NC Real Estate Exam- Chapter 14 Real Estate Financing Principles

NC Real Estate Exam- Chapter 14 Real Estate Financing Principles Federal Reserve System -Answer-Their role is to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate. Primary Mortgage Market -Answer-the lenders that originate mortgage loans Income on a loan is realized from these sources -Answer-1. Finance charges collected at closing, such as loan origination fees and discount points 2. Recurring income, that is, the interest collected during the term of the loan 3. Funds generated by sale of loans on secondary mortgage market 4. (Only for secondary mortgage market loans) Fees for loan servicing Primary Mortgage Market includes -Answer-1. Fiduciary lenders- thrifts, savings association, commercial banks- subject to the FDIC 2. Insurance companies 3. Credit unions 4. Pension funds 5. Endowment funds of universities, etc. 6. Mortgage banking companies 7. Mortgage brokers Secondary Mortgage Market -Answer-Puchases, services, and sometimes re-sells existing mortgages and mortgage backed securities created by the primary mortgage market lenders. This process replenishes funds to the primary market so they can originate more mortgage loans for the house buying public. Lenders often retain servicing functions for a fee. Purchases mortgage loans through agencies, assembles them into packages called pools, and sells them as shares (securitized) to investors or other agencies. Fannie Mae (Federal National Mortgage Association) -Answer-government owned, creates mortgage-backed securities using pool of mortgages as collateral, deals in convention, FHA, and VA loans. Instrumental in devloping the uniform underwriting guidelines that helped assure investors of the quality of the mortgage-backed. Oldest and second largest of the secondary mortgage market Freddie Mac (Federal Home Loan Mortgage Association) -Answer-government owned, has authority to purchase mortgages, pool them, and use them as security for bonds sold on the open market but does not guarantee payment of mortgages Ginnie Mae (Government National Mortgage Association) -Answer-entirely a government agency, a division of HUD, organized as a corporation but without corporate stock, that administers special-assistance programs and guarantees mortgage backed securities using FHA and VA loans as collateral Conventional Loans -Answer-are the most secure loans, the loan-to-value ratio (LTV) is often the lowest for these loans- traditionally 80%, not government-insured or guaranteed, meet all