Examen Chapter 1-4
Under consumer lending law, which of the following advertisements would require a lender to give full disclosure of all aspects of the financing being offered?
"6.5% VA assumable loan" any financing needs full disclosure
Freddie Mac multifamily loan products - options to fund the acquisition, refinance, moderate Rehabilitation, and you construction of multifamily properties that offer affordable rents to families with low and very low incomes
* Forward commitment - provides permanent, long-term financing to build or substantially rehabilitate apartment properties with either tax-exempt Bond financing or low income housing tax credits * Bond credit enhancement - Provides credit enhancement for the tax-exempt bonds of state and local housing authorities. Allows these bond issue worse to receive or maintain an AAA credit rating so that their cost of borrowing is kept low and they can make rents on multifamily developments more affordable * Low-income housing tax credit Investments - Investments of over 6.3 billion dollars have funded over 320,000 units in over 4,300 affordable multifamily housing communities * LIHTC tax-credit moderate Rehabilitation - upfront financing to accomplish moderate Rehabilitation for properties funded entirely or in part with low income housing tax credits and tenants can remain in place during the rehab
Fannie Mae Automated Underwriting - Fannies Mae has two automated underwriting systems available for users, desktop underwriter and desktop originator
- Desktop Underwriter (DU) - helps lenders make credit decisions on conventional conforming, non-conforming and government loans. It allows mortgage applications to be processed in 15 minutes or less - Desktop Originator (DO) - helps brokers and correspondents generate more loans, gain Competitive Edge in Marketplace, boost profitability and enhance customer service and satisfaction. Credit Scores - it's part of the underwriting process and assessment of the borrower's credit risk is done. FICO score, named for Fair Isaac and Company who created the test, is a result of a scoring process that Awards or deduct points based on certain items. * how timely the borrower make payments on other loans credit cards Etc - 35% of the score * how much the borrower currently owes - 30% of score * how long the borrower has had credit - 15% of score * the number of inquiries that have been made to the borrower's credit report - 10% of score * what are the types of credit the borrower currently has - 10% of score Lenders generally request a tri merge credit report which contains information from all three credit bureaus.
Shifting Mortgage Funds - mortgage funds can be shifted to wear their most needed in a variety of
1. Lenders can sell loans to one another - example California Savings and Loan Association has a higher demand for loans than it can meet. A savings and loan Association Illinois has a surplus of deposits and a low demand. California Savings Bank sells the loans to the Illinois Savings Bank. California Bank gets the money it needs to make new loans while the Illinois Bank gets to invest its surplus funds. 2. One institution can sell a part interest in a block of loans to another Institution this is called participation. 3. A more common way of Shifting funds is through the use of mortgage-backed securities - MBS These are backed by a pool of mortgages. Governmental, quasi-governmental or private estate purchase mortgage loans from Banks, mortgage companies another Originators and then assemble them into pools. The Entity then issues Securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool. Important Players in the secondary mortgage Market are: * Ginnie Mae - government National Mortgage Association - a government agency * Fannies Mae - a former government agency that became a private Corporation in 1968 * Freddie Mac - a quasi government agency that it's part agency part private - a private organization that is regulated by the government These agencies collectively known as government-sponsored Enterprises (GSE) purchase loans or guarantee mortgage back securities issued by lenders.
Freddie Mac and predatory lending
A qualified borrower is approved for a mortgage loan, loan is referred to as A paper. Less qualified borrower perhaps with credit problems may have to take a loan at a higher rate of interest referred to as a B paper More serious credit problems might lead to a C paper or even a D paper Any anything "below A" categories are referred to as sub-prime Borrowersu There is a secondary market for less than a paper loans. they are often kept in a portfolio by originating lenders and some lenders May insist on b-type loans to start with and agreed to review the case in once 2 years. If borrower has sell a track record of regular payments and no for the credit issues are written they may upgrade loan to an a position and lower the interest rate Predatory lender is one that preys on customers who fall into the B, C or D lending categories especially those who do not speak English, poorly educated or elderly. example is a lender who convinces elderly Widow to place home equity loan on property and in order to obtain cash even though lender is aware that she will not be able to repay loan and forecloses on property
In the new Closing Disclosure, the lender must disclose details about any partial payment policy with regard to all of the following EXCEPT
A) how partial payments are to be held and when they will be applied. B) the exact percentage of the total amount due that may be accepted. C) whether the lender will accept payments that are less than the full amount due. D) whether the lender will not accept any partial payments. B
Information that cannot change between the original Loan Estimate and the final settlement statement includes all of the following EXCEPT
A) the number of discount points. B) transfer taxes. C) property insurance fees. D) lender origination fees. C. Property insurance fees
Fannie Mae Special Programs - American Dream Commitment and America's Living Communities Plan
American Dream Commitment is Fannie Mae's 10-year pledge to help 6 million families including 1.8 million minority families become first time home owners. It's goals include: - expanding access to home ownership for first-time home buyers and raise the minority homeownership rate. - making home ownership and Rental housing more available for families at risk of losing homes - expanding supply of affordable housing which includes initiatives for Workforce housing and Supportive Housing for the chronically homeless. America's Living Communities Plan - supports community's vision for neighborhood revitalization and development. Works closely with lenders developers government agencies and nonprofit organization to help them achieve affordable housing goals and invest in communities
New components of the Loan Estimate form include all of the following
C) the total payment amount (principal, interest, mortgage insurance, and loan costs) over five years. D) a calculation of the cash needed at closing. A) a calculation of the total interest percentage over the life of the loan.
