Texas Pre-License- Real Estate Finance

mortgage broker

(not to be confused with a mortgage banker) is a licensed professional who originates mortgage loans that are financed by one of several lenders the broker works with. Many mortgage brokers deal exclusively with the residential home loan process, so they are highly specialized and can be beneficial in several ways to potential buyers.

Which of the following is NOT exempted from the CFPB regulations

30 Year Fixed rate mortgages

Real Estate Mortgage Investment Conduit (REMIC)

A REMIC is an investment vehicle that holds commercial and residential mortgages in trust, assembles said mortgages into pools based on risk, and then issues bonds (securities) on these pools to sell to investors on the secondary mortgage market

Price-to-Earnings Ratio (P/E):

A common method of predicting the price of a stock that tells an investor how much dividend they will receive per dollar of stock purchased

Net Negative

A condition in which liabilities on a policy exceed its assets; negative net worth can occur because the policyholder borrowed too much money or because the value of assets declined

Closing Disclosure

A five-page form that provides final details about the mortgage loan you have selected

Mortgage Loan Originator (MLO)

A licensed professional who helps consumers get mortgage loans; can be commercial or residential (RMLO)

Mortgage Broker

A licensed professional who originates mortgage loans that are financed by one of several lenders the broker works with

Secured Loan

A loan that is backed by collateral, which can be sold if necessary to recover the lender's loss if the borrower defaults

Unsecured Loan

A loan that is not connected to any particular asset (example: credit card)

Credit Union

A not-for-profit financial cooperative created to serve its members' needs and provide services similar to those of a bank

Real Estate Investment Trust (REIT)

A registered company that owns and operates commercial real estate; investors can buy and sell interests in real property in the form of REITs

Real Estate Mortgage Trust (REMT)

A type of real estate investment trust that buys and sells real estate mortgages instead of real property

Escrow account

An account set up by a mortgage company for paying property taxes and insurance during the term of the mortgage

Real Estate Settlement Procedures Act (RESPA)

An act designed to protect consumers from predatory lending and educate them about closing and settlement services

Implied Easement

An easement created as a logical feature of the land

Express Easement

An easement created by a written agreement between two or more parties

Easement Appurtenant

An easement that applies to the land regardless of the owner

Easement in Gross

An easement that applies to the person or entity, not the specific land

Floating Easement

An easement that does not have a clearly marked, fixed location to which access is granted

Affirmative Easement

An easement that gives people the right to use someone else's personal property for a specific purpose

Negative Easement

An easement that prohibits a property owner from performing an otherwise legal activity on their own property

APR

Annual Percentage Rate, a numeric representation of an interest rate

Collateralized Mortgage Obligations (CMOs)

Collateralized debt obligations (CDOs) that are made up of bundles or pools of mortgage-back securities (MBS) created by government agencies or investment banks and issued as investment-grade bonds

CFPB

Consumer Financial Protection Bureau; works to protect consumers from unfair, deceptive, and abusive practices

Truth in Lending Act (TILA)

Educates and protects consumers against inaccurate and unfair credit billing and credit card practices by requiring lenders to standardize the way costs associated with borrowing are calculated and disclosed

Mortgage Banker:

Entity that closes mortgages in their own name, using their own funds

Federal Home Loan Bank Act of 1932

Extended $125 million in credit to savings and loan institutions and created the Federal Home Loan Bank System, setting up the twelve regional banks

Which government agency provides insurance to depositors and preserves confidence in the banking system?

FDIC

FHA Mortgage Insurance

FHA loans are mortgages insured by the Federal Housing Administration. FHA mortgage insurance gives lenders protection against losses that can occur when homeowners default on their mortgage loans. This insurance encourages lenders to offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements

Whose purpose is it to support residential mortgage lending and related community investment?

Federal Home Loan Bank

Which of these supports residential mortgage lending and related community investment by providing access to special affordable housing programs?

Federal Home Loan Banks System

FHA

Federal Housing Administration

Volcker Rule

Federal regulation prohibiting banks from conducting certain investment activities with their own accounts, also limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds

Regulation M

First: Regulation M. Regulation M applies to leased property and will, therefore, not be a concern of ours in this course, but a little extra knowledge never hurt anyone! Regulation M implements the Consumer Leasing Act, which applies to everyone who regularly leases, offers to lease, or arranges for the lease of personal property under a consumer lease. Regulation M is designed to provide consumers with meaningful disclosures that enable them to compare terms for a certain lease with those for other leases. It also, when appropriate, allows them to compare lease terms with those for credit transactions. Additionally, good ol' Reg. M provides accurate disclosure in leasing advertisements and limits the size of balloon payments in consumer lease transactions.

