FINANCE
TX STATE AFFORDABLE HOUSING CORPORATION - TSAHC
1994, was created to be a self-sustaining nonprofit housing organization. target housing needs of low-income families and other underserved populations in Texas who don't have acceptable housing options through conventional financial channels Herose for Texas Home Loan Program - home buyer assistance for teachers, police and correctional officers
Over ____ individuals are employed in the real estate finance industry across the United States, according to the Mortgage Bankers Association.
280,000
Inflation and Deflation
A decrease in the purchasing power of the dollar is inflation. An increase in the purchasing power of a dollar is deflation.
CLOSING DISCLOSURE
A five-page form that provides final details about the mortgage loan you have selected
____ ____ specialize in financing for income producing properties such as shopping centers, industrial and office properties, and multi-family homes.
COMMERCIAL LENDERS
The sales comparison approach to value is based on the prices that similar properties (also known as ____) in the vicinity have sold for recently.
COMPARABLES
The ____ approach to value seeks to determine how much a property would cost to replace (meaning, rebuild) after subtracting accrued depreciation.
COST
If your loan is transferred to a new servicer, you generally get two notices: one from your ____ servicer and one from your ____ servicer.
CURRENT NEW
conforming vs no conforming
Conforming conventional loan: Made according to the guidelines that will allow the loan to be sold on the secondary market. (FHA, VA, and conforming conventional loans are all eligible to be sold on the secondary market.) Non-conforming conventional loan: Will probably become a loan held in the lender's portfolio because it does not meet the guidelines to be sold. (For example, a "jumbo loan" will be a nonconforming loan because it exceeds the maximum loan amount allowed to be sold on the secondary market.)
KNOW BEFORE YOU OWE
Consumer Financial Protection Bureau, or CFPB UPDATED IN 2016 CHANGES tolerance for the total of payments housing assistance lending cooperatives privacy and sharing of information
Primary Market Institutions
Credit unions Commercial banks Life insurance companies Savings banks
FARM SERVIE AGENCY - FSA
Dept. of USDA is the Farm Service Agency, or FSA Direct Operating Loans: These loans are used to buy things like livestock and feed, farm equipment, fuel, farm chemicals, and insurance. They can cover family living expenses, be used to make minor improvements or repairs to buildings and fencing, and go toward general farm operating expenses. Microloans: Microloans are operating loans meant be put toward the needs of small and beginning farmers, non-traditional, specialty crop and niche type operations. They ease some of the requirements and offer less paperwork. Direct Farm Ownership Loans: These loans are used to do things like purchase or enlarge a farm or ranch, construct a new or improve existing farm or ranch buildings, and for soil and water conservation and protection purposes. Guaranteed Loans: Guaranteed loans allow lenders to extend credit to family farm operators and owners who don't qualify for standard commercial loans. Farmers receive credit at reasonable terms to finance their current operations or to expand their business; financial institutions receive additional loan business and servicing fees, as well as other benefits from the program, like protection from loss. Youth Loans: Youth loans are used by young people participating in clubs like 4-H clubs or FFA to finance educational, income-producing, agriculture-related projects. (Oh, to be young and in loans!) Minority and Women Farmers and Ranchers Loans: These loans encourage full participation from minority and women family farmers by targeting a portion of direct and guaranteed farm ownership and operating loan funds for minority and women farmers to buy and operate a farm or ranch. Beginning Farmers and Ranchers Loans: These loans provide credit opportunities to eligible family farm and ranch operators and owners who've been in business less than 10 years. Aw, newbies! Emergency Loans: These are designed to assist farmers and ranchers recover from any production or physical losses suffered from drought, flooding, other natural disasters or quarantine. Native American Tribal Loans: These loans are a resource for Tribes to acquire land interests within tribal reservations or Alaskan communities. The loans can be used to advance and increase current farming operations, provide financial prospects for Native American communities, increase agricultural productivity, and preserve cultural farmland for future generations.
A(n) ____ account is a fund held by your servicer that you pay into for property taxes and homeowners insurance.
ESCROW
A tax ____ reduces the taxable value of an asset.