closing disclousre category
Changes to the APR greater than 1/8 of a percent (or ¼ of a percent for loans with irregular payments or periods) Changes to the loan product Adding a prepayment penalty
Freddie Mac and predatory lending - Don't borrow trouble is an anti predatory lending campaign
Combines extensive public education with counseling services. Since 2000, Freddie Mac is expanded the program by using the following tools 1. seed funding 2. Bilingual media tool kit 3. Project coordination 4. Market consultant services 5. On-site training
Since July 21, 2011, the Real Estate Settlement Procedures Act (RESPA) has been administered by the
Consumer Financial Protection Bureau
Non traditional scoring programs - there are some borrowers who have been labeled as unscorable because they paid mostly in cash resulting in a very thin credit file. Many lenders are using non traditional methods of credit scoring that use payment history of items such as rent and utilities as a way of gauging the ability to pay their debts
Description of some of these tools - * Expansion Score - developed by FICO the expansion score analyzes data regarding the consumer and generates a three-digit score based on criteria from non-traditional sources, utility bill payments Etc does not consider rental payments to be a sufficient gauge of a person's ability to pay his or her debts. * Anthem - The Anthem score follows traditional scoring models but incorporates data from rental and Utility payments to non-deductible insurance payments and child care expenses. * Debt Report Suite - Developed buy efunds, debit report Suite integrates the efunds debit Bureau data base with ChexSystems reports to provide a comprehensive history of persons payment spending and lending habits without touching a credit card * PRBC Approach - The payment reporting builds credit (PRBC) reporting agency, uses rental and utility payments to create a report card that grades users on a scale from a to d.
Fannie Mae Mortgage Solutions
Each section has various programs to choose from Home Construction & Renovation * Homestyle renovation mortgage allows a fixed rate mortgage with term of 15 or 30 years or 30 year adjustable rate mortgage that has annual Ridge estaments after 3rd, 5th, or 7th year and purchaser combined home purchase or refinance with home improvements No/Low Down Payment * expanded approval with timely payment Rewards (EA/TPR) - design for borrowers was with less than perfect credit * flexible 100 - allows both fixed and ARM loans, using the automated underwriting program that is not restricted based on the borrower's income. * flexible 97 Dash allows both fixed and ARM loans, uses the automated underwriting program and is not restricted on borrower's income * my Community Mortgage - a flexible mortgage product for low and moderate-income Borrowers * pledged asset mortgage - allows the buyer to borrow up to 80% of the sales price or appraised value, of a home where there's a pledge of stable financial asset Reverse Mortgages for Seniors * HUD'S home equity conversion mortgage (HECM) - FHA reverse mortgage * Home Keeper - reverse mortgage for those 62 and over based on the home's Equity three payment plans available * Home Keeper for home purchase - no borrower income limits and no credit requirements mean the bar where we qualify for a higher price home. Low loan qualifications based on the borrowers age and the value of the home the borrower wants to purchase.
Fannie Mae MBS - pools loans that generally conform to its standards and converts them into single class mortgage back Securities known as Fannie Mae MBS, then guarantee as to timely payment of principal and interest. - mortgages that back of Fannie Mae MBS are held in trust on behalf of Fannie Mae MBS investors and are not Fannie Mae assets. As a Fannie Mae MBS investor the certificate holder receives a pro rata share of the scheduled principal and interest from mortgagors on Loans backing the security.
