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Chapter 14
Real Estate Financing: Practices
| Question | Answer |
|---|---|
| annual percentage rate (APR) | the relationship of all finance charges to the loan amount; must be disclosed to borrowers the Truth-in Lending Act. |
| blanket mortgage | covers more than one parcel of land and usually is used to finance subdivision developments, though it can be used to finance the purchase of improved properties as well |
| buy down | a way to lower the initial interest rate on a mortgage or deed of trust loan;discount points lower the effective interest rate paid by the buyer reducing monthly payments for a set time |
| conforming loan | a standardized conventional loan that meets Fannie Mae or Freddie Mac's requirements; made by for-profit lenders and are not insured by the federal gov't to the most creditworthy borrowers. |
| construction loan | a loan made to finance the construction of improvements on real estate--homes, apartments, office buildings |
| conventional loan | a loan from private investors that requires no government insurance nor guarantee |
| Department of Housing and Urban Development (HUD) | A federal cabinet dept. active in national housing programs; offers programs such h as urban renewal, public housing, model cities, rehabilitation loans, FHA subsidies, fair housing enforcement |
| Equal Credit Opportunity Act (ECOA) | Prohibits creditors from discrimination on the basis of race, color, religion, national origin, sex, marital status, age, and receipt of public assistance. |
| Fair Credit Reporting Act | federal law giving consumers the right to view and correct their credit information |
| Fannie Mae | a quasi-government agency established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders. |
| Federal Reserve System | The country's central banking system, which controls the nation's monetary policy by regulating the supply of money and interest rates |
| FHA-insured loan | a loan insured by the FHA and made by an approved private lender according to FHA's regulations |
| Freddie Mac | a corporation established to purchase primarily conventional mortgage loans in the secondary market |
| Ginnie Mae | a gov't agency under HUD that sells mortgage-backed securities that are backed by pools of FHA and VA loans |
| home equity loan | a source of funds for homeowners who wish to finance the purchase of expensive items; consolidate existing installment loans on credit card debt; or pay for medical, educational, home improvement, or other expenses |
| jumbo loan | a residential mortgage loan in excess of acceptable loan amounts for purchase by Fannie Mae or Freddie Mac; also called nonconforming loans |
| loan-to-value ratio (LTV) | ratio of debt to value of the property |
| open-end mortgage | a line of credit allowing the mortgagee to make additional future advances of funds to the mortgagor, and are generally set up as home equity loans. |
| package loan | a loan that includes not only the real estate, but also all fixtures and appliances installed on the premises; has been used extensively in financing furnished condo units |
| Predatory Lending Act | imposes restrictions and limitations on high-cost loans; revises permissible fees and charges on certain loans; prohibits unfair or deceptive practices by lenders |
| primary mortgage market | made up of lenders that originate mortgage loans |
| 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 |
| purchase-money mortgage | a note secured by a mortgage or deed of trust given by a buyer as a borrower, to a seller, as lender, as part of the purchase price of the real estate. |
| Real Estate Settlement Procedures Act (RESPA) | federal law that ensures that residential buyers and sellers receive full disclosure of all settlement charges; mandates HUD booklet about closing costs, a good-faith estimate of closing costs, and hUD-1 closing statement. |
| Regulation Z | implements the Truth in Lending Act requiring credit institutions to inform borrowers of the true cost of obtaining credit |
| reverse-annuity mortgage (RAM) | allows senior citizens on fixed incomes to utilize the equity buildup in their homes by receiving regular monthly payments from the bank |
| Sales comparison approach | AKA the market data approach. When an estimate of value is obtained by comparing the subject property with recently sold comparable properties. |
| secondary mortgage market | a market for the purchase and sale of existing mortgages |
| Short sale | When lender allows a borrower in default to sell the property for less money necessary to satisfy loan to avoid foreclosure sale; lender usually "forgives" the balance owed after the sale. IRS may consider forgiven amount borrower's taxable income. |
| subordination agreement | a written agreement between holders of liens on a property that changes the priority of mortgage, judgment, and other liens under certain circumstances. |
| subprime mortgage | A loan made to a borrower with a credit rating below what is required for regular loans creating greater liability for the lender that is countered by higher interest rates and fees; called B, C, or D paper. |
| Trigger terms | In real estate advertising, specific phrases called trigger terms, require the advertiser to comply with regulation z, and provide the apr (annual percentage rate)plus total financing term disclosure, including total finance charge. |
| Truth – in– lending act | Implements the truth – in– lending act requiring credit institutions to inform borrowers of the cost of obtaining credit. |
| VA-guaranteed loan | a mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Dept. of Veterans Affairs to limit the lender's possible loss. |
| wraparound loan | enables a borrower who is paying off an existing mortgage to obtain additional financing from a second lender or the seller. |
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whitwill
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