Financing ce shop class
What info must lenders provide under Community Reinvestment Act?
1 - Display the institution's lending policies and inform customers of their rights under the CRA. 2 - Prepare an annual statement that shows their community's geographic boundaries, identifies the community reinvestment credit offered, and includes comments from the public about how the lender is doing in meeting the community's needs.1
Things at national and regional level that affect housing market
1 - Large-scale economic events 2 - National environmental regulations 3 - Regional, national, or international political events
Three goals of the Federal Reserve
1) maximum employment, 2) stable prices, and 3) moderate long-term interest rates. This is to: to provide consumers with a continually improving standard of living and control extreme inflation/deflation
U.S. Treasury some of its Key Bureaus
1-Bureau of Engraving & Printing (BEP) 2-Bureau of the Fiscal Service: 3-Community Development Financial Institution (CDFI): 4-Financial Crimes Enforcement Network ( 5-Inspector General: 7-Internal Revenue Service (IRS): 8-Office of the Comptroller of the Currency (OCC): 9-U.S. Mint 10-Community Development Financial Institution (CDFI): 11-Financial Crimes Enforcement Network (FinCEN):
The Federal Home Loan Bank System (FHLB)
11 regional government-sponsored banks that provide low-cost funding to financial institutions (not consumers), enabling those institutions to provide home mortgage loans and provide small business, rural, agricultural, and economic development lending. Together with its members, the FHLB system represents the nation's largest combined source of home mortgage and community credit.
Federal Reserve is composed of how many banks?
12 regional banks and multiple member banks
HMDA
1975: Home Mortgage Disclosure Act (HMDA) Requires documentation to show that lenders are serving the housing needs of their communities. seeks to address discriminatory lending practices like REDLINING, CFPB is responsible for the HMDA, which requires lenders to maintain, report, and disclose data for the purposes of showing whether the needs of the neighborhoods and communities are being met and assist in identifying discriminatory lending practices. RELASES RAW DATA to public, no consumer id info.
CRA
1977: Community Reinvestment Act (CRA) to help low income communities and fight redlining. Requires lenders to: 1 - Meeting the deposit and credit needs 2 - Investing in development and rehabilitation to enable low- and moderate-income individuals and families to afford a home 3 -Make loan for housing, small businesses, and small farm
HERA
2008: Housing and Economic Recovery Act (HERA) Designed to address the subprime mortgage crisis. Provisions included the SAFE Mortgage Licensing Act and the Mortgage Disclosure Improvement Act.
ARRA
2009: American Recovery & Reinvestment Act (ARRA) Stimulus package created as a response to the economic crisis.
How many branch cities are there for the 12 fed reserve districts
24
Board of Governors-- how many, how long, how do they get position
7 members, all appointed by the president and confirmed by the Senate. 14-year term (only one) All Serve on Federal Open Market Committee One is appointed as chair or vice chair.
How many members serve on each of the 12 Federal Reserve banks Board of Directors
9 on each of board oversees the bankʼs activities and management serve on advisory councils and advise the Board of Governors Federal Open Market Committee.
Taxpayer Relief Act of 1997 (TRA '97)
Aka: TRA '97 .... exempted homeowners from paying taxes on capital gains on as much as $500,000 in gains for married couples filing their income taxes jointly ($250,000 for individuals), provided the property was their primary residence and they lived there for two out of the previous five years.
Board of Governors aka and what does it do?
Aka: the Federal Reserve Board; The board influences monetary policy, analyzes financial and economic conditions, and supervises the financial services industry, among other responsibilities.
Reserve Requirements
Amounts that fed reserves member banks keep on deposit with their district Federal Reserve bank The amount a member bank must keep on reserve can vary anywhere between 3% and 22%, depending on factors such as the location of the bank and the type of deposit
robo-signing
Banks were facing so many defaults that they started cutting corners and pushed many properties through the foreclosure process without closely reviewing the documentation
Right of Rescission under Regulation Z
Borrowers have three business days from the day the loan application is made or the day the disclosure statement is delivered (whichever is later) to rescind. Loans that are being used to purchase a primary residence are exempt from this right of rescission.
When HUD pursues actions that are designed to reduce housing discrimination and help communities recover from disasters, which of its goals is it supporting?
Build strong, resilient, and inclusive communities
How is compliance with CRA ensured?
Community Reinvestment Act ... Periodically, lenders are reviewed for compliance by federal financial agencies such as the Comptroller of the Currency, the Federal Reserve's Board of Governors, the FDIC, or the Office of Thrift Supervision.