EXEMPTION
Secondary Market Members
Fannie Mae Freddie Mac Ginnie Mae Federal Home Loan Bank Private investors Life insurance companies
MORTGAGE ASSISTANCE RELIEF
Federal Trade Commission Rule that protects consumers from predators while they're in default on their mortgage. It's illegal to charge upfront fees. You must clearly and prominently disclose certain information before you sign people up for your services. If you advise someone not to pay their mortgage, you must clearly and prominently disclose the negative consequences that could result. Don't advise customers to stop communicating with their lender or servicer. You must disclose key information to your customer if you forward an offer of mortgage relief from a lender or servicer. Don't misrepresent your services.
Lenders consider a borrower's ____, ____, ____, source of funds, and net worth.
INCome, credit, debt
The ____ ____ loan has monthly payments that are applied exclusively to the interest for a set period. All of the principal on the loan is due at the end of the term.
INTEREST ONLY
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT - FIRPTA
If a seller is not a citizen, then the buyer (or their representative) must withhold 10 percent of the sale proceeds and send it to the IRS within 10 days of closing. A comprehensive purchase and sale agreement should include a paragraph that explains FIRPTA, to ensure that all parties are advised of their responsibilities in this regard. exceptions releases a transferee (or a purchaser or a buyer) from the obligation to withhold tax in cases in which the buyer purchases real estate for use as their home and the purchase price is not more than $300,000.
PMI is for the protection of the ____. The cost of the insurance is charged to the ____.
LENDER BORROWER
The ____ ____ is responsible for the day-to-day management of your mortgage loan account, including collecting and crediting your monthly loan payments, and handling your escrow account, if you have one.
LOAN SERVICER
____ and the rights to ____ them often are bought and sold.
LOANS SERVICE
GOVERNMENT VS CONVENTIONAL LOANS
Loans are either government guaranteed (insured), such as FHA or VA loans, or they are conventional loans. Conventional loans are not insured by the government. They either call for private mortgage insurance (PMI) or they can be free of insurance if the buyer pays a down payment of at least 20% of the sales price.
MORTGAGE INSURANC PREMIUM
MIP, is required insurance to protect the lender in the event of borrower default on an FHA loan. Notice that this is different from the insurance that is sometimes required for conventional loans. Conventional loan → PMI (Private Mortgage Insurance) FHA loan → MIP (Mortgage Insurance Premium)
TAX DEDUCTIONS
Mortgage interest Real estate taxes Discount points paid at closing Loan origination fees
SUBJECT TO SALES
NOT NECAESSARILY LEGAL- RARE- LENDERS WON'T APPROVE What happens when a buyer purchases a property subject to a seller's existing mortgage? You guessed it, the seller's obligations under the existing mortgage remain unchanged. Why? When purchasing a home subject to the existing mortgage, the title changes hands, so the buyer owns the house legally, but the seller's old mortgage stays in place. The buyer pays the seller, and the seller turns around and pays the lender, usually keeping a cut for themselves.
3 CREDIT REPORTING AGENCIES
Not all creditors report to all three of the big national credit reporting agencies (Equifax, Experian, and TransUnion), so a single individual could have a different score from each agency
REPLACED WITH LOAN ESTIMATOR FORM
Only three pages long! (Happier trees, happier me.) Combines loan terms break-down of the TIL and closing costs break-down of the GFE Divided into sections that give clear explanations of any costs associated with the mortgage
Local banks that lend their own money and do not sell their loans on the secondary market are ____ ____.
PORTFOLIO LENDERS
REAL ESTATE PHASES
Phase 1: Recovery ⛑ High unemployment (but it's not getting any worse) Lots of home foreclosures People are hesitant to buy homes Government lowers interest rates to encourage investments Phase 2: Expansion 🏠 market activity really picks up. Businesses are hiring more, and people tend to view real estate as a good investment again. Signs of expansion include: Most available properties have been bought or rented, driving vacancy rates down Rent and home prices are rising Construction for new homes and commercial buildings starts At the end of the expansion phase, people may pay more for real estate than it's worth, because they are anticipating future increases in value. Phase 3: Hyper supply 🏙 supply catches up with (and eventually surpasses) demand. The first warning sign is an increase in vacant or unsold property. Property valuations are also at a high point. Phase 4: Recession 🙁 starts when occupancy falls below the long term average. Homes sit on the market, unsold. Prices are at their lowest. Foreclosures abound, especially when the real estate recession is coupled with an economic recession that leaves homeowners unemployed and unable to pay their mortgages. A recession is a period in which economic activity drastically declines and stays declined for more than six months.