Ginnie Mae

Government National Mortgage Association; a government owned enterprise that promotes homeownership

Subsidized Housing

Government sponsored economic assistance programs aimed at alleviating housing costs and expenses for people with low to moderate incomes

Administrative Procedure Act:

Governs the way administrative agencies of the federal government may propose and establish regulations

Guaranteed Loans

Guaranteed loans allow lenders to extend credit to family farm operators and owners who don't qualify for standard commercial loans. Farmers receive credit at reasonable terms to finance their current operations or to expand their business; financial institutions receive additional loan business and servicing fees, as well as other benefits from the program, like protection from loss.

Community Reinvestment Act (CRA)

Helps commercial banks and savings associations meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods

HFA

Housing Finance Agencies, the many government agencies dedicated to providing fair housing standards and practices

Public Housing

Housing provided for people with low incomes, subsidized by public funds

Commercial Banks

Institutions that provide financial services to the general public and businesses

Depository Institutions

Institutions that use money from their depositors to loan out for mortgages

IRS

Internal Revenue Service, the revenue service of the U.S. federal government

Truth in Lending Act (TILA)

Let's look at another vital piece of legislation, shall we? The Truth in Lending Act of 1968, also known as TILA, is a federal law designed to promote the informed use of consumer credit. TILA requires consumer credit disclosures about terms and cost in order to standardize the manner in which costs associated with borrowing are calculated and disclosed. TILA does many things, including: Gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling Regulates certain credit card practices Provides fair and timely resolution of credit billing disputes

LDP

Limited Denial of Participation

Microloans

Microloans are operating loans meant be put toward the needs of small and beginning farmers, non-traditional, specialty crop and niche type operations. They ease some of the requirements and offer less paperwork.

MARS

Mortgage Assistance Relief Services, makes it illegal to charge upfront fees and requires specific disclosures in ads and when you forward a lender's offer to a homeowner

MCC

Mortgage Credit Certificate, a certificate issued by certain state or local governments that allows a taxpayer to claim a tax credit for some portion of the mortgage interest paid during a given tax year

Secure and Fair Enforcement for Mortgage Licensing Act

On July 30, 2008, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or SAFE Act, was passed. The SAFE Act gave states one year to pass legislation requiring the licensure of mortgage loan originators (MLOs) that met national standards and the participation of state agencies on the Nationwide Mortgage Licensing System and Registry (NMLS). The primary purpose of the SAFE Act is to protect consumers and reduce fraud. Mortgage loan originators who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, or for an institution regulated by the Farm Credit Administration are all registered. All other mortgage loan originators are licensed by the states.

Savings and Loan Associations (S&Ls)

Originally established by the government for the purpose of offering long-term, single-family home loans

Premiums

Payments made to an insurance company in exchange for a policy; usually paid monthly or annually

Regulation M

Prevents manipulation by individuals with an interest in the outcome of an offering, and prohibits activities and conduct that could artificially influence the market for an offered security

Loan Officer

Professional who facilitates the mortgage loan process and is employed by one specific financial institution

Community Investment Program (CIP)

Program operated by each FHLBank that offers below-market-rate loans to members for long-term financing for housing and economic development that benefits low- and moderate-income families and neighborhoods

Where Regulation Z Applies

Regulation Z applies to credit transactions where credit is: Extended to consumers Offered on a regular basis (For instance, Ms. A offering her friend Ms. B a loan doesn't fall under Regulation Z, but a car dealership that offered consumer financing on a regular basis would.) Either subject to a finance charge, such as an interest rate or financing fees, or is to be paid in four or more installments To be used for personal, family, or household purposes (that is, not for business, commercial, or agricultural purposes) A closed-end transaction (that is, any line of credit that is not open-ended or revolving)

Reg Z Made E-Z

Regulation Z bans practices concerning payments made to compensate mortgage brokers and other loan originators. The goal here is to protect consumers in the mortgage market from unfair practices and wrongdoings. The prohibitions related to mortgage originator compensation and steering deal mainly with closed-end consumer loans secured by a "dwelling or property that includes a dwelling." The rule does not apply to open-end home equity lines of credit or time-shares. Nor does it apply to loans secured by real property if the property doesn't include a dwelling.

Broker or Banker?

