Champions Real Estate Finance Exam

Loan-to-Value Ratio (LTV) - ANSWER The percentage of the lesser of the appraised value or sales price that the lender will lend. ex: If a borrower is approved for an 80% loan, it means that the lender will loan up to 80% of the sales price or appraised value, whichever is lower. Package Mortgage - ANSWER Includes both real and personal property ( fixtures and furnishings) Blanket Mortgage - ANSWER Covers more than one piece of property. Wraparound Mortgage - ANSWER Method of financing which preserves the low, existing interest rate on the original note. Open-End Mortgage - ANSWER Permits additional borrowing on the same note. This is sometimes called a credit card mortgage or a home equity line of credit - HELOC. Budget Mortgage - ANSWER The monthly house payment includes principal, interest, taxes and insurance (known as PITI) Collateral -Dependent Loans - ANSWER A hard money loan is a specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate. Character - ANSWER Is a measure of the willingness of a borrower to make on-time payments. Credit character is revealed in the borrower's credit report. Capacity - ANSWER Is a measure of the borrower's ability to repay the debt, and is demonstrated through current earnings and job stability. Capital - ANSWER Is the sum of all assets that the borrower has accumulated. Collateral - ANSWER Is something of value that can be pledged as security for repayment. Yield - ANSWER Is the return that the investor recieves over the life of the loan. (Also known as profit) Originator - ANSWER The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower. Mortgage Broker - ANSWER Typically functions as a middleman between the borrower and the lender, negotiating, selling or arranging loans to be delivered to larger investors. At one time originated up to 80% of all mortgage loans. (Back on the rise) Mortgage Banker - ANSWER Entities which provide their own funds for the purpose of providing mortgage financing, as opposed to commercial banks/savings associations. (Held, or "Warehoused") Correspondent Lender - ANSWER Usually smaller in scale than mortgage bankers or brokers, these lenders typically extend loans with their own funds, at their own risk. Processing - ANSWER Once application is complete the file moves into this phase. Underwriting - ANSWER The detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Closing - ANSWER The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender. Servicing - ANSWER Includes collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance ( and managing escrow and impound funds) remitting funds to the note holder, and following up on delinquencies. Supply and Demand - ANSWER an economic concept that states that the price of a good rises and falls depending on how many people want it and depending on how much of the good is available. Funding - ANSWER The process of transferring funds to a title or escrow company for disbursement The Safe Act - ANSWER Designed to enhance consumer protection and reduce fraud. (Key component of HERA) M1 - ANSWER Is defined as the sum of currency held by the public and transaction deposits at depository institutions. M2 - ANSWER Is defined as M1 plus saving deposits, small-denomination time deposits (those issued in amounts of less than $100,000) and retail money market mutual funds shares. Fiat Money - ANSWER Is currency that is not backed by any precious metals at all. Monetary Policy - ANSWER Is the maintenance of a stable money supply that provides for growth in the economy while keeping inflation in. The federal reserves is responsible for this policy in the United States. Fiscal Policy - ANSWER Federal Government spending. Approved by Congress. At the treasury level, funds can be raised to pay for government spending by raising taxes and increasing borrowing. Federal Reserve (The Fed) - ANSWER is the central bank of the United States Monetary inflation - ANSWER When there is an excess of money supply in the market. Demand-pull inflation - ANSWER When there is more money in the market and less goods for sale. Cost-push inflation - ANSWER Occurs when the cost of production and offering services increase, thereby causing manufacturers and tradespeople/vendors to rais their prices accordingly. Discount rate - ANSWER The interest rate charged member banks that borrow from the Federal Reserve Systems Federal Funds Rate - ANSWER Is the rate that the Federal reserve charges banks for unsecured loans, most of which are for a very short term. Trouble Asset Relief Program (TARP) - ANSWER Was created to restore the nations financial stability and restart economic growth. United State Mint - ANSWER Created by Congress in 1972 and became part of the Department of the Treasury in 1873. The primary mission is to serve the American people by manufacturing, distributing, and circulating precious metal coins, collecting coins and national medals. Also entrusted with providing security over assets. The Federal Deposit Insurance Corporation (FDIC) - ANSWER An agency created in 1933 to insure individuals' bank accounts, protecting people against losses due to bank failures (Insures deposits only) The Federal Home Loan Bank (FHLB) System - ANSWER A system of regional banks from which local lending institutions everywhere in America borrow funds to finance housing, economic development, infrastructure and jobs. The Federal Housing Administration (FHA) - ANSWER Provides mortgage insurance on loans made by blank- approved lenders throughout the US and its territories. Insures mortgages on single-family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. FHA mortgage insurance - ANSWER Provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. Community Development Block Grants (CDBG) - ANSWER To help communities with economic development, job opportunities and housing rehabilitation HOME Investment Partnership Program - ANSWER Block grants to develop and support affordable housing for low-income residents. Rental assistance - ANSWER In the form of section 8 certificates or vouchers for low-income households.