BOARD OF GOVERNORS FOR FED
President of the United States nominates seven people to serve on the Board of Governors for 14-year terms, and the Senate confirms the president's nominations. Additionally, the president appoints a chairman and vice chairman of the board from the seven nominees. The job of the Board of Governors is to set the discount rate and the reserve requirement for member banks. Additionally, the board forms a proper part of the 12-member Federal Open Market Committee (FOMC). The remaining five members of the FOMC are appointed from the 12 Federal Reserve banks. The FOMC is in charge of the Fed's open-market operations, such as the purchase and sale of government securities. all federal banks are required to become members.
DEMAND FACTORS
Prices can increase because of increases in construction costs, the cost of financing, and property values. personal income. If the average salary goes down, or the unemployment rate goes up, the demand for certain types of housing is likely to decrease expectations - of their future financial situation, and of the economy as a whole, will affect the demand for real estate
Factors that Affect Real Estate Prices
Real estate prices can increase or decrease because of changes in: The demand for property The supply of property Unemployment Government influence
The mortgage servicer is required to give you a free annual ____ that details the activity of your escrow account, showing your account balance and payments for your property taxes, homeowners insurance, and other escrowed items.
STATEMENT
DETERMINING VALUE
Sales comparison approach Cost approach Income approach
Settlement Statement
Statement that summarizes all the fees and charges that both the homebuyer and seller face during the settlement process of a housing transaction
GOVERNMENT INFLUENCE
Supply of money: The Federal Reserve controls the money supply and can print money. When money for financing is available, demand for housing rises. Government action has the most direct influence on inflation. Interest rates: Interest rates set by the federal government affect the overall cost of homeownership for anyone who finances their purchase. High interest rates make homeownership more expensive, reducing demand. Real estate prices tend to fall in order to attract buyers in times of high interest rates. Tax policies: Tax policies regarding capital gains tax, homestead exemptions, and mortgage interest deductions affect supply and demand for real estate.
A ____ reduces the amount of taxes due.
TAX CREDIT
TRUTH IN LENDING - TIL & GFE GOOD FAITH ESTIMATE - NO LONGER
TIL Disclosure - A two-page form that: Explains basics of proposed mortgage Real estate loans Loans for personal, family, or household purposes Consumer loans for $25,000 or less Note: Business loans are NOT covered. Not a contract or a commitment to lend Shows the APR, finance charge for the money being borrowed, the amount financed, and the total of all the payments that will be made over the life of the mortgage Breaks down monthly payments into principal and interest, mortgage insurance, and property tax and insurance Tells if a mortgage interest rate is variable or fixed and details prepayment penalties
____ provides an addendum for the parties to negotiate seller financing.
TREC
Tax Exemptions and Credits
Tax exemptions are offered to qualifying: Senior citizens Individuals with disabilities Homestead property Tax credits are dollar amounts that can be applied to taxes owed. For example, if a homeowner owes $500 in income taxes and has a tax credit of $100, they will owe $400 in taxes.
TX VETERANS LAND BOARD - VLB
Texas veterans the opportunity to buy land at below-market rates with low down payments. 1 ACRE OR MORE
CLOSING DISCLOSURE
The Closing Disclosure is a form that effectively replaces the Final TIL Disclosure and the HUD-1 Settlement Statement. Is five pages long (and lovely) Combines the finalized loan terms with a in-depth breakdown of closing costs The Closing Disclosure is the document that both the seller and the buyer will sign at the closing table. prepared and filled in by either a Title Company representative or a Real Estate Attorney. CFPB requires that the buyer or seller gets three business days before the closing to review the Closure Disclosure. All documents need to be sent to the title company in time for this review. can be completed by either a title company representative or a real estate attorney. Lenders are required to provide the Closing Disclosure three business days prior to closing.
