1.REF/disintermedian/hypothecation/primary market/ expansion/silent generation/taxplay relief act/homeowner affordability/dodd-frank/ HARP/US MINT/BOG/FOMC/Prime rate/FDIC/Regulation Z

home insurance

$50-$100

Primary Market (local)

1.Bank 2.Credit union

influence supply

1.Construction of new properties 2.Renovations or conversions of property 3.Low construction costs

FDIC Funding

1.Earnings from U.S. Treasury securities 2.Premiums from banks and thrifts

doesn't influence supply

1.High employment levels 2.Availability of loans 3. Low interest rates

Pre-Crash Characteristics

1.Low interest rates 2.High property values 3.Loose credit qualifications

money

1.Store of value 2.Unit of account 3.Medium of exchange

electricity

100~150

real estate tax

100~200

FEDERAL RESERVE BANKS

12 Federal Reserve Banks has a nine-member board of directors. The banks are responsible to this board, which oversees the bankʼs activities and management. Members of the board of directors serve on advisory councils and advise the Board of Governors on current topics. Members of the board of directors also serve on the Federal Open Market Committee.

How long does his right to rescind loan?

3 days from -loan application -disclosure statement

The Federal Home Loan Bank System(FHLB)

A lender's lender a collective of 11 regional government-sponsored banks that provide low-cost funding to financial institutions (not consumers), enabling them to provide home mortgage loans, and small business, rural, agricultural, and economic development lending. the nation's largest combined source of home mortgage and community credit. Member banks own stock in their regional FHLB, 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. Without the FHLB system, fewer funds would be available to make real estate loans, and the funding that's available would be more expensive.

Member Banks

A nationally chartered bank must be a Federal Reserve member bank. many state-chartered bank are Federal Reserve member bank. Member banks must purchase stock in their district bank. Member banks can borrow money from their district bank.

reserve requirements.

Amounts that member banks keep on deposit with their district Federal Reserve bank ensure that banks will have funds available when they need them. 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.

Echo Boomers (aka Generation Y) 1980s - 1990s Some crossover with Millennials, but many are children of Baby Boomers

Bought a small condo in the city after some searching on a mobile app. This group tends to delay typical adulthood rites, such as marriage, career, family. Fully 97% of this group financed the home purchase, with 56% blaming student loan debt for their inability to save. Prefer city life, smaller condo units, high-tech-enabled units; likely to look online first before making a purchasing decision; more than half used a mobile device, with 26% finding the home they eventually purchased via a mobile device.

The U.S. Treasury

Bureau of Engraving & Printing (BEP): Designs and produces currency Bureau of the Fiscal Service: Provides accounting, financing, collection, payment, and shared services Community Development Financial Institution (CDFI): Makes credit and financial services available to distressed communities Financial Crimes Enforcement Network (FinCEN): Supports investigations of financial crimes Inspector General: Performs independent audits, investigations, and reviews to support the U.S. Treasury Internal Revenue Service (IRS): Determines, assesses, and collects taxes Office of the Comptroller of the Currency (OCC): Charters, regulates, and supervises banks U.S. Mint: Designs and produces coins

leverage

By putting down just a small amount (say 10%), the investor in real estate controls a 100% investment.

Millennials (aka Generation Z) 1990s - 2001 (though some put this group between 1982 and 2002, and others lump Millennials with Generation Y)

Children of Generation X, this group saw the Great Recession, 9/11, and numerous industrial and governmental scandals in their formative years and can appear to lack direction. Many will likely get assistance from their parents to finance their housing purchases when/if they decide to purchase.

EXPANSION

Companies are hiring, lowering unemployment More buyers, heavy demand Decreasing supply Public confidence increases Home prices rise

fed doesn't do

Decreases employment rates

Federal Reserve System (aka "the Fed")

Decreases employment rates nation's money manager and the U.S. central bank comprised of 12 regional banks and multiple member banks). supervision over bank activities and facilitation of the selling or discounting of commercial paper designed to influence the supply of money and the cost to borrow money toward a three-part goal of maximum employment, stable prices, and moderate long-term interest rate Long-term, the Fed seeks to provide consumers with a rising standard of living, which involves increased consumption. Short-term, the Fed seeks to avoid extreme inflationary periods (during which the prices of goods and services increase) or deflationary periods (during which the prices of goods and services decrease). In other words, the Fed seeks to ensure that the economy grows at a balanced pace, but not too fast.

