finance 2
deed of trust parties
Beneficiary (Lender), Trustor (Borrower), Trustee (Third Party)
Voluntary lien vs. involuntary lien
Owners agree to have a security placed on themselves or their property vs. creditor places lien without owners' consent via legal means
municipal bond
a bond issued by a state or local government -schools
Which of the following loan types can be packaged into a mortgage-backed security eligible for guarantee by Ginnie Mae?
loans insured or guaranteed by US government agencies
What are advances?
loans the federal home loan bank makes to member banks
A 2/1 Buydown
reduces the interest rate by 2% the first year and 1% the second year, until it reaches its original principal interest for example 1st year=4.5% 2nd =5.5% 3rd= 6.5% 4th= 6.5% and so on
What is the benefit Ginny Mae investors have over those who invest in other MBSs?
they are able to collect timely principal and interest payments
Cross-default clause
triggers a debt default if the issuer defaults on any of its other debt obligations
Mutual savings banks were created to serve ______ during the mid-19th century.
workers
Lifting clause
A clause in a junior mortgage allowing a borrower to replace an existing first mortgage without disturbing the status of the junior mortgage.
exculpatory clause
A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault. protects the borrowers assets that are not part of the lien
deed of trust
A deed to real property, which serves the same purpose as a mortgage, involving three parties instead of two. The third party holds naked title for the benefit of the lender. Beneficiary (Lender), Trustor (Borrower), Trustee (Third Party)
farm credit system
A federal agency of the Department of Agricultural that offers programs to help families purchase or operate family farms. government-sponsored enterprise
freddie mac
A government supervised enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market.
specific lien
A lien affecting or attaching only to a certain, specific parcel of land or piece of property.
alienation clause
A provision in a mortgage requiring full payment of the debt upon the transfer of title to the property, due on sale. Prevents loan assumptions.
corporate bonds
Bonds issued by corporations to fund operating expenses -new production line
separation clause
a misleading dismissal of the abortion issue
general lien
A lien that attaches to all property owned by an individual. Real and personal.
defeasance clause
A necessary mortgage clause in title theory states. When the debt is satisfied, this clause causes title to pass automatically back to the borrower. Satisfaction of mortgage; release from records.
Alienation Clause
A provision in a mortgage requiring full payment of the debt upon the transfer of title to the property, due on sale. Prevents loan assumptions.
carryback loan
The extension of credit from the seller to the buyer to finance the purchase of the property, accepting a deed of trust or mortgage instead of cash. Sometimes called a purchase money loan.
3-2-1 Buydown
The interest rate starts low but increases by 1% each year for three years until it reaches the rate stated in the note.
participation certificate
a certificate representing an undivided interest in a Freddie Mac pool
power of sale clause
a clause authorizing a private foreclosure sale that does not require court action
judgement lien
a lien placed on property to settle a judgement from a lawsuit
non-recourse loan
a loan that carries neither a penalty nor further obligation to repay if not paid back
junior loan
a loan that creates a lien against property that already has been pledged as collateral
What's a participation certificate?
a mortgage backed security issued by freddie mac
Carryback Financing
a note is accepted by a seller instead of cash
The ______ clause is also known as a due-on-sale clause.
alienation
subordination cause
allows a junior lien to rake priority over a senior lien
Regional State Bank is a member bank of the Federal Home Loan Bank. In exchange for mortgage collateral, Regional State Bank received a loan from the FHLB so it can make additional loans to consumers. What is the loan called that Regional State Bank received?
an advance
in a deed of trust, who is the trustor
borrower
subordinate agreement
changes the priority of the liens to be paid under certain conditions
When Fannie Mae purchases a loan, they pay the loan originator a(n) ______ fee.
collection fee
Farmer mac
create a secondary market for agricultural mortgage and rural utilities loans.
The ______ clause protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure.
exculpatory
Conventional loans from large commercial banks are the primary target for which secondary market player?
fannie mae
Which entity provides disclosures and public information about the financial condition of FCS?
federal farm credit banks funding corporation
Which of the following is Fannie Mae most likely to purchase?
a conventional fixed rate mortgage issued by a commercial bank
Which of the following entities buys loans primarily through thrifts?
freddie mac
Morris still owes his lender for the financing obtained in purchasing his home. Several years later, Morris took out a home equity line of credit. This means that ______.
if morris is foreclosed on, the home equity will not be paid until the first loan is paid off
A lender benefits from selling loans to Fannie Mae by ______.
increasing capital to offer loans with larger sale prices
industrial revenue bond
issued by municipalities but are supported by a lease agreement with a corporation
Which of the following clauses is included in Fannie Mae's multi-state note?
late charge
Housing and Economic Recovery Act of 2008
legislation aimed primarily at addressing the effects of the subprime mortgage crisis
in a deed of trust, who is the beneficiary
lender
Statutory Right of Redemption
The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges.
reconveyance
The transfer of the title of land from one person to the immediate preceding owner. This instrument of transfer is commonly used to transfer the legal title from the trustee to the trustor (borrower) after a trust deed debt has been paid in full.