FDIC
The FDIC is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. They receive no funding from Congress. present insured amount is $250,000, per depositor, per insured depository institution for each account ownership category. Directly examines and supervises more than 4,500 banks and savings banks for operational safety and soundness. Examines banks for compliance with consumer protection laws, including, but not limited to: the Fair Credit Billing Act, the Fair Credit Reporting Act, the Truth-In-Lending Act, and the Fair Debt Collection Practices Act. The FDIC also examines banks for compliance with the Community Reinvestment Act (CRA), which requires banks to help meet the credit needs of the communities they were chartered to serve. Responds immediately when a bank or thrift institution fails. created a number of policy standards outlined for lending companies, but not an entire policy that should be followed by all. Each lender should factor things such as company size, number of lenders, location, etc., into the creation of their policies in adherence to the FDIC.
FEDS 3 INSTRUMENTS
The discount rate - interest rate at which the Fed lends money to its member banks. The reserve requirement Open-market operations-
3 INSTRUMENTS OF MONETARY POLICY
The discount rate- interest rate at which the Fed lends money to its member banks. When a member bank in sound financial condition requires a short-term loan, the Fed will advance the funds at what is known as the primary credit rate, the most important of the Fed's discount rates and the one often referred to as "the discount rate." This rate is typically set slightly above the short-term market interest rate.- higher discount rate lowers the supply of loans by increasing the cost lenders pay to issue them. This causes interest rate changes to ripple through the entire financial system, raising or lowering the cost of borrowing money in any capacity. The reserve requirement Open-market operations
SUPPLY & DEMAND
The law of supply and demand states that the forces of supply and demand push the market price of any commodity to one particular point, the market equilibrium. This equilibrium is the point at which the supply and demand curves cross. When supply exceeds demand, prices decrease ⬇️ When demand exceeds supply, prices increase ⬆️ Demand tells us how many consumers are able to afford a home Supply is determined by the amount of properties that are vacant or are available for sale or rent.
____ can buy a home without a down payment.
VETERANS
FEDERAL RESERVE
Wilson signed the Federal Reserve Act in 1913, creating the Federal Reserve. While previous attempts at creating a federal bank had left many common workers feeling like they were left out in the cold in favor of the big banks, this new bank felt like it existed for all Americans. The purpose of the bank is fourfold: Conduct the monetary policy of the United States Supervise and regulate financial institutions for the protection of the consumer Maintain the financial system's stability Provide services to the government, to financial institutions, and to the public Federal Reserve System (sometimes just known as "the Fed"). This system is composed of 12 member banks across the United States, each serving a different geographical area. The purpose of the Federal Reserve is fourfold: Conduct the monetary policy of the United States Supervise and regulate financial institutions for the protection of the consumer Maintain the financial system's stability Provide services to the government, financial institutions, and the public
FISCAL POLICY
a broad term used to refer to the tax and spending policies of the federal government. Fiscal policy decisions are determined by the Congress and the Administration; the Federal Reserve plays no role in determining fiscal policy.
GLASS STEAGALL ACT
a law that sought to separate commercial and investment banking. 1999, the law was repealed. Investing in non-investment grade securities for themselves Underwriting or distributing non-governmental securities Affiliating (or sharing employees) with companies involved in such activities 1999, the law was repealed.
MONETARY POLICY
actions of central banks to achieve big, macroeconomic policy objectives, such as price stability, full employment, and stable economic growth. Congress established maximum employment and price stability as the macroeconomic objectives for the Federal Reserve; they are sometimes referred to as the Federal Reserve's dual mandate. Apart from these overarching objectives, Congress determined that operational conduct of monetary policy should be free from political influence. As a result, the Federal Reserve is an independent agency of the federal government.
COMMUNITY REINVESTMENT ACT- CRA
aims to address lending discrimination by requiring that lenders submit an annual statement including public comments about their attempts to help low-income communities. An institution's past performance of helping its community is taken into account in considering an institution's application for new banks, including mergers and acquisitions.