Insured

Deposit accounts, including: checking accounts, savings accounts, money market, certificates of deposit (CD)

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

Silent Generation Mid 1920s to mid 1940s . Grew up during the Great Depression era.

During World War II, they watched America surpass its previous economic conditions and become a global superpower. Only 55% financed their home purchase, and those who financed averaged a 23% down payment.

not an incentive for growth

Enact a moratorium on building permits and business licenses. Raise taxes for residents and local business owners.

HUD Programs

FHA The Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA approved lenders throughout the U.S. and its territories. GNMA The Government National Mortgage Association (Ginnie Mae or GNMA) was created to expand affordable housing in America by linking global capital markets to the nation's housing markets In the past, banks routinely had to retain mortgages because they were nearly impossible to sell to investors. This obstacle significantly limited the number of new loans that could be originated. To combat this, 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. Community Development Block Grant In 1974, Pres. Gerald R. Ford signed a law creating one of HUD's hallmark programs: The Community Development Block Grant (CDBG) Program. Title I of the Housing and Community Development Act of 1974 merged seven individual competitive grant programs into a block grant that gives local communities the right to decide how best to meet their own community development needs. Fair Housing HUD's Office of Fair Housing and Equal Opportunity (FHEO) aims to eliminate housing discrimination, promote economic opportunity, and achieve diverse, inclusive communities through enforcement, administration, public education, and development of federal fair housing policies and laws.' Housing Choice Vouchers The housing choice voucher program is the federal government's program for helping very low-income families, the elderly, and disabled individuals to afford decent, safe, and sanitary housing in the private market. Native American Housing HUD's Office of Native American Programs administers housing and community development programs that benefit American Indian and Alaska Native tribal governments, tribal members, the Department of Hawaiian Home Lands, Native Hawaiians, and other Native American organizations, with the goal of increasing the availability of safe and affordable housing to Native American families.

Secondary Market (NATIONAL)

Fannie Mae Freddie Mac Ginnie Mae Fed Home Loan Bank Investment banks Private investors National institutions purchase loans made by local lenders Players in the secondary market package loans and sell these packages to investors as Mortgage Backed Securities (MBSs)

educational information

Fannie Mae Internal Revenue Service Ginnie Mae

data or statistics

Federal Housing Finance Agency Banking and Insurance Analysts U.S. Census Bureau

More than one third of the banks in the country are

Federal Reserve member banks

What item is bought and sold on open market operations ?

Government securities

Market Changes

Housing values fell Interest rates increased

The FDIC takes action

Insures deposits made at banks and thrift institutions Inspects bank operations Analyzes soundness of banks 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.

TILA Violations

Intentional violations: Fines up to $5,000 and/or imprisonment up to 12 months Unintentional violations: Damages of two times the finance charge, up to $1,000 maximum

Generation X Early 1960s to early 1980s Highly educated, active, balanced

Largest share of first-time homebuyers (76%) (NAR survey 2014). More than half used a mobile device to search for their homes, with 22% finding the home they eventually purchased via a mobile device.

Money Measures

Liquidity

How does the U.S. Treasury do this?

Manages federal finances, government accounts, and public debt Produces currency and coins, and issues government securities Collects duties, monies, and taxes owed to the U.S. and pays what is owed by the U.S . Supervises national banks and financial institutions Enforces finance and tax laws Investigates counterfeiters, forgers, and tax evaders

NOT INSURED

Mutual funds, securities, stocks, bonds, insurance, and annuity products are not insured by the FDIC.

Mortgage Backed Securities (MBSs)

Players in the secondary market package loans and sell these packages to investors as Mortgage Backed Securities (MBSs) MBSs are generally considered to be a very safe investment

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.

What does the U.S. 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

February 19, 2010: Hardest Hit Fund

Provided $7.6 billion to the 18 hardest hit states, plus the District of Columbia, to develop locally tailored programs to assist struggling homeowners in their communities. States have until 2017 to utilize the funds according to federal guidelines.

The two most common methods used when a bank fails are the payout method and the ______ method.

Purchase and assumption

long- and short-term debt instruments are called ______.

Securities

The Treasury was authorized to attempt to:

Stabilize the financial system by investing capital in and buying assets from financial institutions. This helped to avoid failures of large institutions and increased confidence in the financial system. Boost credit markets by purchasing assets and providing capital to Fannie Mae, Freddie Mac, and other secondary market institutions. This kept Fannie Mae and Freddie Mac operating, and jumpstarted secondary markets that had largely stalled, which led to improved availability of credit and loans. Prevent avoidable foreclosures by providing mortgage relief to qualified homeowners and aid to specific areas that were hardest hit by the economic crisis.

