Real Estate Unit 13 Flashcards

Real Estate Unit 13 Flashcards Which entity is NOT part of the primary mortgage market?-Rural housing service-Life insurance company-Mortgage broker company-Federal National Mortgage Association Federal National Mortgage Association. The federal Nation Mortgage Association (Fannie Mae) is secondary mortgage market participant.Which group insures federally chartered savings associations?-Bank Insurance Fund-Deposit Insurance Fund-Office of Thrift Supervision-Federal Housing Finance Board Deposit insurance fund. The Deposit Insurance Fund insures both federally chartered banks and savings associations.State-chartered commercial banks must display the word "National" somewhere in their name. True or False?False. Commercial bank chartered by the federal government must display the word "National" or the initials "N.A." somewhere in their name.When the FED decides to sell securities through open-market bulk trading, the supply of money in circulation increases. True or False?False. When the FED decides to sell securities through open market bulk trading, all funds received are held by the FRS. This reduces the supply of money in circulation, which in turn causes a drop in loanable funds and causes interest rates to rise.Mortgage loan originators create loans with either their own funds or money borrowed from financial institutions. True or False?False. Mortgage lenders (mortgage broker companies) originate loans with either their own funds or money borrowed from financial institutions. The role of the mortgage loan originator is limited to acting as an agent. A mortgage loan originator submits loan applications from prospective borrowers to various mortgage banker companies and other lenders unit the loans are approved or abandoned. If a loan application is approved, the mortgage loan originator earns a negotiated loan origination fee and drops out of the loan transaction.The process of consolidating many small savings accounts belong to individual depositors and investing the funds into larger, diversified projects is known as...-disintermediation.-loan origination.-intermediation.-discounting.Intermediation. Intermediation is a process practiced by financial institutions that serve as intermediaries between depositors and borrowers.The cost of 5 discount points on a $100,000 loan is $5,000.True or False?True. Each discount point is equal to 1 percent of the loan amount. Five discount points is equal to fiver percent of $100,000 or $5,000.Fannie Mae does NOT make loans directly to consumers; rather, Fannie Mae purchases loans for its own portfolio.True or False?True. Fannie Mae (formerly called the Federal National Mortgage Association or FNMA) was established by congress in 1938 for the purpose of creating a secondary market for mortgage loans. It is authorized either purchase loans for its own portfolio or underwrite loans.Which activity is NOT conducted by mortgage lenders?-Originate loans-Servicing loans-Charge interest

and loan origination fees-Accept saver's deposits Accept saver's deposits. Mortgage lenders (mortgage broker companies) are not financial intermediaries, and, as

such, do not accept savings deposits.The Fed periodically buys and sells an inventory of securities to increase or decrease the amount of money in circulation known as...-the reserve require.-liquidation.-portfolio reallocation.-open-market operations.Open-market operations. Open-market operations involve the purchase and sale of U.S. Treasury and federal agency securities.The discount rate is another term for mortgage points. True or False?False. The discount rate is the interest rate charged member banks for borrowing from the Federal Reserve Bank.Deposit accounts are insurance to $100,000 per depositor in each bank or thrift the FDIC insures. True or False?False. Deposit accounts are insured to $250,00 per depositor in each bank or thrift the FDIC insures. The coverage limit will return $100,000 (except for IRAs), effective January 1, 2014.A buyer pays $198,000 for a home and secures a mortgage for 80 percent of the purchase price. The mortgage is for 5 percent plus 2 points. How much did the buyer pay in discount points?-$792-$2,810-$3,168-$3,960

$3,168. The solution is: $198,000 purchase price x .80 rate

= $158,400 mortgage; $158,400 x .02 rate = $3,168 Lenders sometimes handle the loan payment collection and record keeping associated with mortgage loans known as...-open-market operations.-leverage.-loan origination fees.-servicing the mortgage.Servicing the mortgage. Some lenders "service" (handle the loan payment collecting and record keeping) the mortgages they originate.What is the result of increasing the discount rate?-The borrower pays higher out-of pocket expenses at closing.-The money supply increases.-The money supply decreases.-The local banker is not affected by increasing the discount rate.The money supply decreases. If the discount rate is increased, member banks have to pay a higher interest rate for money borrowed from their district bank. The higher interest rate is passed on in the form of higher interest to consumers. This reduces the number of loans made and less money circulates in the marketplace.Federally chartered SAs are required to be members of their district Federal Home Loan Bank. True or False?True. All federally chartered savings associations are required to be members of their district FHLB. While membership is optional for state-chartered savings associations, mutual savings banks, and insurance companies, many that meet federal standard and can qualify elect to join because only member institutions are allowed to borrow from their district FHLB for up to one year without collateral.Each discount point paid to the lender will increase the lender's yield (return) by approximately 1/8 of 1 percent.True or False?True. Discount points increase the actual yield from a mortgage without showing an increase in the interest rate on the mortgage. As a general rule of thumb, each discount point paid to the lender will increase the lender's yield (return) by approximately 1/8 of 1 percent (.00125).Which interest rate is charged member banks for borrowing money from the Federal Reserve?-Discount-Prime-Usury-Consumer Discount. The discount rate is the interest rate charged member banks for borrowing from the Fed.The amount that Federal Reserve member banks are required to keep on deposit is called the reserve

requirement. True or False?True. The amount that member banks are required to keep on deposit is called the reserve requirement. Raising or