RESPA
applies to most loans that are secured by a mortgage lien placed on a one- to four-family residential property. Purchase loans Assumptions Property improvement loans Refinancing loans and equity lines of credit (generally) For a loan to fall under RESPA, it has to be what is called a federally related mortgage loan. A federally related loan is one that is directly or indirectly supported by federal regulation, insurance, guarantees, supplements, or assistance.
FHA LOAN
are an option for buyers who may not be qualified for a conventional loan. It allows them to put down a smaller down payment (as low as 3.5%) and get into their own home sooner than they may have been able to afford it without this program. The small down payment is acceptable to lenders because they have some assurance that the FHA will pay them if the buyer defaults. insurance for an FHA loan is expensive. It protects the lender, but it is paid for by the borrower. FHA insurance requires an upfront fee (called the Up-front Mortgage Insurance Premium, or UFMIP) in addition to a monthly fee. BENEFITS OF FHA low down payment assumable, transferable at current interest rate less stringent on debt ratios
FEDERAL HOME LOAN BANKS
are cooperatives and their members are shareholders. Thrifts, credit unions, and insurance companies all have the right to become members of FHLBanks. support residential mortgage lending and related community investment through its member financial institutions. The System provides members with access to: Reliable, economical funding and technical assistance Special affordable housing programs support residential mortgage lending and related community investment. The system provides members with access to reliable, economical funding, technical assistance and special affordable housing programs.
SUPPLY
available amount of something, and it's based on the willingness and ability of sellers in a given market to sell their property As the price of housing increases, owners become more willing to sell. PRICE PLAYS IMPORTANT ROLE IN SUPPLY COST OF PRODUCTION EXPECTATIONS
PRIMARY DEALERS
banks and securities broker-dealers that trade in U.S. Government securities with the Federal Reserve Bank of New York (FRBNY). The Federal Reserve sends and receives funds from the primary dealer's accounts at its bank. The purchase of government securities adds to the reserves from the banking system while the sale of securities drains those reserves. Through the adjustment of the reserves balances, the federal funds rate is influenced.
SELLER FINANCING
buyer makes mortgage payments directly to the seller. It may be an untraditional means of home buying Texas Real Estate Commission (TREC) provides an addendum for the parties to negotiate seller financing (the Seller Financing Addendum). When interest rates on money in the bank are very low, the seller can frequently make a greater profit by leaving the money in the property and becoming the lender
HUD
cabinet department in the executive branch of federal govt mission is to increase homeownership, support community development, and increase access to affordable housing free from discrimination. Much of this is done through HUD's enforcement of the Fair Housing Act & RESPA.
ESCROW ACCOUNTS
contains money that the borrower pays to the loan servicer, which the servicer reserves until it's needed to pay for the home insurance and property taxes. Escrow accounts are mandatory for many loans, including government insured loans and some conventional loans.
GRAMM-RUDMAN ACT
contributed to the housing/banking crisis in 2008 which allowed banks to engage in trading profitable derivatives that they sold to investors. Because these mortgage-backed securities needed mortgages as collateral, it created an ongoing demand for even more mortgages.
FEDERAL RESERVE
controls this country's monetary policies. These policies can dictate the interest rates and supply of money.
DODD FRANK ACT
created the most significant financial reforms to the American banking system since the post-Great Depression legislation. gave the FDIC the power to liquidate more than just commercial and investment financial institutions with its insurance fund. This meant that the FDIC was granted the power to liquidate insurance companies and other non-bank financial institutions and thus protect consumers from more risk. Orderly Liquidation Fund was created to liquidate non-bank financial companies. Dodd-Frank Act gave more power to FDIC, allowing them to better protect consumers from risk.