Truth in Lending Act and Regulation Z 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. In 2011, the Dodd-Frank Act shifted part of TILA's rulemaking authority to the Consumer Financial Protection Bureau

When securities are bought:

The FOMC buys securities in exchange for money. This means there is now more money available in the economy and more money for lending and purchases. This encourages economic growth.

When securities are sold:

The FOMC sells these securities in exchange for money. This means there is now less money available in the economy. Less money in the economy means less money available for lending and purchases, which slows the economy dow

Which agency regulates FHLBanks?

The Federal Housing Finance Authority

Discount Rate

The Reserve district bank lends money to the member bank If a member bank wants to borrow money, it can use commercial paper as collateral for a loan

equitable title

The borrower's interest in a mortgaged property

April 2010: Home Affordable Refinance Program (HARP)

The cutoff date for this program included any loans made after June 1, 2009. The program allowed refinancing at more favorable rates, even when the loan-to-value ratio exceeds 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.

Federal funds rate

The member bank is charged the federal funds rate to borrow this money If a member bank wants to borrow money without collateral for a short period (usually overnight) Other member banks can lend this money

LOWERED THE FEDERAL FUNDS RATE

The rate dropped from 5.25% to nearly 0% • The drop in rates made borrowing cheaper for banks and, through them, for consumers. This encouraged consumers to spend more, leading to economic improvement.

Prime rate

This interest rate is the prime rate, the interest rate the bank charges the most creditworthy consumers If a consumer wants to borrow money, they go to their bank Many banks use the discount or federal funds rate as a base interest rate, then add a percentage to it

Establish interest rates and monetary policy

This is not a function of the Treasury, but is instead a function of the Federal Reserve

February 18, 2009: Homeowner Affordability and Stability Plan (includes the 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

treasuries.

To resolve this deficit, the Treasury may issue securities, or debt instruments called treasuries. • These are guaranteed by the full faith and credit of the U.S. government. • These vary by maturity length (or when the debt is paid back in full) • Treasury bills: Short-term maturities, usually one year or less • Treasury notes: Intermediate-term maturities, ranging from two to 10 years • Treasury bonds: Long-term maturities of 30 years • By selling treasuries, the Treasury is essentially pulling money out of the economy.

Treasury Securities

Treasury collects money through income tax payments, Social Security payments, and other means. Treasury deposits these funds with the Federal Reserve, domestic, and foreign banks. Treasury funds government spending and pays bills

RECESSION

Unemployment increases Foreclosures increase Supply trumps demand; more properties sit vacant Public confidence falls Home prices fall

OVER SUPPLY AKA HYPER-SUPPLY

Unemployment low; hiring stabilizes Many buyers Lots of new construction, increasing supply Public confidence very high Home prices are over-valued

RECOVERY

Unemployment stabilizes, but remains high Foreclosures remain high High supply of homes on the market, few buyers General public unease Home prices are under-valued

Surplus

When spending and bills are less than revenue:

Deficit

When spending and bills are more than revenue:

Which of the following is a likely effect when the discount window is closed?

When the discount window is closed, banks cannot obtain additional funds from their reserve bank to make more loans to consumers.

Baby Boomers 1946 - 1964 Children of the Silent Generation,

a product of the post-WWII baby boom, a huge explosion in the U.S. population Those over age 58 tend to purchase townhomes or condos; 80% of those under age 58 purchase single-family homes (NAR survey 2014).

annual percentage rate (APR)

accounts for charges and fees associated with a loan or credit in addition to the interest rate Loan A: $1,000, term = one year, interest rate = 5%, $25 transaction fee With Loan A, you're paying $50 in interest (5% x $1,000) plus $25 in other charges or fees. The lender deducts the transaction fee from your loan total, so you actually only receive $975, but pay $75 total for the loan. Divide this by your amount received ($75 / $975) and we get an APR of 7.7%. Regulation Z requires lenders to use a standardized measure for interest rates (the APR)

Many state-chartered banks

are also members, and must meet certain criteria • 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

growth is dependent on one industry

community may over-build and be left holding the proverbial bag if that industry or employer leaves.