Expansion cycle
Companies are hiring, lowering unemployment More buyers, heavy demand Decreasing supply Public confidence increases Home prices rise
commercial paper
Consumers and business owners need funds to purchase personal property or to meet short-term needs. Banks make loans to these consumers to meet their needs. These loans are called commercial paper
HOPE for Homeowners program
Created via Housing and Economic Recovery Act 2008 -- to address subprime loan crisis; The program encouraged lenders to write down principal loan balances to a maximum of 96.5% of the home's new appraised value. FHA was authorized to insure up to $300 billion in new 30-year fixed rate mortgages for this purpose
How Does HUD Goal #3: Use housing as a platform to improve quality of life.
Deploy solutions to end homelessness. Promote economic prosperity for residents of HUD-assisted housing. Promote the health and housing stability of vulnerable populations.
How does the Community Development Block Grant program assist in supporting HUD's mission?
Distributes grant funding to help meet community needs as determined by state and local governments
How Does HUD meet Goal #2: Meet the need for quality, affordable rental homes.
Ensure sustainable investments in affordable rental housing. Preserve quality, affordable rental housing where it's most needed by simplifying and aligning the delivery of rental housing programs.
How does HUD meet Goal #1: Strengthen the housing market to bolster the economy and protect consumers.
Establish a sustainable housing finance system. Achieve a more balanced housing market by ensuring that everyone, particularly underserved communities, has access to credit. Restore the financial health of the Federal Housing Administration (FHA) while supporting access to mortgage financing.
four phases of real estate cycle
Expansion Over Supply/Hyper-Supply Recession Recovery
FHFA
Federal Housing Finance Agency, created by HERA, which regulates and manages the finances of the government-sponsored entities Fannie Mae and Freddie Mac.
What agency receives paper currency prior to its distribution but after it's printed?
Federal Reserve
M1, M2, and M3
Financial analysts classify money as M1, M2, and M3 based on liquidity, with M1 most liquid and M3 least
HUD's strategic plan outlines the ______ that support its mission.
Four goals
Four HUD Goals
Goal #1: Strengthen the housing market to bolster the economy and protect consumers. Goal #2: Meet the need for quality, affordable rental homes. Goal #3: Use housing as a platform to improve quality of life. Goal #4: Build strong, resilient, and inclusive communities
What happens with FOMC buys securities?
HEATS up the economy by making more loans available.
Who do consumers complain to related to EOCA
HUD
Community Development Block Grant (CDBG)
HUD Block Grants: CDBG funds are distributed to state and local governments according to their population, poverty, and other housing variables. The vast majority (95%) of the people targeted by the program are low- to moderate-income citizens.
Which of the following can you offer to your low-income buyer clients with a small down payment?
Housing choice vouchers
HUD -- Housing Choice Vouchers
Housing subsidies, paid to landlords. tenats find the property rather than live in subsidized gov housing.
Federal Funds Rate
If a member bank wants to borrow money without collateral for a short period (usually overnight), other member banks can lend this money. The member bank is charged the federal funds rate to borrow.
What can DOJ Do regarding violations of EOCA?
In cases involving a pattern or practice of discrimination in home mortgage or home improvement loans, the U.S. Department of Justice can file a lawsuit under both the Fair Housing Act and the ECOA.
Regulation Z
In the Loan Estimate or the Closing Disclosure the Real Estate Lenders must disclose: 1- APR 2 -finance charges 3 - lender's name 4 - total amount being financed 5- number, amount and date of of payments due 6 - information related to loan assumption late and pre-payment penalties
2009: Homeowner Affordability and Stability Plan
Included: Home Affordable Modification Program (HAMP). This plan used cost sharing and incentives to encourage lenders to reduce homeowner's monthly payments to 31% of their gross monthly income, with the lender responsible for getting the mortgage payments to under 38%, and the government sharing the cost to meet the 31% goal. It also involved forgiving or deferring a portion of the borrower's mortgage balance. If they complied with this voluntary program, mortgage servicers received incentives to modify loans to help homeowners stay current.
Which of the following is classified as the least liquid on the scale?: Checking accounts; Institutional money market funds Savings accounts; Traveler's checks
Institutional money market funds
TILA Violations: consequences for lender
Intentional violations: fines of as much as $5,000 and/or imprisonment up to 12 months Unintentional violations: damages of two times the finance charge, up to $1,000 maximum
Who makes up the FDIC?
It's comprised of a five-person board of directors. Members are appointed by the president and confirmed by the Senate. No more than three members can be from the same political party.
Mortgage REITs
Lend money for mortgages and invest in mortgages, as well as mortgage-backed securities. Get their income from interest earned from investments.
Prime Rate
Many banks use the discount or federal funds rate as a base interest rate, and then add a percentage to it. This new interest rate is the prime rate, the interest rate the bank charges the most creditworthy consumers.
To resolve a deficit, the Treasury does what
May issues securities, or debt instruments, called treasuries. By selling treasuries, the Treasury is essentially pulling money out of the economy.
What can member banks of the 11 Regional FHLBs do?