Remember that mortgage bankers close mortgages in their own names, using their own funds. Mortgage brokers do not have any money of their own for loans and therefore do not close mortgages in their own names. Remember: "a broker is broke-r." They have no money to lend to homebuyers.

The Glass-Steagall Act

Remember the 1929 stock market crash and bank failures that led to the Great Depression? I mean, I know you weren't actually there, but you remember that happened, right? Cool. Well, the Glass-Steagall Act was the legislative response to these things. The financial crash was largely blamed on too much commercial bank involvement in the stock market (including excessive risk taking with depositors' funds). The GSA addressed this by separating investment and commercial banking activities.

Loans Covered by RESPA

So which loans does RESPA cover? RESPA applies to most loans that are secured by a mortgage lien placed on a one- to four-family residential property. These loans include: Purchase loans Assumptions Property improvement loans Refinancing loans and equity lines of credit (generally)

Settlement Statement

Statement that summarizes all the fees and charges that both the homebuyer and seller face during the settlement process of a housing transaction

TILA's Regulations

TILA is designed to help consumers compare the costs of credit from different lenders with one another and with the cost of buying with cash and to protect consumers from unfair and inaccurate credit practices. The act has two principal regulations, referred to as Regulation M and Regulation Z.

TDHCA

Texas Department of Housing and Community Affairs, responsible for homeownership, affordable rental housing, community and energy assistance programs and activities serving primarily low-income Texans

TSAHC

Texas State Affordable Housing Corporation, offers home down payment assistance programs, including first-time homebuyer grants for Texas families

VLB

Texas Veterans Land Board, finances land, home loans and home improvement loans for Texas veterans and active military members who are eligible under VLB requirements

HUD

The Department of Housing and Urban Development

Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States federal government that preserves public confidence in the banking system by insuring bank deposits. Since the inception of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure. (Wow!)

What is the Federal Home Loan Bank System?

The Federal Home Loan Bank System is a system of regional banks from which local lenders borrow funds to finance housing, economic development, and jobs. Federal Home Loan Banks are member owned cooperatives. Banks, thrifts, credit unions, and insurance companies have the right to become members of the FHLBanks. Each member is a shareholder. Most lenders take advantage of being able to borrow money from their regional FHLB office at good terms.

The Federal Reserve

The Federal Reserve (commonly referred to as The Fed) is the centralized United States bank created in 1913 by the Federal Reserve Act in response to the lack of public trust in, and government regulation of, banks in America. The purpose of the Federal Reserve is fourfold: Conduct the monetary policy of the United States Supervise and regulate financial institutions for the protection of the consumer Maintain the financial system's stability Provide services to the government, financial institutions, and the public

The Housing and Urban Development Act of 1970

The Housing and Urban Development Act of 1970 introduced the federal Experimental Housing Allowance Program (EHAP) and the Community Development Corporation, authorizing larger outlays for housing subsidy programs and rent supplements for moderate-income households. In the 1970s, studies began to show that the biggest housing problem afflicting low-income families and individuals was no longer substandard housing, but instead the high percentage of income spent on housing. With this knowledge, Congress passed the Housing and Community Development Act of 1974, amending the Housing Act again to create the Section 8 Program.

SAFE Act

The Safe Mortgage Licensing Act; sets a minimum standard for licensing and registering mortgage loan originators

The Treasury Department

The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. The Treasury Department performs a critical and far-reaching role in enhancing national security by implementing economic sanctions against foreign threats, identifying and targeting the financial support networks of national security threats, and improving the safeguards of our financial systems.

The Discount Rate

The discount rate is the interest rate at which the Fed lends money to its member banks. When a member bank in sound financial condition requires a short-term loan, the Fed will advance it the funds at what is known as the primary credit rate, the most important of the Fed's discount rates and the one often referred to as "the discount rate." This rate is typically set slightly above the short-term market interest rate.

The Dodd-Frank Act

The last set of financial regulations I want to go over is a major one. In fact, it's the most far reaching Wall Street reform in history. It passed not too long ago, and people are still debating its pros and cons today. We're talkin' Dodd-Frank. This huge collection (over 2,000 pages!) of financial reform legislation is formally known as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Obama administration passed it in 2010 with the intention of correcting the excessive risk taking that led to the financial crisis of 2008.

Consumer Financial Protection Bureau (CFPB)

The name kind of says it all. This agency's job is to protect consumers in the realm of the financial sector. They do this by requiring lending institutions to have clear documentation regarding their transactions.

