Chapter 14 Real Estate Financing: Practices

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  1. Annual Percentage Rate (APR)
    The relationship of the total finance charges associated with a loan.  This must be disclosed to borrowers by lenders under the Truth-in-Lending Act.
  2. Blanket Mortgage
    a mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt.  Usually used to finance subdivision developments.
  3. Buydown
    A financing technique used to reduce the monthly payments for the first few years of a loan. i.e. 3-2-1 buydown.
  4. Certificate of Reasonable Value (CRV)
    a form indicating the appraised value of a property being financed with a VA loan.
  5. Conforming Loan
    A standardized conventional loan that meets Fannie Mae's or Freddie Mac's purchase requirements.
  6. Construction Loan
    made to finance the construction of improvements on real estate.  Highest risk loan.
  7. Conventional Loan
    A loan from private investors that requires no government insurance nor guarantee
  8. Department of Housing and Urban Development (HUD)
    A federal cabinet department active in national housing programs.  Among its many programs are urban housing programs, public housing, model cities, rehabilitation loans, FHA subsidies, fair housing enforcement, and water and sewer grants.
  9. Equal Credit Opportunity Act (ECOA)
    The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status.
  10. Fair Credit Reporting Act
    Gives individuals the right to check their own credit reports and demand that mistakes be corrected.
  11. Fannie Mae
    A quasi-governmental agency established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders.
  12. 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.
  13. FHA-insured loan
    A loan insured by the Federal Housing Administration and made by an approved private lender in accordance with the FHA's regulations. 29/41
  14. Freddie Mac
    A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market.
  15. Ginnie Mae
    A government agency under HUD that plays an important role in the secondary mortgage market.  It sells mortgage-backed securities that are back by pools of FHA and VA loans.
  16. Home equity loans
    A loan under which a property owners use their residence as collateral and can then draw funds up to a prearranged amount against the property.
  17. Jumbo loan
    A residential mortgage loan in excess of acceptable loan amounts for purchase by Fannie Mae or Freddie Mac, also called nonconforming loans.
  18. Loan-to-value ration (LTV)
    The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.
  19. Open-end mortgages
    a mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage; and equity line mortgage.
  20. Package loan
    used to finance the purchase of both real property and personal property, such as in the purchase of a furnished home that includes window coverings and major appliances.
  21. Predatory Lending Act
    Imposes restrictions and limitations on high-cost loans, revised the permissible fees and charges on certain loans, prohibits unfair or deceptive practices by mortgage brokers and lenders, provides for public education and counseling about predatory lending.
  22. Primary Mortgage Market
    The mortgage market in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mortgage brokers.
  23. 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.
  24. Purchase-money mortgage
    A note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate.  In NC, a seller lender is not entitled to a deficiency judgement.
  25. Real Estate Settlement Procedures Act (RESPA)
    Federal Law that ensures that residential buyers and sellers receive full disclosure of all settlement charges when a 1-4 family unit residence is financed by federally-related first mortgage loans. The Act mandates a HUD booklet about closing costs, a good-faith estimate of closing costs, and a standardized HUD-1 closing statement.  The act, known as Regulation X, also prohibits kickbacks from lenders.
  26. Regulation Z (Truth-in-Lending Act)
    Implements the Truth-in-Lending Act requiring credit institutions to in inform borrowers of the true cost of obtaining credit.
  27. Reverse-annuity mortgage (RAM)
    A loan under which the homeowner receives monthly payments based on the homeowner's accumulated equity rather than a lump sum.  The loan must be repaid at a prearranged date, upon death of the owner, or the sale of the property.
  28. Sale and leaseback
    a transaction in which an owner sells improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises.
  29. Secondary Mortgage Market
    A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called the secondary money market.  Mortgages are first originated in the primary mortgage market.
  30. Subordination agreement
    A written agreement between holders of liens on a property that changes the priority of mortgage, judgement, and other liens under certain circumstances.
  31. Subprime mortgage
    A loan made to a borrower with a credit rating below what is required for regular loans creating greater risk liability for the lender that is countered by higher interest rates and fees; called B, C, or D paper.
  32. Trigger terms
    Specific numbers about price or percentages that if used makes total financing term disclosure mandatory under Regulation Z.
  33. VA-guaranteed loan
    Uses only total-monthly-debt-to-income ratio to qualify its borrowers, set at 41% of the borrower's monthly income.
  34. Wraparound loan
    A method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position.  The new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender.
Card Set
Chapter 14 Real Estate Financing: Practices
Modern Real Estate Practice in NC 8th Edition
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