Fannie Mae guidelines - 1. loan limits - loan limits are set and are linked to Federal Housing Finance board's October single-family price survey. Loan limits are adjusted each year in accordance with results of this housing survey 2. Debt to income ratio - borrowers monthly debt payments cannot exceed 28% of monthly income 3. PMI - any loan made that has loan-to-value ratio of more than 80% must carry PMI 4. Gifts - funds from gifts may be used as all or part of 20% down payment 5. Seller downpayment - if borrower has a 5% down payment, seller can contribute up to 3% of closing costs. Seller contribution goes up to 6% if down payment is 10%.
Fannie Mae Mortgage Solutions
Fannie Mae has developed a variety of mortgage products to provide more affordable home financing opportunities. Adjustable rate * interest rates fixed for 1, 3, 5, 7 or 10 years before becoming * interest rate caps for adjustable. And life of the loan. * convertible loans, adjustable to fixed rate, available Balloon * fixed rate with loan term of 7 years * amortized over 30 years * at end of year 7, payoff and lump sum or refinance Fixed Rate - choose from these programs * 15 year - offers a lower interest rate. Builds up Equity faster * 20 year - pay less interest over the life of the loan, compared to 30 year mortgage. * 30 year - most popular mortgage. Usually requires a down payment of only three to 5% * 40-year - lower mortgage payment because of longer amortization period. Easier to qualify for * biweekly mortgage - mortgage payment every 14 days, takes about 22 years to pay off a 30 year mortgage. * expanded approval with timely payment Rewards (EA/TPR) - design for borrowers with less-than-perfect credit * interest-only mortgage - lower payments for the first few years of the mortgage term * my Community Mortgage - flexible mortgage product for low and moderate-income Borrowers. * Native American housing loans - supports landing on fee simple, federally restricted trust lands and tribally restricted fee simple Lance. * pledged asset mortgage - allows the buyer to borrow up to 100% of the sales price or appraised value of less of a home when there is a pledge of a stable financial asset * rural housing loans - include additional flexibilities for Rural communities: - higher income limits in rural rural areas and new rural appraisal guidelines * simultaneous second mortgage - originates and closes a second loan in conjunction with the First Mortgage
Farmer Mac - Federal agricultural mortgage Corporation created by Congress in 1988 established secondary market for agricultural real estate and rural housing mortgage loans, to increase availability of long-term credit at steady rates to American farmers, ranchers and Rural homeowners
Farmer Mac provides liquidity and lending capacity to agricultural mortgage lenders in these ways * purchases newly originated and pre-existing eligible mortgage loans directly from lenders and pre-existing eligible mortgage loans from lenders and other third parties in negotiated transactions * issues long-term standby purchase commitments for newly originated in pre-existing eligible mortgage loans * exchanges newly-issued agricultural mortgage-backed Securities guaranteed by farmer Mac for newly originated and pre-existing eligible mortgage loans that back the Securities and swap transactions * purchases and guarantees mortgage-backed bonds secured by eligible mortgage loans, which are referred to as agvantage bonds Farmer Mac has two programs * Farmer Mac 1 - I want to make purchases or commits to purchase eligible loans. To be eligible for Farmer Mac one program, loans must meet farmer Max underwriting, appraisal, documentation and other specified standards * Farmer Mac 2 - purchases the guaranteed portions of loans guaranteed by the US Department of Agriculture
More Fannie Mae Sets limits for loans, and any loan that falls Within These limits and meets other Fannie Mae guidelines is called a conforming loan.