SERVICING TRANSFER
current servicer will send a letter 15 days before the effective date of transfer or earlier. The soon-to-be servicer sends a notice within 15 days after the effective date of the transfer. effective date, to clarify, is the day that the first mortgage payment to the new servicer is due. 60 DAY GRACE PERIOD IN THIS PROCESS notices will include New servicer's name and address Date when the current servicer will stop accepting payments Date when the new servicer will start accepting payments Phone numbers of both service companies Information about any changes in optional insurance policies Assurance that the terms and conditions of the loan (as long as they are not directly related to servicing details) will not change because of the transfer Statement about the consumer's rights and where to direct questions or complaints the owner of a loan and the servicer of a loan are not necessarily the same
USDA LOANS
don't require a down payment
Federal Home Loan Bank Act of 1932
extended $125 million in credit to savings and loan institutions and created the Federal Home Loan Bank System with twelve (12) regional banks. Federal Home Loan Bank System is composed of 11 Federal Home Loan Bank Districts is to support residential mortgage lending and related community investment through its member financial institutions, and to provide access to reliable economical funding, technical assistance and special affordable housing programs.
SECTION 8 HOUSING
federally funded low-income housing program that allows private landlords to rent apartments and homes at fair market rates to qualified low-income tenants, with a rental subsidy administered by Home Forward. In this program, tenants pay about 30 percent of their income for rent, while the rest of the rent is paid with federal money. The number of units a local housing authority can subsidize under its Section 8 programs is determined by Congressional funding. The largest part of Section 8 is the Housing Choice Voucher program, which pays a large portion of the rents and utilities of about 2.1 million households.- allows a tenant to move from one unit of at least minimum housing quality to another through "tenant-based" rental assistance. It also lets individuals apply their monthly voucher towards the purchase of a home. The maximum allowed voucher is $2,000 a month.
SAFE ACT - SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING ACT - PART OF DODD FRANK
gave states one year to pass legislation requiring the licensure of mortgage loan originators (MLOs) that met national standards and the participation of state agencies on the Nationwide Mortgage Licensing System and Registry (NMLS).
ADMINISTRATIVE PROCEDURE ACT - APA
governs the way administrative agencies of the federal government may propose and establish regulations. The APA also establishes a process for the United States federal courts to directly review agency decisions. established both a classification for different types of agency decision-making and a set of procedural rules to govern that decision-making in every respect. Require agencies to keep the public informed of their organization, procedures, and rules Provide for public participation in the rule making process Establish uniform standards for the conduct of rule making and adjudication Define the scope of judicial review
FUNDING
happens when the lender provides the cash in the amount of the approved loan. It is the transferring of funds to a title company or escrow company so that they may be disbursed from there
HYPOTHECATION
his concept is closely related to collateral, as it involves a borrower pledging a certain asset as collateral for the loan. In hypothecation, the borrower maintains their ownership of the asset and has free reign to use and enjoy it. The lender has an equitable title in the property, meaning they have no right to the property unless there is a default. Once the loan is fully paid off, that right disappears.
FINAL CHOICE ACT
hoped it would end bailouts
SUBSIDIZED HOUSING
housing is owned and operated by private owners who get subsidies in exchange for renting to low- and moderate-income individuals and families. Owners can be individual landlords or for-profit or nonprofit corporations.
PORTFOLIO LENDER
important to the commercial investor. Local banks that lend their own money and do not sell their loans on the secondary market plans to keep the loan in their portfolio for the entire term of the loan.
TX DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS - TDHCA
improved quality of life through the development of better communities. Economic development Infrastructure for rural communities Energy assistance Manufactured housing FIRST TIME HOMEBUYERS program - first time homebuyer hasn't weed a house in 3 years
INTERBANK BORROWING
interbank borrowing costs, or LIBOR rose interbank rate is the rate of interest charged on short-term loans made between banks.
CLOSING
is the consummation of a real estate transaction when all the necessary contracts are signed and the lender disburses the funds of the mortgage loan.
UNDERWRITING
is the process of deciding the level of risk a lender would take on by offering a loan to a certain borrower for a specific property. It's a complex process that has been automated to some degree, but still requires the work of a specially trained professional. This decision about risk is made using the borrower's loan application, documents within their file, and information about the property for which the mortgage is sought.