Member banks own stock in their regional FHLBs, and can borrow money from district FHLBs for up to one year without collateral, or for longer periods with collateral. If collateral is used, it takes the form of government securities or existing real estate mortgages. Borrowing money provides a member bank with the funds to keep making loans in its community.
Federal Open Market Committee
Members from different areas within the Federal Reserve system work together to form the Federal Open Market Committee.
How many Member Banks are there of fed reserve
More than one third of the banks in the country are Federal Reserve member banks. All national banks must be members of the Federal Reserve System. Many state-chartered banks are also members and must meet certain criteria.
Industrial revenue bonds (IRB)
Municipal debt securities issued by a government agency on behalf of a private sector company and intended to build or acquire factories or other heavy equipment and tools. IRBs were formerly called Industrial Development Bonds (IDB)
NSP
Neighborhood Stabilization Program (part of HERA 2008), gave emergency assistance grants to states to purchase and redevelop foreclosed and abandoned homes and residential properties. NSP is a component of the Community Development Block Grant (CDBG) program.
FHEO
Office of Fair Housing and Equal Opportunity HUD office on fair housing
ONAP
Office of Native American Programs -HUD program to help native Americans.
Open-Market Operations (OMOs) and who oversees it?
Open-market operations are when government securities are bought and sold in the open market in order to increase or decrease the amount of money in the banking system. Federal Open Market Committee (FOMC) oversees these open market operations
Who Administers TILA?
Originally, the Federal Reserve had supervisory responsibility over TILA. The Fed enacted Regulation Z, which contained the laws and statutes for implementing TILA. In 2011, the Dodd-Frank Act shifted part of TILA's rule making authority to the Consumer Financial Protection Bureau.
The Government National Mortgage Association (Ginnie Mae or GNMA
Part of HUD: created to expand affordable housing in America by linking global capital markets to the nation's housing markets. Ginnie Mae developed the very first mortgage-backed security (MBS) in 1970, which allowed many loans to be pooled and used as collateral in a security that could be sold in the secondary market. These are loans that are insured or guaranteed by the federal government. Ginnie Mae provides a guarantee backed by the full faith and credit of the U.S. Ginnie Mae's guarantee helps to make more loans available.
Mortgage Forgiveness Debt Relief Act of 2007
Prior to the act, taxpayers whose homes were sold as a result of a foreclosure had to include the loan write-off amount (the forgiven debt) as taxable income. The act exempted homeowners from this requirement.
The Bureau of Engraving and Printing does what?
Produces paper currency in DC and Fort Worth, also known as Federal Reserve Notes. Produces security documents and materials. Assists in the production of passports, military identification, and immigration documents.
What does the Treasury do?
Promotes sustainable economic growth and stability. Ensures the country's financial security. Advises the president on economic and financial issues. Improves financial institution governance.
If the bank or thrift fails, the FDIC takes what actions?
Purchase and assumption: An open bank assumes all deposits of the failed bank. It may also purchase that bank's assets or sell them at auction. Payout: The FDIC pays the insured deposits to the consumers. It tries to recover some of these costs by selling off parts of the failed bank's estate.
Benefits of being Federal Reserve Bank member
Purchase stock in their district reserve bank equivalent to a specific percentage of their capital (in order to maintain sufficient reserves). Obey Federal Reserve rules and regulations.
Requirements to be member bank of federal reserve?
Purchase stock in their district reserve bank equivalent to a specific percentage of their capital (in order to maintain sufficient reserves). Obey Federal Reserve rules and regulations.
How Does HUD meet Goal #4: Build strong, resilient, and inclusive communities.
Reduce housing discrimination. Increase the health and safety of homes. Support the community's ability to recover from disasters by developing a more resilient "built" environment
American Recovery and Reinvestment Act year and what it did
Stimulus billl 1 - Home buyer credit of $8,000 for all homes purchased January 1, 2009 and December 1, 2009 2 - Repairing and modernizing public housing, including increasing the energy efficiency 3 - Tax credits for financing low-income housing construction 4 -Rental assistance via housing voucher program 5 - Increase $ to the Neighborhood Stabilization program and CDBG 6 - Rental assistance to prevent homelessness 7 - Mortgage assistance to wounded service members
Regulation B
The Consumer Financial Protection Bureau (CFPB) regulates the Equal Credit Opportunity Act through Regulation B, which specifies that applicants for credit be judged only on their credit worthiness (income, debts, credit history).
ECOA
The Equal Credit Opportunity Act (ECOA) of 1974 was the first in a series of fair housing lending laws enacted for the purpose of preventing lenders from discriminating against applicants based on age, race, color, religion, sex, national origin, marital status, or public assistance income. Sets forth specific requirements for notifications regarding denial of credit, disclosures (such as the borrower's right to receive a copy of the appraisal), and requires that lenders provide borrowers a copy of all completed home appraisals, whether credit is granted or denied.
Discount Window
The discount window is a central bank lending facility meant to help commercial banks manage short-term liquidity needs. Banks that are unable to borrow from other banks in the fed funds market may borrow directly from the central bank's discount window paying the federal discount rate.
2010: Home Affordable Refinance Program (HARP)
The program allowed refinancing at more favorable rates, even when the loan-to-value ratio exceeded the 80/20 rule, which normally prompts private mortgage insurance, without the requirement for PMI. This program was not available to borrowers who had missed mortgage payments.
micromarket
The real estate market in which you practice your craft as a real estate professional
mortgage backed securities
The secondary market includes investment banks, such as Fannie Mae, Freddie Mac, and Ginnie Mae, among others. Players in the secondary market then package loans and sell these packages to investors as mortgage backed securities (MSBs). These are considered to be a very safe investment, and provide additional funds to the secondary market, so that they can purchase more loans from the primary market! Do you see how that works?
What happens when the FOMC sells securities?
This means that there is now LESS money available in the economy, so less lending. SLOWS Economy.
hypothecation
This process of pledging your home to the lender as collateral for the loan is called .
Troubled Asset Relief Program (TARP)
This program gave the Treasury permission to spend as much as $700 billion on economic relief. (The Dodd-Frank Act subsequently lowered this amount to $475 billion.) It allowed Treasury to: buying assets from financial institutions (bail out); $ to keep Fannie Mae, Freddie Mac operating; mortgage relief to qualified homeowners in hard it areas
A short-term security issued by the Treasury that has a maturity term of one year or less is called a _______.
Treasury bill
treasuries
Treasury may issues securities, or debt instruments, called treasuries
An intermediate-term security issued by the Treasury that has a maturity term of between two and 10 years is called a _______.
Treasury note
The _______ requires lenders to disclose financing terms to consumers in a manner that's not misleading or deceitful.
Truth in Lending Act
What year was TILA passed
Truth in Lending Act passed in 1968
Discount Rate as it relates to federal reserve
Two definitions: First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal Reserve Bank through the discount window loan process.
Recession cycle
Unemployment increases Foreclosures increase Supply trumps demand, more properties sit vacant Public confidence falls Home prices fall
Over Supply/Hyper-Supply cycle
Unemployment low; hiring stabilizes Many buyers Lots of new construction, increasing supply Public confidence very high Home prices are overvalued
recovery cycle
Unemployment stabilizes, but remains high Foreclosures remain high High supply of homes on the market, but few buyers General public unease Home prices are undervalued
When HUD pursues actions that are designed to end homelessness and promote the health and housing stability of vulnerable populations, which of its goals is it supporting?
Use housing as a platform for improving quality of life
disintermediation
When bank deposits are less than bank withdrawals; this means the bank has less money to loan to others. In other words, there's less credit available to consumers. Less credit means less spending, causing a slowdown in the economy.
Where does FDIC money come from?
Where does the money come from?
Things at local level that affect housing market
Zoning ordinances Lending activities Political activities Employment trends Local environmental regulations Building standards
The Federal Open Market Committee (FOMC) does what? Number of members and from where>
enacts monetary policy by managing the countryʼs money supply. 12 members total 7 - all of the Board of Governors members 1 - Pres. of the Federal Reserve Bank of New York 4 - president from the other Federal Reserve Banks (which serve on a rotating basis)
2010: The Dodd-Frank Wall Street Reform and Consumer Protection Act
established the Consumer Financial Protection Bureau (CFPB), whose mission is to ensure that consumer financial products and services are fair, transparent, and competitive. The Dodd-Frank Act (which is how it's commonly known) was implemented in phases; recent changes in qualified mortgage rules are part of the act
The American Taxpayer Relief Act of 2012 (ATRA)
extended 2007 Morgage Forgiveness Dept Relief Act provision that exemption to paying taxes on loan write off in forclosures, as well as mortgage insurance premium deductions that were available to certain taxpayers. These benefits were extended through 2016.
Money
is a medium of exchange (or payment), it holds its value, relatively speaking, and it signifies a specific value or unit.
Treasury bonds
long-term maturities of 30 years
The U.S. Mint does what?
produces coins used in circulation as currency. It Produces commemorative coins and medals. Sells and stores platinum, gold, and silver bullion coins. Located in DC, Denver, Philly, San Fran, West Point, Fort Knox.
Treasury notes
short-term maturities, usually one year or less intermediate-term maturities, ranging from two to 10 years
FHLBs are regulated by
the Federal Housing Finance Authority, and the FHLB is considered a government-sponsored enterprise
Equitable Title
the borrower's interest in a mortgaged property.
The Truth in Lending Act (TILA)
was enacted as part of the Consumer Protection Act in 1968. TILA's purpose was to better educate the public about the costs of credit and financing through improved disclosures that are required of lenders and credit providers.