REAL 4000 Final Exam |70 Questions
and Answers
Real estate is _____, while real property is ______. - -Land and its permanent
improvements, a bundle of rights in land and its permanent improvements
- Which type of ownership estate is the most complete bundle of rights - -
Fee simple absolute
- Competition for physical location and space - -The user market
- characteristics of real estate - -localized markets, highly segmented
markets, immobile products, heterogeneous products
- The land that benefits from an easement appurtenant is referred to as - -
The dominant parcel
- FHA Loan - -mortgage guaranteed or insured by the government. For
middle and low income families who do not qualify for conventional loan.
max amount of 65% of conventional loan.
- VA loan - -Mortgage guaranteed or insured by the government for
veterans and spouses. allow higher LTV and less stringent on credit score.
Same as FHA in essence.
- Conforming Loan - -meet standards to be bought by Fannie Mae or Freddie
Mac on the secondary market. lowest default risk
- Non-conforming loan - -Does not meet GSE standards, higher rate and
higher risk
- Jumbo Loans - -Usually conform to standards, but exceed the maximum
size. Higher int rate
- PMI - -Mortgage insurance, required for mortgages with LTV>80%. Usually
covers the top 20% of the loan (insures 20% of loan value in case of default).
Allows lenders to make loans to borrowers who cannot make 20% down
payment.
- Purchase Money mortgage - -Mortgage loan offered by house seller. All or
part of purchase price. Usually a second mortgage.
, - Package mortgage - -Loan used to finance purchase of home in which
furniture and other personal property are included. personal property is
added to collateral for the loan.
- Home equity loan - -Form of second mortgage in which the borrower uses
his or her equity in a house as collateral. Benefits: lower interest rate, longer
term, and MORE FAVORABLE TAX STATUS.
- Piggyback Loan - -Second loan originated at same time as original loan.
Allows borrower to reach 20% down payment and avoid PMI.
- Reverse mortgage loan - -For old people. Owner gets payments from
lender pulling from equity in a home. Losses covered when the borrower dies
and sale price covers amount owed.
- Purchase money loan vs contract for deed - -Contract for deed is NOT a
mortgage loan. Under purchase money, the title is transferred at same time
as possession. With contract for deed, only possession is passed to borrower
until debt is paid. Think of foreclosure process when the borrower holds the
title (purchase money) vs when the lender holds the title (contract for deed)
- Pipeline Risk - -Two different risks around mortgage bankers. Including
fallout risk and interest rate risk.
- Fallout risk - -Risk lying with mortgage banker when interest rates are
falling. The borrower may find a better rate loan and not commit to the loan.
- Interest rate risk - -Risk lying with mortgage banker when interest rates
are rising. When interest rates rise, the NPV of a series of cash flows
decreases. So, when the mortgage banker tries to sell the mortgage on the
secondary market, the NPV may be lesser than when the load originated,
and create a loss.
- Thrift maturity imbalance problem - -Using short term savings to fund long
term fixed rate loans. The rates can change over time, and the thrift may
have to pay more to savings account holders' than they receive from interest
rate payments. Cost of funds rise faster than the yield on investments.
- Importance of Fannie Mae and Freddie Mac - -Allow liquidity in housing
finance. Allow efficiency and flexibility in mortgage market. Broaden range of
people that can obtain mortgage allowances. Reduced interest rates and
costs of borrowing.
- 4 channels of modern home mortgage lending - -traditional direct lending,
GNMA process, GSE process, and private process of nonconforming loans
and Answers
Real estate is _____, while real property is ______. - -Land and its permanent
improvements, a bundle of rights in land and its permanent improvements
- Which type of ownership estate is the most complete bundle of rights - -
Fee simple absolute
- Competition for physical location and space - -The user market
- characteristics of real estate - -localized markets, highly segmented
markets, immobile products, heterogeneous products
- The land that benefits from an easement appurtenant is referred to as - -
The dominant parcel
- FHA Loan - -mortgage guaranteed or insured by the government. For
middle and low income families who do not qualify for conventional loan.
max amount of 65% of conventional loan.
- VA loan - -Mortgage guaranteed or insured by the government for
veterans and spouses. allow higher LTV and less stringent on credit score.
Same as FHA in essence.
- Conforming Loan - -meet standards to be bought by Fannie Mae or Freddie
Mac on the secondary market. lowest default risk
- Non-conforming loan - -Does not meet GSE standards, higher rate and
higher risk
- Jumbo Loans - -Usually conform to standards, but exceed the maximum
size. Higher int rate
- PMI - -Mortgage insurance, required for mortgages with LTV>80%. Usually
covers the top 20% of the loan (insures 20% of loan value in case of default).
Allows lenders to make loans to borrowers who cannot make 20% down
payment.
- Purchase Money mortgage - -Mortgage loan offered by house seller. All or
part of purchase price. Usually a second mortgage.
, - Package mortgage - -Loan used to finance purchase of home in which
furniture and other personal property are included. personal property is
added to collateral for the loan.
- Home equity loan - -Form of second mortgage in which the borrower uses
his or her equity in a house as collateral. Benefits: lower interest rate, longer
term, and MORE FAVORABLE TAX STATUS.
- Piggyback Loan - -Second loan originated at same time as original loan.
Allows borrower to reach 20% down payment and avoid PMI.
- Reverse mortgage loan - -For old people. Owner gets payments from
lender pulling from equity in a home. Losses covered when the borrower dies
and sale price covers amount owed.
- Purchase money loan vs contract for deed - -Contract for deed is NOT a
mortgage loan. Under purchase money, the title is transferred at same time
as possession. With contract for deed, only possession is passed to borrower
until debt is paid. Think of foreclosure process when the borrower holds the
title (purchase money) vs when the lender holds the title (contract for deed)
- Pipeline Risk - -Two different risks around mortgage bankers. Including
fallout risk and interest rate risk.
- Fallout risk - -Risk lying with mortgage banker when interest rates are
falling. The borrower may find a better rate loan and not commit to the loan.
- Interest rate risk - -Risk lying with mortgage banker when interest rates
are rising. When interest rates rise, the NPV of a series of cash flows
decreases. So, when the mortgage banker tries to sell the mortgage on the
secondary market, the NPV may be lesser than when the load originated,
and create a loss.
- Thrift maturity imbalance problem - -Using short term savings to fund long
term fixed rate loans. The rates can change over time, and the thrift may
have to pay more to savings account holders' than they receive from interest
rate payments. Cost of funds rise faster than the yield on investments.
- Importance of Fannie Mae and Freddie Mac - -Allow liquidity in housing
finance. Allow efficiency and flexibility in mortgage market. Broaden range of
people that can obtain mortgage allowances. Reduced interest rates and
costs of borrowing.
- 4 channels of modern home mortgage lending - -traditional direct lending,
GNMA process, GSE process, and private process of nonconforming loans