BOARD OF GOVERNORS = Reserve Board

consists of seven members, all appointed by the president and confirmed by the Senate. These members serve one 14-year term. Members may be appointed (and confirmed) as a chair or vice-chair of the board. The board influences monetary policy, analyzes financial and economic conditions, and supervises the financial services industry, among other responsibilities.

February 17, 2009: The American Recovery and Reinvestment Act (ARRA) a.k.a. "the stimulus package."

create new jobs and save existing ones, to spur economic activity and invest in long-term growth, and to foster new accountability and transparency in government spending. funding for entitlement programs (e.g., unemployment benefits), and funding for federal contracts, grants, and loan

international level

economic events environmental regulations international political events

FEDERAL OPEN MARKET COMMITTEE (FOMC)

enacts monetary policy with a goal of stable prices and economic growth. It does this by managing the countryʼs money supply. The FOMC consists of 12 members: • Seven Board of Governor members • President of the Federal Reserve Bank of New York • Four presidents from the other Federal Reserve Banks (which serve on a rotating basis)

July 2010: The Dodd-Frank Wall Street Reform and Consumer Protection Act.

established: 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 is being implemented in phases; recent changes in qualified mortgage rules are part of the act.

Taxpayer Relief Act of 1997 (TRA '97)

exempted homeowners from paying taxes on capital gains up to $500,000 for married couples filing their income taxes jointly provided the property was their primary residence and they lived there for two out of the previous five years.

American Taxpayer Relief Act of 2012 (ATRA)

extended this exemption, as well as mortgage insurance premium deductions that were available to certain taxpayers.

Troubled Asset Relief Program (TARP)

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.)

Checking accounts

have a higher reserve requirement than savings accounts because checking deposits are considered more short-term than savings deposits.

Federal Reserve operates

independent of all government agencies. Members from different areas within the Federal Reserve system work together to form the Federal Open Market Committee.

12 reginal banks

interact directly with member banks and the U.S. Treasury.

When the Treasury encounters a deficit between funds and bills,

it may sell securities to generate more income. This removes money from the economy, as it's now in the Treasury's accounts. Less money in the economy means less money in the market for lending and purchasing. This could cause the real estate market to slow down.

grow too fast

local infrastructure and amenities may not be able to support the growth.

Building standards

local level

All national banks.

must be members of the Federal Reserve System.

disintermediation

over a prolonged period, more funds are withdrawn from financial institutions than are deposited, And lenders will naturally curtail lending, which results in an economic slowdown Federal Reserve (the Fed) and the secondary mortgage markets help to redistribute funds and do their best to ensure that adequate cash remains available.

bureau of engraving

paper currency password military ids immigration documents

hypothecation

process of pledging your home to the lender as collateral for the loan is called

us mint

produce coin metal

All members of the Board of Governors

serve on the Federal Open Market Committee

There are 24 branch cities located across the country

support the activities of the district banks.

City banks

tend to have higher reserve requirements than rural banks due to their higher activity level.

FHLBs are regulated by

the Federal Housing Finance Authority and the FHLB is considered a government-sponsored enterprise. The FHLB system is comprised of 11 FHLBanks that serve the U.S. FHLBanks are privately owned cooperatives. FHLBanks are owned by their member banks.

When a mortgage is used to secure the property as collateral

the borrower holds both legal and equitable title to the property, but the mortgage document places a lien on the property. The lien gives the lender the right to seize and sell the house should the borrower default. This lien shows up on the property title, and the property canʼt be transferred without the debt to the mortgagee being satisfied. I

When a deed of trust is used to secure the property as collateral

the borrower holds equitable title, and a trustee holds the legal title. Borrowers have the right to use and occupy the property until theyʼve repaid the loan. Once the loan is repaid, the trustee transfers legal title to the borrower.

grow too slow

the local economy could be negatively impacted, which could cause a downturn.

local level

zoning ordinances lending activities political activities employment trends local environmental regulations building standards

Benefits of Membership:

• Access to Federal Reserve financial and information services • Borrow money from the district bank, when needed • Stability of performing activities under the Federal Reserveʼs protection

Federal Deposit Insurance Corporation (FDIC)

• 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 Funding is received from bank and thrift premiums and U.S. Treasury security earnings. The FDIC insures deposits up to $250,000 per depositor, per bank or thrift institution, and inspects operations and soundness of banks

EXPANDED OPEN MARKET OPERATIONS

• Long-term securities were purchased through a program called quantitative easing (QE) Trillions of dollars were spent purchasing these securities and lending money to financial institutions

moratorium

暂停