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Real Estate - Ch. 13
Government Involvement in Real Estate Financing
| Term | Definition |
|---|---|
| blanket loan | A mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien upon repayment of a definite portion of the debt. |
| buydown | A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or the seller. |
| certificate of reasonable value (CRV) | A form indicating the appraised value of a property being financed with a VA loan. |
| Community Reinvestment Act of 1977 (CRA) | Under the act, which was revised most recently in 2008, financial institutions are expected to meet the deposit and credit needs of their communities. |
| construction loan | A short-term loan usually made during the construction phases of a building project (also referred to as interim financing). |
| conventional loan | A loan that requires no federally sponsored insurance or guarantee. |
| Equal Credit Opportunity Act (ECOA) | The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, marital status, or receipt of public assistance. |
| Fannie Mae | A government-supervised enterprise established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders. |
| Farmer Mac | The Federal Agricultural Mortgage Corporation—a privately owned and publicly traded company established by Congress to create a secondary market for agricultural mortgage and rural utilities loans. |
| Federal Deposit Insurance Corporation (FDIC) | An independent federal agency established by Congress to examine and supervise financial institutions, manage receiverships, and insure deposits (currently up to $250,000 per depositor per financial institution). |
| Federal Reserve System (Fed) | The country’s central banking system, which establishes the nation’s monetary policy by regulating the supply of money and interest rates. |
| FHA-insured loan | A loan insured by the Federal Housing Administration and made by an approved lender in accordance with FHA regulations. |
| Freddie Mac | A government-supervised enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market. |
| Ginnie Mae | A government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA-insured and VA-guaranteed loans as collateral. |
| government-sponsored enterprises (GSEs) | Organizations created by the federal government (Fannie Mae, Freddie Mac, Farmer Mac, Ginnie Mae) to help increase loan opportunities for homebuyers. |
| home equity loan | A loan under which a property owner uses the property as collateral and can then draw funds up to a prearranged amount against the property. Also called a home equity line of credit, or HELOC. |
| mortgage insurance premium (MIP) | The FHA insurance that is a percentage of the loan amount that the borrower is charged as a premium. |
| Office of the Comptroller of the Currency (OCC) | Government agency which sets standards and regulations for fiduciary lenders. |
| open-end loan | A mortgage loan that is expandable by increments up to a maximum dollar amount, with the full loan being secured by the same original mortgage. |
| package loan | A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances. |
| primary mortgage market | The mortgage market in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mutual savings banks. |
| private mortgage insurance (PMI) | Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. |
| Real Estate Settlement Procedures Act (RESPA) | The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees. |
| Regulation Z | Implements the Truth in Lending Act (TILA), requiring credit institutions to inform borrowers of the true cost of obtaining credit. |
| sale-and-leaseback | A transaction in which the owner sells improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises. |
| secondary mortgage market | A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages. Mortgages are first originated in the primary mortgage market. |
| triggering terms | Specific credit terms, such as down payment, monthly payment, and amount of finance charge or term of loan. |
| Truth in Lending Act (TILA) | Federal government regulates the lending practices of mortgage lenders through this act. |
| VA-guaranteed loan | A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the U.S. Department of Veterans Affairs in order to limit the lender’s possible loss. |
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