RE: Types of Loans, Terms, and Issues

Graduated Payment Mortgage

A loan where the payments gradually adjust (usually upward) based on a pre-determined schedule and amount is known as a _________________ loan.

Bridge Loan

Also known as a swing loan, this is a temporary (for example, 90-day) loan that provides funds for a homebuyer to use as a down payment for a new home, prior to selling the current home.

subprime

Borrowers with B, C, and D credit ratings are considered what type of borrowers?

Fannie Mae/Freddie

Conventional loans are said to be conforming when they meet ___________/__________ guidelines.

GSE (Government Sponsored Enterprise)

Fannie and Freddie are considered what?

Partnership between mortgagors

In what type of partnership do participants have shared responsibility for a single mortgage?

Partnership among mortgagees

In what type of partnership does each mortgagee receive a share of the mortgage payment? This involves more than one mortgagee as owner of the finance instrument in which each receives an equal share of the mortgage payment?

Partnership between mortgagees and mortgagors

In which type of participation agreement would a financier lower the interest on the mortgage in exchange for partial ownership of the project?

5%

Interest rates that are more than ______ over the current market rate are considered predatory lending.

22%

Once a homeowner reaches a ___% equity position, PMI is cancelled automatically.

secondary market

Originators of conventional loans usually package and sell the loans on what type of market?

80%

Private mortgage insurance (PMI) is required by conventional lenders when the loan-to-value ratio exceeds ___%

Installment sale

This contract is a contractual agreement in which the buyer pays the seller the purchase price over time in a series of installments until the contract has been paid in full. With this type of sale, the seller retains legal rights to the property while the buyer has equitable rights.

Amortized Loan

This is the process of paying off a loan by making periodic payments of principal and interest. Initially, most of the payment will go toward interest, with ever-increasing amounts going toward principal until the loan is paid off.

Home Equity Line of Credit (HELOC)

Used similarly to a credit card. An open line of credit based on the available equity in the borrower's home. A credit line that's based on a percentage of the available equity in the property. A borrower can use the funds as needed, repay them, and borrow them again.

- Rate - Margin - Index

What 3 factors affect an ARM?

The Homeowner and Equity Protection Act

What act is an amendment to the Truth in Lending Act? This act addresses abusive practices in refinancing and home equity loans by requiring special disclosures and restrictions on loan terms.

Reverse annuity mortgage

What is a loan in which the property owner uses equity to get money out, and as the funds are drawn over time, the bank gains ownership of the property? For Example: Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank by using his house as collateral. What is this type of loan called?

Amortized

What is this called? Debt is paid off by making periodic payments consisting of interest and principal.

Adjustable Rate

What is this called? Interest rate fluctuates based on the economic index to which it's tied.

Growing Equity

What is this called? Interest rate remains the same, but monthly payments increase over time according to a set schedule

Straight

What is this called? Only interest is paid until the end of the loan term, when the principal is repaid in full.

PMI (Private Mortgage Insurance)

What protect the lenders in case of borrower default when the borrower has put down less than 20%?

80/10/10

What ratio is acceptable in a piggyback, split, and mortgages financing arrangement? The borrower takes one loan for 80% and another for 10%, and puts 10% down.

Conventional

What type of loan is neither guaranteed nor insured by government agencies?

The PMI Act of 1998

What's another name for the Homeowner's Protection Act?

Truth in Lending Act

Which of the following acts created regulations for advertising credit services?

Real Estate Settlement Procedures Act

Which of the following lending regulations apply to mortgage loans and settlement services?

They're insured or guaranteed by a government agency.

Which of the following statements is true about government loans?

Subprime lenders

Who are a valuable part of the mortgage process, making homeownership possible for many who would not otherwise qualify for loans?

Home equity

With this common loan type, the home is used as collateral and the loan creates a second mortgage if the first mortgage hasn't been paid off. A lump-sum loan that must be repaid by the homeowner

Fixed-rate

With what type of loan do the principal and interest payments remain the same for the life of the loan?

Equity skimming

occurs when an investor receives title to a property, and usually rents out the home but doesn't make the mortgage payments. This usually ends up in foreclosure.

Conventional Leaders

will require PMI on loans where the LTVR is in excess of 80%.