First Mortgages * one family home 417,000 * two-family home 533,850 * three-family home 645,300 * 4 family home 801,950 one to four family mortgages in Alaska, Hawaii, Guam and US Virgin Islands are 50% higher than the limits for the rest of the country Second mortgages * 208,500 * In Alaska, Hawaii, Guam and US Virgin Islands, 312,750 Loans that don't meet the Fannie Mae guidelines including the loan limits above are called non conforming loans. even though Fannie Mae sets loans loan limits, a purchaser May pay any price for a property and make up the difference in cash. any loan that exceeds the conforming loan limits is called a jumbo loan. Jumbo loans have a higher rate of interest and they require a larger down payment
Freddie Mac Community initiatives - communities in our nation faced trust, Language and Cultural barriers that prevents community members from seeking Tona home. to remove these barriers and expand home ownership opportunities Freddie Mac and other organization have developed initiatives that can help lenders and community-based organization read consumers in their daily environments
Get the facts! developed to dismiss common myths about buying and owning a home in America. Workshop available in English or Spanish, community-based organizations present 1 hour Workshop as preface to homebuyer education Credit smart and credit smart Espanol credit and financial education program, insight into how lenders assess credit histories, educate consumers about long-term credit and money management and explains role of credit in purchasing and maintaining the home. The E Bus self contained traveling mortgage information center comes with computer workstations and internet connectivity. On the E dash bus, consumers talk with mortgage experts to get tailored evaluation of their finances and qualifications for for mortgage. They also can get help filling out a mortgage application service available to low and moderate-income consumers Spanish language mortgage documents to serve the needs of the Hispanic Community, Freddie Mac and Fannie Mae jointly offer Spanish translations of their documents and the provided for Security Instruments and promissory notes and are available in all 50 states free and downloadable
Ginnie Mae (GNMA) - Mortgage backed securities - two types of mortgage-backed Securities MBS programs - Ginnie Mae 1 & MBS
Ginnie Mae 1 & MBS - are based on single family pools and are Ginnie Mae's most heavily traded MBS product. A pool must consist of mortgages within one of these categories. * single-family level payment mortgages * single-family buy down mortgages * single-family graduated payment * single-family growing Equity mortgages * manufactured home * project construction loans including multi-family residential, hospital, nursing home, and group practice facility loans * project permanent loans, including multifamily residential hospital nursing home in group practice facility loans
Ginnie Mae (GNMA) - Mortgage backed securities - two types of mortgage-backed Securities MBS programs - Ginnie Mae 2 & MBS
Ginnie Mae 2 & MBS - are modified pass-through mortgage-backed securities. an issuer May participate either by issuing custom, single issue were pools or through participation in the insurance of multiple issuer pools. A custom pool has a single issue or that originates and administers the entire pool. A multi issuer pool typically combines loans with similar characteristics. Loans with different interest rates may be included in the same pool or loan package except in the manufactured home loan program where different rules applicable Ginnie Mae 2 & MBS have a central pain and transfer agent that collects payments from all his chores and makes one Consolidated payment on the 20th of each month to each security holder. Any one pool must consist of only one of the following mortgage types: * single-family level payment mortgages, FHA, VA or rural housing service loans * single family graduated payment mortgages, FHA or VA * single-family growing Equity mortgages, FHA or VA * manufactured home loans, FHA or VA * single-family adjustable rate mortgages, FHA or VA the minimum pool size is 1 million / single family pools, 350,000 for manufactured home pools and 500,000 for all other pool types
Freddie Mac - mortgage-backed security for conventional loans 1971
Ginnie Mae and Fannie Mae created to deal primarily with the purchase of FHA and VA loans Freddie Mac buys conventional loans from Savings Banks, commercial Banks and mortgage companies and assembles these loans into a pool of mortgages and issues a security backed by the mortgages. The security is called a participating certificate or guaranteed mortgage certificate. Freddie Mac guidelines for lenders * loan limits - loan limits link to the federal Housing Finance board's October single-family price survey. Loan limits are adjusted each year in accordance with the results of this housing survey and apply 4 to 1 residences. * PMI - any loan made that has a loan to value ratio of more than 80% must carry PMI * gifts - funds from gifts may be used as all are part of the 20% down payment * Southern downpayment Dash if a borrower has a 5% down payment, seller can contribute up to 3% of closing costs. So contribution goes up to 6% of down payment is 10%.
Ginnie Mae (GNMA) - is a division within the Department of Housing and Urban Development, HUD. it's basic Mission when established in 1968, was to create an operator mortgage-backed security program for HUD and VA mortgages
Ginnie Mae developed the first mortgage-backed Security in 1970. The security was backed by pull of FHA and VA mortgages. Called a pass through security because monthly principal and interest payments are collected from the borrower and passed through to the investors. Ginnie Mae doesn't purchase mortgages but guarantees that the monthly payment will be made every month. In return for this guarantee Ginnie Mae collects a small fee from the lender every month. Mortgage backed Securities are pools of mortgages that are used as collateral for issuing Securities called pass through certificates. There are three types of mortgage-backed securities: * Straight pass through - the security holder receive the actual principal and interest payments as they are received from the mortgages in the pool. * Modified pass-through - the security holder receives the interest portion of the payment, whether or not has been collected and the principal payment when it is collected. * Fully modified pass through - the security holder receive payment of both principal and interest, whether or not it has been collected.
Specific tolerance levels for changes between the charges in the Closing Disclosure form and the Loan Estimate form were established when the
Good Faith Estimate was revised, effective January 2010.
