Ch. 10 Financial Institutions

Inflation

Is the result of too much money chasing too few goods

Deflation

Is when prices of real estate, goods, and service services go down

Buyers market

When the prices of real estate are down, terms are easy and there is usually a great deal of real estate estate listed for sale or rent

Sellers market

The prices of real estate are up and there is less real estate listed for sale or rent

Federal reserve banking system (Fed)

Is the nations central banking Authority

Federal reserve board

Is a committee appointed by the president, but is politically independent

Gross domestic product (GDP)

Is the total value of all goods and services produced by an economy during a specific period of time

Refinancing

Is the process of obtaining a new loan to pay off the old loan

Loan to value

Is the percentage of sale price or appraised value, whichever is lower, the lender will loan to the borrower to purchase the property

Capacity

Is determined based upon a borrower savings, valuable property, and income, and is evaluated in terms of the reliability of these assets. Excellent evidence of capacity would be sufficient income in good collateral.

Collateral

Is valuable property pledged as a guarantee for payment of a loan

Desire (to pay)

Is demonstrated by a good credit history, reflecting the discipline to make monthly payments on time

Credit scoring

Gives lenders a fast and objective measurement of your ability to repay a loan or make timely credit payments

Net worth

Is the amount that is left after subtracting all that you owe (debt) from what you own (assets)

Liquidity

Is the ease and rate with which an asset can be converted into a medium of exchange (like cash)

Opportunity cost

Is the lost profit one could have made by the alternative investment action not taken

Institutional lenders

Are very large corporations that lend the money of their depositors to refinance real estate transactions

Federal deposit insurance corporation (FDIC)

Is a government corporation that, for a fee, ensures each account of a depositor up to $250,000

General purpose, slender

They lend money for anything from real estate to sailboats

Non-institutional lenders

Are individuals and organizations that lend on a private or individual basis

Conventional loans

Are not insured or guaranteed by the US government

Credit union

Is a co-operative association and organized to promote thrift among its members and provide them with the source of credit

Real estate investment trust (REIT)

Is a type of company that sells securities to invest in real estate properties

Equity trust

Is a company that invest in real estate itself or several real estate projects

Mortgage trust

Is a company that invest in mortgages and other types of real estate loans or obligations

Pension plan

Is an investment organization that obtains funds from people before they retire and invest this money for their clients retirement

Mortgage bankers (companies)

Usually lend their own money or roll it over so they can originate, finance, and close first trust, deeds or mortgages secured by real estate. They then sell loans to institutional investors and service loans through a contractual relationship with the investors.

Private mortgage insurance (PMI)

Is a guarantee to lender that the upper portion of a conventional loan will be repaid if a borrower defaults and a deficiency occurs at the foreclosure sale

Mortgage insurance premium (MIP)

Is the protection for the FHA that ensures the letter for any loss if there is a foreclosure

FHA mortgage loan correspondent

Is a mortgagee approved by the secretary of the department housing in urban development

VA loan

For veterans; is not a loan, but rather a guarantee to an approved institutional lender

Certificate of reasonable value (CRV)

Is an appraisal of the property to be purchased by the veteran

California housing finance agency (Cal HFA)

Is a state agency that sells bonds so that it can provide funds for low income family housing on a project or individual home basis

Secondary mortgage (trust deed) market

Provide provides an opportunity for financial institutions to buy from and sell first mortgages (trust deeds) to other financial institutions

Jumbo loan

The requested loan amount is higher than the Fannie Mae and Freddie Mac loan limit

Mortgage loan originator

Is an individual who takes a residential mortgage loan application or offer offers or negotiate terms of a residential mortgage loan for compensation or gain

Mortgage loan disclosure statement

Is a form that completely and clearly states all the information and charges connect with a particular loan

Threshold reporting

Is the requirement of reporting an annual and quarterly loan activity to the department of real estate if within the past 12 months, the broker has negotiated any combination of 20 or more loans to a subdivision or a total of more than $2 million in loans

Commissioners permit

Is the approval of the proposed real property, security and plan of distribution

Real property securities dealer (RPSD)

Is any person acting as principal or agent who engages in the business of selling real property securities (such as promissory notes or sale contract contracts)