14.Case Study Question Set B

1. Fannie Mae pools the loan along with many others to create Mortgage-Backed Securities, which are subsequently purchased by the Florida Teachers Retirement System

Secondary market participant.
Investors who are the ultimate owners of mortgage-backed securities are also secondary market investors.

2. Javier and Raquel continue to make their payment to FCMC (……).Annually, the FCMC analyzes their escrow account, and provides interest statements. FCMC pays real estate taxes and insurance from the escrow account when they are due and contacts the borrowers as necessary. The bank withholds a fee for these activities and forwards the rest of the borrower’s monthly payment to Fannie Mae.

Servicer
Collecting, managing tax and insurance payments, annual reporting to the borrower are all servicing tasks.

3. Things are going well for Javier and Raquel, and they need more room for their growing family. Seven years have passed since they purchased their home. They are unaware of Fannie Mae, or the WVDFI, and are comfortable with FCMC. They contact FCMC (…….)for a pay-off amount on their current mortgage so they know how much equity they have.

Servicer.
Calculating and quoting payoffs is a servicing function.

4. Based on the findings of that internal audit, FCMC underwriters got some additional training. Except for Wendy, who got a new job as (……) answering the phone in the Collections Department.

Servicer.
Congrats Wendy! Collections is a servicing function.

5. About a year after the loan closed, the West Virginia Division of Financial Institutions (WVDFI) (…..) informs FCMC that they are conducting a routine examination. The WVDFI randomly selects Javier and Raquel’s loan and 50 others, which they review for legal compliance. FCMC executives are pleased and relieved when the WVDFI report shows no significant errors.

Examiner/regulator
The West Virginia Department of Financial Institutions is the regulator of mortgage licensees within the state. Licensees are examined on a regular basis to confirm compliance with state and federal regulations.

6. Fannie Mae found other problems in the audit and required FCMC to respond with a revised Quality Control Plan. They hired Sheila to head up the new program. The first thing Sheila(…….)did was a full review of the loans that FCMC had closed within the last three years.

Primary market participant.
Quality Control is a requirement of primary market participants.

7. Fannie Mae’s Quality Control Department (……) also happens to select Javier and Raquel’s loan for a random quality control audit. Things do not go so well for FCMC this time. Wendy wasn’t thorough in her review of the appraisal. The audit reveals errors that Fannie Mae claims led to a serious over-valuation of the property. Although they could be forced to repurchase the loan from Fannie Mae, FCMC is able to negotiate a compromise and are only required to indemnify Fannie Mae in the event of a loss.

Secondary market participant.
Secondary market participants maintain quality control programs to assure that their guidelines are being followed. You might have also considered the choice “examiner/regulator” here which would not really be a wrong answer as the function is like an examiner, however the role of assuring quality does fall under the role of secondary market participant.

8. Things are going well for Javier and Raquel, and they need more room for their growing family. Seven years have passed since they purchased their home. They are unaware of Fannie Mae, or the WVDFI, and are comfortable with FCMC. They make an appointment with Taylor, an FCMC loan officer(……), so that they can learn about new mortgage terms that might be available to them.

Primary market participant
Meeting with consumers to discuss terms is a loan originator function and thus a primary market function.