
The practice by lenders of refusing to make loans in certain risky or transitional neighborhoods
Securitization
The process of creating new securities backed (collateralized) by a package of other securities or assets
Credit Enhancement
The process whereby the issuer of a mortgage-related security adds support to the underlying assets by contributing capital or overcollateralizing the assets
Statutory Right of Redemption
The right of a borrower after a foreclosure sale to reclaim his property by repaying his defaulted loan
Right of Recision
The right to undo a contract if certain legal requirements are not fulfilled
Counterparty Risk
The risk that either party to a contract may default on the agreement
Government National Mortgage Association (Ginnie Mae)
This HUD agency operates as a participant in the secondary mortgage market. It is involved with special government financing programs for urban renewal projects, elderly housing, and other high-risk mortgages. GNMA also carries out the liquidation and special assistance function performed by the Federal National Mortgage Association prior to its reorganization in 1968. The association is involved with the mortgage securities pool and tandem plan
Intent Approach
Under this approach, discrimination is said to exist if a lender intends to treat minority groups less favorably
Effects Method
Under this method, discrimination is said to exist if member of a minority group are underrepresented in a class of those receiving credit relative to their proportion in the general population
Practices Method
Under this method, discrimination is said to exist when a lender fails to adhere to a set of guidelines governing the do's and don'ts of the lending procedure