The new Loan Estimate form replaces the
Good faith estimate and TIL
more Freddie Mac loan products - home possible mortgages - flexible underwriting, low to no down payments, expanded loan-to-value ratios and other special underwriting features to underserved qualified Borrowers
Home possible 100 * requires no down * available as fixed or arm * available one unit primary residence * not available for manufactured home * eligible as an A- mortgage Home possible 97 * available for one to four unit primary residences * available for manufactured home purchases * requires 3% down payment on 1-2 unit homes * requires 5% down payment on 3-4 unit residences and manufactured * available as fixed or arm * requires two months reserve on 2 to 4 unit homes * Reserve cannot come from gift funds Home possible neighborhood Solutions mortgage * borrowers who are teachers, School administrators, Law Enforcement Officers, firefighters healthcare workers are active or retired members of us armed forces or Reserve * home possible neighborhood Solutions 100 and home possible solutions 97 are the same as home possible 100 and home possible 97 mortgages except for these differences * governed by area median income limits in most cases * debt to income ratio of 45% * 1 month reserves required, can be a gift
The Farm Credit System
In 1916 to provide American agriculture with a source of sound, dependable credit at competitive rates of interest.
Fannie Mae Special Programs -Neighborhood Champions
Neighborhood Champions - in 2004 Bank of American Fannie Mae teamed up to make home buying easier for teachers, police officers, firefighters, nurses, Hospital workers and other community service professionals. Fannie Mae committed to buy all neighborhood Champions mortgages originated by the Bank of America. Neighborhood Champions mortgage is Broad and standard underwriting rules on credit, income, assets, and down payments. Features include : - highly flexible credit standards allow applicants with little or no credit history or below-par credit scores to be under written on the basis of 12 monthly rent payments plus telephone, cable TV or Utility payments. - qualifying income can include undocumented cash from sideline employment or Moonlighting. - down payment on $333,700 maximum mortgage can go as low as 0 with just $500 necessary from the applicant for part of the closing costs - the program allows Financial gifts from relatives, friends or organizations. - applicants can purchase either one or two unit properties, Condominiums and cooperatives in select areas. The loans carry a 30-year fixed rate on a 7-1 hybrid AR M terms.
tax increment financing
Projects of community redevelopment agencies are funded in large part with tax increment financing. This technique allocates the increased property tax revenues derived from redevelopment to pay the debts incurred in improving the area.
A GFE of all closing costs must be given to a borrower within three days of application, according to which congressional act?
RESPA
Which of the following charges is limited to no more than a 10% increase between the amount given in the Loan Estimate form from the Closing Disclosure form?
Recording fee paid by the buyer
The disclosure of all elements of financing in advertising is required under
Regulation Z of TILA
Housing Choice Voucher Program ( HUD)
SECTION 8: is the federal government's major program for assisting very low-income families, the elderly, and the disabled in obtaining safe and affordable housing.
Good Faith Estimate (GFE)
This GFE gives you an estimate of your settlement charges and loan terms if you are approved for this loan.
Housing and Economic Recovery Act of 2008 (HERA)
This program was designed to stabilize communities suffering from large numbers of abandoned homes and foreclosures by providing funds to all states and selected local governments to acquire and redevelop those properties.
APA has four basic purposes ( Administrative procedures act)
To require agencies to keep the public currently informed of their organization, procedures and rules; To provide for public participation in the rulemaking process; To prescribe uniform standards for the conduct of formal rulemaking and proceedings which are required by statute to be made on the record after opportunity for an agency hearing; and To restate the law of judicial review.
Real Estate Mortgage Investment conduit - the tax reform Act of 1986 created a special tax vehicle called a real estate Mortgage Investment conduit (REMIC) for entities that issue multiple classes in investor interest that are backed by mortgage
a Remic is an investment-grade mortgage bond that separates mortgage pulls into different maturity and risk classes REMICs hold commercial and residential mortgages and trust and issued Securities representing an undivided interest in these mortgages. A remic can be a corporation, trust, Association or partnership. the remic assembles mortgages into pools and issues pass through certificates, multi-class bonds or other Securities to investors in the secondary mortgage Market. Mortgage-backed securities issued through a Remick can the other debts that were financed by the issuer or a sale of assets remic is a conduit for tax purposes, meaning the income of the rimac is passed through to the investor who report the income on their individual tax returns. The tax reform act eliminated the double taxation of income earned at the corporate level by an issuer and dividends paid to the Securities holders. A remic itself is exempt from federal taxes although income earned by investors is fully taxable. As a tax-exempt entity, a remic may invest only in qualified mortgages and permitted Investments including single-family or multi-family mortgages, commercial mortgages, second mortgages, mortgage participation and federal agency pass-through securities. Credit card receivables, leases and auto loans are not eligible Investments. A remic can issue mortgage Securities in a variety of forms. Freddie Mac and Fannie Mae are among the major issuers of remic along with privately-operated mortgage conduit sold by Mortgage Bankers, mortgage insurance companies and savings institutions
Home Mortgage Disclosure Act (HMDA)
all mortgage originators are required to report information relating to income level, racial characteristics, and gender of mortgage applicants. This includes loans originated as well as applications rejected.
