Chapter 13 Section 5

Question 1

primary mortgage market

Answer 1

-where loans are originated
-market consists of individuals and businesses that want or need to borrow money and the various sources for these loans

Question 2

mortgage lenders

Answer 2

-a licensed individual who lends money
-license required

Question 3

warehousing/warehouse lending

Answer 3

-mortgage lenders may borrow money as a line of credit from a commercial bank
-borrowed funds are used to fund additional mortgage loans that borrowers initially use to buy property

Question 4

savings associations

Answer 4

-a type of mortgage lender, typically for residential loans

Question 5

portfolio lender

Answer 5

-a lender that retains and services mortgages that they originate rather than sell them to other investors is referred to as a portfolio lender

Question 6

commercial banks

Answer 6

-stock companies that are owned by their stockholders and are chartered either by the state or by the federal government

Question 7

credit unions

Answer 7

-a nonprofit, cooperative financial institution owned and run by its members

Question 8

life insurance companies

Answer 8

-organized as either stock companies owned by stockholders or mutual associations owned by the policyholders
-largest source of funds for financing both apartment projects and commercial properties

Question 9

mortgage brokers

Answer 9

-a company, individual, or institution that originates loans and earns fees associated with the origination

Question 10

mortgage loan originator (MLO)

Answer 10

-an individual, who takes a residential mortgage loan applications or offers or negotiates terms of a residential mortgage loan for compensation
-do not make loans
-take applications and search for lenders who offer the lowest interest rates and easiest borrower qualification

Question 11

mortgage brokers

Answer 11

-an individual who conducts loan originator activities through one or more licensed MLOs
-must be licensed

Question 12

secondary mortgage market

Answer 12

-provides a constant source of funds with which to make real estate loans
-consists of secondary market lenders who purchase mortgages that originated in the primary mortgage market

Question 13

Fannie Mae (FNMA)

Answer 13

-originally created in 1938 as a government-owned corporation for the purpose of purchasing FHA loans

Question 14

Freddie Mac (FHLMC)

Answer 14

-purpose was to purchase conventional loans that were originated by savings and loan associations

Question 15

Ginnie Mae (GNMA)

Answer 15

-government-owned corporation that operates within HUD
-took over special assistance housing programs authorized by congress and acts to make low-yield, high-risk loans marketable

Question 16

conforming loans

Answer 16

-loans which are underwritten in accordance with requirements of freddie mac or fannie mae

Question 17

conforming lenders

Answer 17

-lenders that originate conforming loans

Question 18

nonconforming loans

Answer 18

-a loan offered to borrowers who do not qualify for conforming loans
-typically higher interest rates, may carry additional upfront fees, and insurance requirements

Question 19

portfolio mortgage lenders

Answer 19

-originate and fund their own loans, may service them for the entire life of the loan

Question 20

correspondent mortgage lenders

Answer 20

-originate and fund loans in their own name, then sell the off to larger mortgage lenders, who in turn service them, or sell them on the secondary market