LOAN PROCESSING
lender collects information from the buyer that will help determine the loan type and amount they will qualify for
TILA
loan is to be repaid in more than four installments or if a finance charge is made: Real estate loans Loans for personal, family, or household purposes Consumer loans for $25,000 or less Note: TILA does NOT cover business loans. Protect consumers against inaccurate and unfair credit billing and credit card practices Provide consumers with rescission rights Provide for rate caps on certain dwelling-secured loans Impose limitations on home equity lines of credit and certain closed-end home mortgages 2 REGULATIONS Regulation M applies to leased property Regulation Z protects people when they use consumer credit. - bans practices concerning payments made to compensate mortgage brokers and other loan originators. Regulation Z applies to loans that are (1) extended to consumers; (2) offered on a regular basis; (3) either subject to a finance charge or to be paid in four or more installments; (4) used for personal, family, or household purposes; or (5) a closed-end transaction (not open-ended or revolving).
USDA SECTION 502 LOANS
loans that help low- and very-low-income applicants get decent and safe housing in eligible rural areas by providing payment assistance to increase an applicant's repayment ability.
CONVENTIONAL LOANS
no government guarnatee used to require 20% until PMI developed once borrower reaches 20% equity they can stop paying PMI
TX MORTGAGE CREDIT CERTIFICATE - MCC
offers tax credits for income tax purposes for multiple years. claim a tax credit for some portion of the mortgage interest paid per year. So basically, it is a dollar-for-dollar reduction against their federal tax liability. ELIGIBILITY Meet income and home purchase requirements Have not owned a home as primary residence in the past three years Meet the qualifying requirements of the mortgage loan Plan to use the home as their primary residence -annual tax credit will be 40% of the annual interest paid on the mortgage loan. maximum amount of the tax credit shall not exceed $2,000 per year.
PRE APPROVAL
pproval from the lender to borrow an amount at an interest rate within a small range. An application, credit report, and supporting financial documentation are required.
DODD - FRANK ACT
provided common-sense protections, creating a new consumer watchdog to prevent mortgage companies and pay-day lenders from exploiting consumers. The main goal of Dodd-Frank was to protect people from unfair and abusive financial practices, and to make sure things like the financial crisis didn't happen again. -The Volcker Rule - a ban on proprietary trading by commercial banks. Restricted United States banks from making certain speculative investments that did not benefit their customers Prohibited banks from conducting investment activities with their own accounts Limited banks ownership of hedge funds or private equity funds to 3% of total ownership interest -Regulation of derivatives -Creation of the Consumer Financial Protection Bureau - develop and enforce clear and consistent rules for the financial marketplace and hold financial firms to higher standards. Create easier-to-use mortgage disclosure forms Improve consumer understanding Aid in comparison shopping for the borrower Prevent surprises at the closing table, a.k.a. "Know Before You Owe" -Creation of the Office of Credit Ratings
MHA - MAKING HOME AFFORDABLE
provided mortgage relief to homeowners to prevent avoidable foreclosures. This included the Home Affordable Modification Program (HAMP), which permanently reduced mortgage payments to affordable levels for qualifying borrowers. MHA expanded to include a number of other specialized programs. MHA helped over 1.8 million families obtain mortgage relief and avoid foreclosure. MHA expired in December 2016.
FHA
provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. The administration insures mortgages on single family and multifamily homes (including manufactured homes and hospitals). It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception. FHA loans are mortgages insured by the Federal Housing Administration. FHA mortgage insurance gives lenders protection against losses that can occur when homeowners default on their mortgage loans. This insurance encourages lenders to offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements. FHA is an insurer and not a lender. This means that borrowers will need to get their loan through an FHA-approved lender, and not directly from the FHA.
HOUSING FINANCE AGENCIES - HFA'S
re state-chartered entities designed to increase housing opportunities for lower-income and underserved people through the financing, development, and preservation of affordable housing. in Texas, the department that serves as an HFA is called the Texas Department of Housing and Community Affairs.
LOAN COMMITMENT
separate and final step, happens when the lender is approving the exact loan terms for a specific property.