more Freddie Mac loan products - fixed rate mortgages
alt 97 mortgage * allows for a loan to value ratio between 90 and 97% * can you use alternate sources of funds not permitted for other mortgages Freddie Mac purchases * no minimum down payment from borrowers funds * applies to the purchase or refinance of 1 unit primary residences only guaranteed (section 502) rural housing (GRH) mortgages * available to borrowers in rural areas * property must be meet designation of rural defined by rural housing service RHS * applies to the purchase of 1 unit primary residence only. * not available for Farms HUD - guaranteed section 184 Native American mortgages * guaranteed by the US Department of Housing and Urban Development HUD * mortgage must contain certain documentation of land status and show what court system has jurisdiction over the land * applies to purchase of a 1 to 4 unit primary residence, owner-occupancy is not required for travel a designated housing entities, Indian housing authorities or an Indian tribe
money
anything generally accepted as a means of paying for goods, services and paying off debts
more Freddie Mac loan products
balloon / reset mortgages - 5 or 7 year terms. Mortgage is amortized over 15, 20 or 30 years but payments are fixed for First 5 or 7 years, balloon payment at the end of 5th or 7th year. borrower has option to reset interest rate and if reset conditions are met the remaining term of loan in the middle of the balloon payment. adjustable rate mortgages - ARM - have set interest rate for specific period of time then the rate is adjusted. Example, 1-year arm there is a first-time interest change date approximately 12 months for the first payment date and interest change date every 12 months there after Freddie Mac offers 6 month, one year, 3 year, and five year ARMs. A- mortgage for less than Stellar credit histories * fixed rate mortgage or arm to either purchase or refinance a 1-4 Family Residence, second home or investment property
medium of exchange
basic function of money
closing charges that are 10%
charges for third-party services for which the consumer is allowed to shop, and recording fees imposed on the consumer.
full-bodied money
coins that contain the same value in metal as their face value
token coins
coins with face values higher than the value of their metal content
RESPA covers the sale of residential properties and the acquisition of
commercial properties
M1 money supply
consists of currency, travelers' checks, demand deposits, and other checkable deposits at depository institutions
money market securities
debt instruments or securities with maturities of one year or less
entitlement communities
defined as metropolitan cities with populations of at least 50,000 and urban counties with populations of at least 200,000. States distribute to nonentitlement communities.
Real Estate Settlement Procedures Act (RESPA)
designed to protect the participants in a real estate transaction by providing closing cost information so they better understand the settlement procedures.
Community Reinvestment Act (CRA)
ensures that financial institutions pursue their responsibilities to meet both deposit and credit needs of members of the communities in which they are chartered.
Fannie Mae - shareholder owned company, does not lend money directly to home buyers stock is actively traded on the stock exchange and other exchanges. operates under a congressional Charter channeling its efforts into increasing the availability and affordability of homeownership for low, moderate, and middle-income Americans, Fannie Mae receives no Government funding or backing.
established in 1938 in order to increase flow mortgage money by creating secondary Market to purchase Federal housing Administration FHA insured mortgages. after World War II Fannie Mae was expanded to include VA guaranteed mortgage loans. at that time purchased FHA and VA loans at par - full face value Charter Act of 1954 recharter Fannie Mae by removing government backing for money borrowed to fund Fannie Mae secondary market operations and allowed Fannie Mae to finance to private capital. Fannie Mae purchases, and sells mortgages in addition to purchasing new loans and purchases could be made at whatever discounted price would give reasonable rate of return. can now establish own criteria for accepting a mortgage submitted to it for sale but does not have to purchase every submitted mortgage. Fannie Mae purchases Mortgages - executes servicing agreement allowing loan originator to be collection agent and receive a fee up to 1/4 to 3/8 of 1% of the loan amount. Fannie Mae sells Mortgages - does so in open market transactions. 1968 Charter Act - Fannie Mae became a fully private company operating with private capital on a self-sustaining basis. subject 2 Federal corporate income tax but exempt from state income taxes. role was expanded by mortgages Beyond traditional government loan limits, purchase mortgage at premium in excess of par and given authority to issue mortgage-backed securities. The 1968 act also provided for continuing HUD over site and to ensure it's adherence to the public purpose. Emergency home finance Act of 1970 - gave Fannie Mae authority to deal in conventional mortgages, new law also requires the HUD secretary to provide prior approval of purchases of conventional mortgages. Secondary mortgage Market enhancement Act of 1984 - SMMEA - clarify to modified several of Hud's regulatory powers over Fannie Mae. Required HUD to respond within 45 days to any request for new program approval made by Fannie Mae under the 1968 Charter Act and authorized Fannie Mae to purchase and deal in subordinate lien mortgages.