Servient Estate

The party that has the burden of granting the other party access in an easement

Dominant Estate

The party that is gaining access to the servient estate's land in an easement

USDA Farm Loan Types

There are many types of FSA loans. Direct Operating Loans: These loans are used to buy things like livestock and feed, farm equipment, fuel, farm chemicals, and insurance. They can cover family living expenses, be used to make minor improvements or repairs to buildings and fencing, and go toward general farm operating expenses. Microloans: Microloans are operating loans meant be put toward the needs of small and beginning farmers, non-traditional, specialty crop and niche type operations. They ease some of the requirements and offer less paperwork. Direct Farm Ownership Loans: These loans are used to do things like purchase or enlarge a farm or ranch, construct a new or improve existing farm or ranch buildings, and for soil and water conservation and protection purposes.

Emergency Loans

These are designed to assist farmers and ranchers recover from any production or physical losses suffered from drought, flooding, other natural disasters or quarantine.

Native American Tribal Loans

These loans are a resource for Tribes to acquire land interests within tribal reservations or Alaskan communities. The loans can be used to advance and increase current farming operations, provide financial prospects for Native American communities, increase agricultural productivity, and preserve cultural farmland for future generations.

Direct Operating Loans

These loans are used to buy things like livestock and feed, farm equipment, fuel, farm chemicals, and insurance. They can cover family living expenses, be used to make minor improvements or repairs to buildings and fencing, and go toward general farm operating expenses.

Direct Farm Ownership Loans

These loans are used to do things like purchase or enlarge a farm or ranch, construct a new or improve existing farm or ranch buildings, and for soil and water conservation and protection purposes.

Minority and Women Farmers and Ranchers Loans

These loans encourage full participation from minority and women family farmers by targeting a portion of direct and guaranteed farm ownership and operating loan funds for minority and women farmers to buy and operate a farm or ranch

Beginning Farmers and Ranchers Loans

These loans provide credit opportunities to eligible family farm and ranch operators and owners who've been in business less than 10 years. Aw, newbies!

Financial Stability Oversight Council (FSOC)

This group of 15 members monitors the stability of the financial system, looks for risks in the system, and addresses those risks.

VLB Home Requirements

To qualify under VLB, homes must meet the following requirements: Must be the veteran's primary residence in Texas Must be a single family attached or detached home, town home or condominium If a duplex or other multi-family unit, must have been constructed at least five years prior to the closing date of the loan If a new home, must have either ENERGY STAR certification or HERS Index score of 75 or less Must remain as the veteran's primary residence for at least three years, and the Veteran borrower must occupy the home within 60 days after loan closing.

Regulation Z

Under TILA, prohibits specific acts and practices in connection with an extension of credit secured by a consumer's dwelling

The Community Reinvestment Act (CRA)

You know that the Department of Housing and Urban Development, or HUD was created to create strong, sustainable, inclusive, and quality affordable communities for all. (See how I snuck in some review there?) Well, closely related to HUD in function is another governmental program you should know about, the Community Reinvestment Act, or CRA. The CRA was enacted by Congress in 1977 with the intent to address discrimination in loans made to individuals and businesses from low and moderate-income neighborhoods.

Youth Loans

Youth loans are used by young people participating in clubs like 4-H clubs or FFA to finance educational, income-producing, agriculture-related projects. (Oh, to be young and in loans!)

The goals of the CFPB are to create easier-to-use mortgage disclosure forms, improve consumer understanding, prevent surprises at the closing, and

aid in comparison shopping for the borrower

Savings and loan associations

also known as thrift lenders, were originally established by the government for the purpose of offering long-term, single-family home loans. In the past, most conventional mortgage lending was done by the savings and loan industry. S&Ls dominated the home loan market.

The Federal Reserve uses all of the following instruments to implement its monetary policy EXCEPT:

credit checks

Money laundering

generally refers to financial transactions in which criminals, including terrorist organizations, attempt to disguise the proceeds, sources, or nature of their illicit activities by funneling the money through otherwise legitimate business transactions.

Why do life insurance companies tend to invest in commercial multifamily real estate?

its considered low-risk compared to stocks

What is the goal of the Dodd-Frank Act?

prevent the excessive risk taking that led to the financial crisis of 2008

What is the purpose of the Federal Home Loan Bank System?

provide access to special affordable housing programs, support residential mortgage lending and related community investments, provide access to reliable, economical funding and technical assistance

Which of the following is NOT a way agricultural lending differs from residential lending?

the borrower is usually a large corporation

Which of the following is NOT a purpose of the Truth in Lending Act?

to regulate rates lending institutions can charge