Fannie Mae
Creates a secondary market for FHA & VA mortgages. Also sells mortgage loan products.
Administered Price System
Fannie Mae's method for purchasing mortgages according to daily economic indicators.
MBS
Mortgage backed securities.
Subprime Market
Mortgages granted using liberal qualifying standards.
Hypothecation
Borrower pledges collateral for a loan, while retaining ownership of the assets and enjoying the benefits therefrom.
Equitable Interest
A right in equity that, if violated (suffers a harm), is subject to satisfaction by an equitable remedy.
Reserve Requirements
Member banks are required to keep a specific percentage of deposits in reserve with the Federal District Bank to protect depositors.
Commercial Paper
Loans issued by commercial banks. The Fed resells this paper in secondary market, thus helping banks gain cash flow.
Discount Rate
Interest charged by member banks on funds borrowed from the Fed.
Prime Rate
Fed discount rate that banks use to determine the interest rate given to their prime customers.
Federal Funds Rate
Interest rate the Fed charges member banks for short-term (sometimes over night) loans that don't require collateral.
Open-Market Operations
Used by Fed to balance economy. Purchase or sale of government securities by lots.
FHA
Federal Housing Administration
TILA
Truth in Lending Act - Reg Z. Requires lenders to reveal total cost of loan and APR.
APR
Annual Percentage Rate = Total loan cost.
Right of Rescission
Borrower has 3 days to resend on loans secured by primary residence (excluding home loans).
US Treasury
The Nation's fiscal manager.
Treasury Bonds, Notes & Bills
US long-term debt instruments, 30 year, 10 year and short term.
FDIC
Federal Deposit Insurance Corporation - Insures member accounts up to $250,000.
FHLB
Federal Home Loan Bank - 12 U.S. sponsored banks offering low-cost funding to banks for home mortgage loan and other purposes.
HUD
Housing & Urban Affairs - Supervises the FHA, directs Ginnie Mae, enforces Fair Housing & RESPA
RESPA
Real Estate Settlement Procedures Act - Protects consumers by providing closing cost
NSP
Neighborhood Stabilization Program - Help stabilize homes in areas with many foreclosures. Grants provided to states for purchase.
ILSFDA
Interstate Land Sales Full Disclosure Act - Developer selling out-of-state must provide statement of record to HUD and property report to buyer.
ECOA
Equal Credit Opportunity Act - Prevents discrimination on basis of race, color, religion, sex, national origin, marital status, age or dependence on public assistance.
GFE
Good Faith Estimate must be provided to consumer within 3 days of filling out loan application. RESPA
AFBA
Affiliated business disclosure when referred to business with ownership.
HUD-1 Settlement Statement
Must be given to borrower if requested it within 24 hours of closing.
Initial Escrow Statement
Must be given to borrower at closing or in 45 days after closing.
CMO
Collateralized Mortgage Obligation - secondary market
GSE
Freddie Mac and Fannie Mae - Government Sponsored Enterprises
FHFA
Federal Housing Finance Agency - Independent agency regulates Fannie Mae, Freddie Mac & Federal Home Loan Bank.
Fannie Mae Underwriting
80% LTV, min 3-5% downpayment
Jumbo Loans
Noncomforming Loans issued in excess of limits by GSEs.
Ginnie Mae
Government-backed securities guarantees on special qualifying loans. HUD
REMIC
Real Estate Mortgage Investment Conduit - Administered by Ginnie Mae.
Who Makes RE Loans?
Primary Lenders and Financial Intermediaries
Demand Deposits
Checking Accounts
Interim Financing
construction loans.
Participation Financing
Lender requires partnership with developer.
Mortgage Brokers
Connects borrowers and lenders.
Mortgage Bankers
Originate new loans and collect payments, inspect collateral, supervise foreclosure, manage real estate loans.
Warehouse Funds
Loan until loan goes through.
SAFE Act
Secure and Fair Enforcement Mortgage Licensing Act - Minimum standards for licensing.
REIT
Real estate investment trust - Sold like stock, offers tax benefits. Must be 75% real estate & distribute 90% of taxable income to shareholders as dividends.
Registered Bonds
Issued to a specific owner and cannot be transferred without owners signature.
Bearer Bonds
Interest paid to person possessing the bond.
Coupon Bonds
have interest coupons attached which are removed and become due and cashed by bearer.
Revenue Bonds
Funds specific community improvement projects for cities.
IRBs
Industrial Revenue Bonds used to finance industrial projects that will generate revenue used to pay the debt.
Industrial Development Bonds
Allows investors to finance apt. and commercial developments tax exempt.
Mortgage Revenue Bonds
Tax exempt for investors limited to low-income buyers, first-time buyers, etc...
Zero Coupon Bonds
Discounted price held until maturity.
Encumberances
A right or interest in property held by one other than the legal owner. Includes easements, restrictions and encroachments.
Lien
Financial encumbrance.
Title Theory
Lender has greater rights until property paid off.
Lien Theory
Gives the borrowers more rights, equitable right of redemption
Legally enforceable lien
Mortgage + Note
Granting Clause
Pledges the mortgagor's rights.
Defeasance Clause
Defeats foreclosure by stating mortgagor wil get full title upon repayment
I=PRT
I = Interest
P = Principal
R = Rate
T = Time
Interest Rate Caps
Highest amount that an adjustable rate mortgage will go.
Index
Adjustable rate mortgage goes by an index to which a margin can be applied.
GPM
Interest rates lower in early years of the loan. Neg amort will increase
Home Equity Loans
Were prohibited. CLTV
HELOC
Home Equity Line of Credit.
Reverse Annuity Mortgage RAM
Borrower owns home.
Fannie Mae / Freddie Mac Conforming
PITI shall not exceed 28% of borrowers gross monthly income / 36% long-term debts
PMI
Private Mortgage Insurance - Required when LTV exceeds over 80% of loan - Avoid it with 20% down
Sale & Leaseback
Owner sells to investor then leases it back.
MIP
Mortgage Insurance Premium
Minimum down payment FHA
3.5 %