barter
exchange of goods or services without using money
HUD is
federal agency responsible for national policy and programs that address housing needs. The Federal Housing Finance Agency was established under the Federal Housing Reform Act of 2007 as an independent agency to regulate the government-sponsored entities of Fannie Mae, Freddie Mac, and the Federal Home Bank.
The new Closing Disclosure form contains elements of the old HUD-1 Settlement Statement and the
final Truth-in-Lending Disclosure Statement.
Freddie Mac loan products
fixed rate mortgages - Freddie Mac offers terms of 15, 20, 30 and 40 years - Borrowers can get these loans to purchase or refinance a 1-4 Family Residence single family first or second home or investment property other fixed rate mortgage products: * Freddie Mac 100 - allows 97 to 100% loan to value ratio on single-family primary residence * borrower can get a loan for purchase or refinance * requires 35% mortgage insurance * requires 3% or $500 in closing costs from borrowers own funds * requires 2 months of Reserves streamline purchases - offering 400 * Borrowers pay nominal fee or higher interest rates for a loan with less documentation and faster * credit score of 740 or better streamline purchase - offering 401 * borrowers get a loan with less documentation and faster processing without paying a fee * credit score of at least 680 * requires verification of employment for submission of tax returns * no more than a 50% debt to income ratio affordable Merit rate mortgages * design for borrowers with weak credit or past credit challenges * borrowers have a year period in which to make 24 consecutive on time mortgage payments in order to qualify for one-time 1% interest rate reduction * applies to a 1/2 for unit primary residence only includes Condominiums, PUD and manufactured homes * purchase only - no refinance
surplus economic unit
generates more money than it spends, and thus, it as excess money to save or invest
A developer is planning a new subdivision of building lots. In which case will the developer be subject to the Interstate Land Sales Full Disclosure Act?
if it is marketed out of state
real assets
include the direct ownership of land, buildings or homes, equipment, inventories, durable goods and precious metals
more Freddie Mac loan products
initial interest * interest-only payments for a specified period of time beginning with the first monthly payment after the note date * principal and interest payments on a fully amortized basis for the rest of the mortgage term. * these loans can be fixed rate, 30 year set up as 10 / 20 ( interest only for 10 years) or 15/15 ( interest-only for 15 years) * or mortgage could set up as an arm * these loans can be for one unit primary residence, manufactured homes and co-ops are not eligible Alternative stated income mortgage * allows the use of stated self-employment income for self-employed borrowers must provide verification of two years self-employment in same business * for the purchase of one unit primary residence * loan can be fixed rate, arm or balloon / reset loan * the borrower must provide the greater of $25,000 or 25% down payment from their own funds. Funds may come from cash or other equity, cannot come from gifts, grants or Sweat Equity..
savings-investment process
involves the direct or indirect transfer of individual savings to business firms in exchange for their debt or stock securities
Community Development Block Grant (CDBG) program
is one of HUD's longest continuously running programs. Since its inception in 1974, the CDBG program has helped communities with economic development, job opportunities, and housing rehabilitation. funds have been used to construct and improve public facilities such as water, sewer, streets, and neighborhood centers; to purchase real property; and to assist private businesses.
fiat money
legal tender proclaimed to be money by law
RESPA requires
lenders to provide a good-faith estimate, HUD-1 settlement cost booklet, and mortgage servicing disclosure statement.
Primary mortgage Market
lenders who originate loans that is they lend money directly to borrowers and they make up the primary mortgage Market.
Secondary mortgage Market
loans originated in the primary Market Market can be bought, sold or traded in the secondary mortgage Market. Primary lender sell their notes to generate more money to make more loans. secondary mortgage Market consists of holding Warehouse agencies. these agencies purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors. Investors can purchase fractional interest in these packages or mortgage pools through the services of local stock brokers. discounts are used frequently in the secondary Market. Entities that buy and sell mortgages negotiate on the basis of yields. Discounts are used to adjust yields, so the buyers and sellers of the mortgage notes can reach agreement and make the sales.
bimetallic standard
monetary standard based on two metals, usually silver and gold
credit money
money backed by the creditworthiness of the issuer
store of value
money held for some period of time before it is spent
financial assets
money, debt instruments, equity securities and other financial contracts that are backed by real assets and the earning abilities of issuers
property report
must be delivered to the buyer before the purchase of the property. The seller must have a signed receipt from the buyer indicating receipt of the property report. If a property report is received within 48 hours before signing, the buyers have the right to change their minds within seven days, cancel their contract, and receive a return of any deposits made. However, if the report is not received within the allotted time, the buyers may legally rescind their contract at any time.
