Balloon loans partially amortized loan with final payment substantially

Champions School Principles of Real Estate II Flashcards Mortgage Backed SecuritiesType of asset-backed security that is secured by a mortgage or collection of mortgages. The mortgages are sold to a group of individuals (a government agency or investment bank) that securitizes, or packages, the loans together into a security that investors can buy.Federal Open Market Committee (FOMC)Sets the Fed's monetary policy, which is carried out through the Trading Desk of the Federal Reserve Bank of New York Chronological AgeThe actual age of the property in years. If the house is 20 years old Balloon loanspartially amortized loan with final payment substantially larger than the others.Principle of SubstitutionAccording to this principle, the value ofa commodity is infuenced by the cost of acquiring a substitute or comparable item Principle of RegressionThe presence of lower-priced properties in the area will cause a decline in the value of the subject property.Community Reinvestment Act.A federal law passed to ensure that banks would serve the needs of the community in which they were chartered to do business and prohibits redlining. enacted by Congress in 1977 revised 1995 mortgageeKnown as the lender GRM (Gross rent Multiplier)The relationship between the amount of rent a specific property can command, and the value of the property to the owner.AppraisalAn Appraiser's opinion of value External obsolescenceThe loss in value of a property caused by factors outside of the property itself. Such as the oversupply and consequent drop in demand for a particular kind of property, government actions, such as zoning changes or condemnation proceedings, and proximity to undesirable land uses, such as highways or factories.Adjustment PeriodThe interest rate and monthly payment change every month, 3 months, 6 months, 1 year, 3 years, 5 years or 7 years Effective AgeThe appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades. A house may be well-maintained and been updated over the years; therefore, the appraiser might determine that a 20-year-old house might have an age of 10

package mortgageIncludes both real and personal property ( fixtures and furnishings) Minimum withdrawal in Texas on HELOC (Home Equity Line of Credit)

$4000.00

ForeclosureThe legal procedure under which property may be sold to satisfy an unpaid promissory note Principle of changeChange is constant; therefore, the forces acting on a parcel of land are always affecting the value of the land.LTV (Loan to Value Ratio)The percentage of value or sales price that a lender is willing to finance.Ad ValoremAccording to value

2 categories Residential Loans are divided into: conventional/ government loans

Fannie MaeFormerly known as the Federal National Mortgage Association (FNMA), Fannie Mae is the largest investor in home mortgages today.Began in 1938 federal agency.Became private 1968 Subject PropertyTerm use in the appraisal report to describe the property being appraised Consumer Financial Protection Bureau (CFPB) enforces what Acts?TILA (Truth in Lending), RESPA ( Real Estate Settlements Procedures Act), FCRA (Fair Credit Reporting Act, ECOA (Equal Credit Opportunity Act)

• Types of Appraisal ReviewsDesk Review/ Field Review

MarginThe percent added to the index in order to calculate the payment interest rate USPAPUniform Standards of Professional Appraisal Practice GRM (Gross rent Multiplier) FORMULASales Price ÷ Monthly Rent Loan FundingThe process of transferring funds to a title or escrow company for disbursement Discounted Initial Rate (teaser rate)A lower interest rate is offered by the lender during the first year or more of the loan.limited appraisal reportShorter version of the appraisal report for underwriting, rather than requiring a full appraisal report, which includes interior inspection.ValueThis does not always equal price mortgagorKnown as the borrower Functional obsolescenceThe loss in desirability of the style, layout, or function of an element of a property over time Another Name for environmental or economic obsolescence External obsolescence Acronym D.U.S.T stands forDemand,Utility, Scarcity, Transferability characteristics of value in a property open ended mortgagePermits additional borrowing on the same note and mortgage.

• CAPS for Interest RatePer Adjustment Cap/Lifetime Cap/ Initial Adjustment Cap

Principle of Increasing/or decreasing returns It is prudent to improve property when the value added by the improvement exceeds cost of the improvement. It is would suggest that an owner should not "over improve" a property.promissory noteAlso known as a real estate lien notes the borrower's unconditional promise to repay, and includes the amount borrowed, payment amount, due date and rate of interest.

• Approaches to Value for AppraisalSales comparison approach, the cost approach, and

income approach Principle of contributionSuggests that the value of a property is equal to the sum of the contributory value of each of its component parts mortgageThe document that pledges the property as security for repayment of the note, is recorded in the county in which the property is located.Mortgage BankerA person, corporation or firm, not otherwise in banking, that provides its own funds for mortgage financing as opposed to savings and loan associations or commercial banks that use other people's money (depositors) to originate mortgage loans discount ratethe interest rate a Reserve Bank charges eligible financial institutions to borrow funds on a short-term basis PENSIL(Property Address, Estimated Value, Name of the borrower, SSN, Income, Loan Amount) Freddie MacFederal Home Loan Mortgage Corporation (FHLMC) in 1970 for the purpose of purchasing mortgages in the secondary market DepreciationThe reduction in value of property from causes such as deterioration or obsolescence.Mortgage Fraud Fine$10,000 not to exceed RedliningThe practice of refusing to provide financing in a particular location For an application to be considered "complete" the lender must have all of the following...

PENSIL

UnderwritingThe detailed process of evaluating a borrower's loan application to determine the risk involved for the lender Field ReviewMany lenders, especially when dealing with high-LTV loans, will order this type of appraisal IRV formulaI = income, R = return on investment and V = value (V =I

÷R), (R= I ÷ V), (I =V X R)

blanket mortgagecovers more than one piece of property Income CapitalizationThe appraisal of commercial income properties Government National Mortgage Association (GNMA), or Ginnie Mae Was established in the United States in 1968 to promote home ownership wholly owned government association that operates the mortgage-backed securities program designed to facilitate the flow of capital

Loan ProcessingBuilding a file that will be used to make an underwriting decision Loan ServicingSending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance (and managing escrow and impound funds), remitting funds to the note holder, and following up on delinquencies.The Equal Credit Opportunity Act ECOAPassed 1974 ensures that all consumers are given an equal chance to obtain credit Sub-prime loansBorrowers are rated A-F with a prime borrower having an A rating. A minus to F-rated borrowers will pay 1 to 5 % higher than those with good credit. ese are non-conforming loans.

• Ways a "Comp" can differSuperior + Inferior

Fannie Mac 1003The standard loan application in use is the Uniform Residential Loan Application Principle of anticipationStates that the purchase price is affected by the expectation of future appeal and benefits

• Things Value of a Property can be affected by social, economic, governmental, and environmental

influences OriginationThe process of creating a new mortgage loan Uniform Standards of Professional Appraisal PracticeStandards that have been established by the Appraisal Standards Board of the Appraisal Foundation Physical deteriorationThe loss in a property's value due to daily wear and tear.Loan ClosingThe consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are disbursed by the lender.primary mortgage marketThe market in which borrowers and lenders come together to create and negotiate the terms of a mortgage transaction Net/Gross Adjustments may not exceed what % 15% Net/ 25% Gross Adjustments The most commonly misunderstood appraisal concept Market Value Truth In Lending Act (TILA)U.S. federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs Indexwhat the lender uses as an instrument for measuring changes in interest rates Fraud Enforcement and Recovery Act (FERA) It was signed into law by President Barack Obama in May

• It increases the penalties for a federal conviction for

mortgage fraud to a maximum of 30 years in prison and a ne of up to $1 million. FERA also increases the statute of limitations for mortgage fraud from 5 years to 10 years.ReconciliationFinal Step in Appraisal Process Principle of progressionThe value of a subject property is increased by the value of surrounding properties