VA LOANS
similar to FHA guarantees loans instead of insuring them allows veterans to qualify for a loan with no down payment borrower pays a fee up front for guaranteeing but no ongoing monthly premiums
HOUSING FINANCE AGENCIES - HFA
state-chartered entities designed to increase housing opportunities for lower-income and underserved people through the financing, development, and preservation of affordable housing. EVERY STATE HAS THEM HFA is called the Texas Department of Housing and Community Affairs. National Council of State Housing Agencies (NCSHA) consolidate and coordinate HFA power rely on 3 federally authorized programs admind by NCSHA Mortgage Revenue Bonds (MRB) The Low Income Housing Credit The HOME Investment Partnerships Program (HOME) also NCSHA participates in Section 8 contract administration and restructuring, and federal housing assistance programs, including homeless assistance and the Community Development Block Grant program.
PUBLIC HOUSING
the housing authority owns the resident's building and is the resident's landlord. A private company may manage the building for the housing authority or be part of the ownership, but the building is controlled by the housing authority.
US TREASURY
the purpose of the U.S. Treasury is to maintain a strong economy and create economic opportunities and job opportunities. The Treasury does this by promoting conditions enabling economic growth and stability, both at home and abroad, while working to strengthen national security by combating any financial threats. And by protecting the integrity of the financial system, the Treasury manages the U.S. Government's finances and resources effectively. Borrowing the necessary funds to run the federal government Collecting revenue Producing coins and currency Disbursing payments to the American public
FEDERAL FUNDS RATE
the rate that depository institutions pay when they borrow money from each other to adjust their reserve balances and to keep an adequate amount of money in their account at the Federal Reserve. Reserve balances are set by the Federal Reserve to be certain the Fed has sufficient available funds to cover checks and electronic payments that are processed on behalf of the dealers. lending rate between banks at the Federal Reserve
Federal Open Market Committee (FOMC)
top monetary policy-making body for the Federal Reserve which is charged with overseeing the federal government's open market operations. is in charge of the Fed's principal tool — its open-market operations. These operations consist of buying government securities. OPEN MARKET OPERATIONS the federal interest rate needs to be raised, then they will decrease the money supply by taking away surplus liquidity from commercial banks. If the interest rate needs to be lowered, they will increase the money supply by giving commercial banks liquidity. Liquidity describes cash or assets that can be converted to cash quickly.
SECURITIES
two goals in mind when buying and selling securities: Reach a targeted amount of reserve balances held at the Reserve Reach a targeted federal funds rate In connection with the reserve requirement, banks have accounts with the Fed in which they keep their required reserves. For our purposes, it is mainly just important to observe that when the Fed buys securities from the securities market, it increases the money supply by putting more money into the hands of consumers. When the Fed sells securities, it decreases the money supply by collecting more money in exchange for the debt instruments.
HHF HARDEST HIT FUND
was created to provide targeted aid to families in states hit hard by the economic and housing market downturn. The participating states were chosen either because they are struggling with unemployment rates at or above the national average or steep home price declines greater than 20 percent since the housing market downturn.
LOAN SERVICING
which is a collection of monthly payments, usually including payments on the principal, interest, taxes, and insurance, or PITI (we'll discuss PITI in more detail later in the course) — along with the maintenance of records. The loan servicer is also responsible for sending the collected funds to the note holder and contacting the borrower about any delinquencies. Additionally, the loan servicer will provide the borrower an annual statement that details the activity of the escrow account, showing the account balance and payments for property taxes, homeowners insurance, and other escrowed items. Servicing costs about 0.25% to 0.50% of the loan balance, and that fee is passed on to the borrower (usually from the secondary-market investor). While we're on the subject, I'll mention that a net basis rate or wholesale rate means that a servicing fee has not been included.
RESPA
within three days of receiving a loan application, the lender must provide the applicant with the following material: A booklet entitled "Settlement Costs and You," published by HUD, concerning settlement services (It's quite a juicy read!) A truth-in-lending statement, indicating the total credit costs and the annual percentage rate (APR) of the loan, which may differ from the initial rate a borrower will pay on the loan A good-faith estimate of settlement costs, detailing the expected costs of closing and indicating which settlement services are mandated by the lender RESPA also requires that any time the closing agent refers a borrower to a firm with which the lender is affiliated, the lender must inform the borrower of the connection through an Affiliate Business Arrangement (ABA) Disclosure stating the relationship and that the buyer need not use affiliated firms RESPA explicitly "prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan."