Part 3 Unit 3 The secondary Mortgage Market

Ginnie Mae developed the first mortgage-backed security that was backed by a pool of

FHA and VA mortgages.

Which loan enterprise is considered a private corporation with a public purpose?

Fannie Mae

Briefly explain the two types of mortgage-backed securities programs under Ginnie Mae.

Ginnie Mae I - based on single-family pools and generally have the same or similar maturities and interest rate on the mortgages. Ginnie Mae II - modified pass-through mortgage-backed securities wherein an issuer may participate by issuing custom single-issuer pools or multiple-issuer pools.

What does Ginnie Mae now handle that used to be managed by Fannie Mae?

Ginnie Mae handles the housing assistance and loan management functions that were originally managed by Fannie Mae.

Ginnie Mae is a division within the Department of ___.

Housing and Urban Development (HUD).

Name the five items that are included in the Fannie Mae guidelines to which lenders must conform.

Loan limits, debt-to-income ratio, private mortgage insurance, gifts, seller down payment

Name the four items included in Freddie Mac's guidelines for lenders.

Loan limits, private mortgage insurance, gifts, seller down payments

What is the purpose of the secondary mortgage market?

The purpose of the secondary mortgage market is to provide liquidity (funds) for the primary market (institutional lenders).

Fannie Mae

a government sponsored enterprise (GSE) that was established in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government insured loans

With the Ginnie Mae II MBS, any one pool would not include

a single-family pool size of $500,000.

Fannie Mae sets loan limits that are adjusted

annually

Ginnie Mae I MBS

based on single family pools, most heavily traded, payments made on the 15th,

Any lender wanting to sell loans to Fannie Mae must have only conventional loans to sell. have already tried to sell to Freddie Mac. follow conventional loan requirements. conform to Fannie Mae guidelines.

conform to Fannie Mae guidelines.

A Ginnie Mae II MBS ____________ has a single issuer that originates and administers the entire pool.

custom pool

Warehousing

describes a line of credit extended by a commercial bank to a mortgage banker. The mortgage banker deposits (warehouses) loans in the commercial bank, and then borrows against this collateral to fund new loans. The loans serving as security are "warehoused" at the bank and later sold to secondary market investors.

How does Ginnie Mae work?

doesn't purchase mortgages; it guarantees that the monthly payments will be made every month. In exchange for the guarantee, lender pays a fee

Fannie Mae does not

lend money directly to home buyers.

Freddie Mac has guidelines to which _________ must conform.

lenders

A Ginnie Mae I MBS pool would consist of

manufactured home loans. single family buydown mortgages. project construction loans.

A seasoned mortgage

one that has been in existence for some time and has a good record of repayment by the mortgagor.

Freddie Mac introduced the first

security backed by conventional loans.

What is Ginnie Mae's purpose?

to create and operate a mortgage-backed security program for the Federal Housing Administration and Veterans Administration mortgages.

Mortgage backed security for Conventional loans

Freddie Mac

Which participant in the secondary mortgage market is dedicated to putting homeownership within reach for minority populations?

Freddie Mac

Which participant in the secondary mortgage market was created to establish a reliable secondary market for the sale of conventional mortgages? Fannie Mae HUD Freddie Mac Ginnie Mae

Freddie Mac

From whom does Freddie Mac purchase loans, what kind of loans does it purchase, and what does it do with the loans after purchasing them?

Freddie Mac purchases conventional loans from savings banks, commercial banks, and mortgage companies, assembles the loans into a pool of mortgages, and issues a Participating Certificate or Guaranteed Mortgage Certificate security backed by the mortgages.

Within the Fannie Mae guidelines, a borrower's monthly debt-to-income ration cannot exceed

28%

With Freddie Mac, if the borrower has a ___% down payment, a seller can contribute up to ____% of the closing costs.

5, 3

Fannie Mae buys FHA, VA, and conventional loans and is the largest purchaser in the secondary market. True or False

True

What happens when Fannie Mae purchases a mortgage?

When Fannie Mae purchases mortgages, it executes a servicing agreement which allows the loan originator to be the collection agent and receive a fee. The loan originator can receive a potentially substantial income from these fees, which range from one-fourth to three-eighths of one percent of the loan amount.