The six triggers in an application are
name, income, and Social Security number; the property address; an estimate of value of the property; and the mortgage loan amount sought.
Freddie Mac has an electronic underwriting system called loan prospector and some of those features are:
offers lenders three easy to learn documentation levels - loan prospector assesses the three C's - credit reputation, capacity and collateral lenders can access credit reports from various reporting agencies CBC innovis, Equifax, FIS Credit Services, first American credco, Kroll factual data, land America and land safe Fred's feedback to lenders concerning minimal collateral assessment that's required for the loan to be eligible for sale to Freddie Mac.
zero tolerence category
origination charges paid to the lender or the mortgage broker; charges for third-party services paid to an unaffiliated third party for which the consumer is not permitted to shop; charges for third-party services paid to an affiliate of the lender or mortgage broker; and transfer taxes
representative full-bodied money
paper money that is backed by an amount of precious metal equal in value to the face amount of the paper money
Interstate Land Sales Full Disclosure Act (ILSFDA)
passed by Congress in 1968, established the informational criteria for marketing residential land to potential buyers. Designed to reduce fraud in the sales of land by developers, the law requires that anyone selling or leasing 25 or more lots of unimproved land as part of a common plan in interstate commerce must comply with the act's provisions.
Charges that are not subject to either the zero or 10% tolerance include
prepaid interest; property insurance premiums; amounts placed into escrow, impound, reserve, or similar accounts; charges paid to third-party service providers selected by the consumer; and charges paid for third-party services not required by the lender.
The primary purpose of ECOA is to
prevent discrimination by lenders
standard of value
prices and contracts for deferred payments are expressed in terms of the monetary unit
Equal Credit Opportunity Act (ECOA)
prohibits lenders from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or dependency on public assistance.
bankers acceptance
promise of future payment issued by a firm a guaranteed by a bank
debit cards
provide the immediate direct transfer of deposit accounts
monetary system
responsible for carrying out the financial functions of creating and transferring money
ECOA prohibits discrimination by lenders on the basis of all of the following EXCEPT
sexual orientation
repurchase agreement
short term debt security sold by a business firm or financial institution to another business or institution where the seller agrees to repurchase the security at a specified price and date
federal funds
short term loans, usually with maturities of one day to one week made between depository institutions
negotiable certificate of deposit
short-term debt instrument issued by depository institutions to individual or institutional depositors
treasury bill
short-term dot obligation issued by the US federal government to meet its short-term borrowing needs when imbalances exist between tax revenues and government expenditures
commercial paper
short-term unsecured promissory note issued by a high credit-quality corporation
deficit economic unit
spends more money than it brings in and must balance its money receipts with money expenditures by obtaining money from surplus units
The type of report a developer must provide to HUD in compliance with marketing residential land to potential buyers under the Interstate Land Sales Full Disclosure Act is called a(n)
statement of record
individual net worth
sum of an individuals money, real assets and financial assets or claims against others less the individuals debt obligations
HUD's primary activities include
supervising the Federal Housing Administration (FHA), directing Ginnie Mae, enforcing the Fair Housing Act, managing the Housing Choice Voucher Program (formerly Section 8 Housing), managing the Indian Housing Act, and supervising public housing projects.
statement of record
that includes explanations and descriptions of existing and proposed encumbrances, improvements, utilities, schools, recreation areas, roads, and all services to be provided for the residents' use.
liquidity
the ease with which an asset can be exchanged for money or other assets
The trigger terms for disclosing all elements of financing in advertising include
the rate of interest, number of payments, term of the loan, amount of monthly payment, down payment amount, and percentage of down payment.
Which of the following charges for third-party services is subject to the zero tolerance category?
those paid to an affiliate of the lender
automatic transfer service accounts
used to make direct deposits to, and payments from, checkable deposit accounts
Neighborhood Stabilization Program (NSP)
was established to help stabilize communities that have suffered from foreclosed and abandoned homes. NSP funds authorized under the Housing and Economic Recovery Act (HERA) (called NSP1 funds) provided grants to states and selected local governments to purchase and redevelop such properties.
