Conventional Loans
Loans that do not involve government cooperation
Unconventional Loans
Loans that are created or financed with the help of a government source
National housing act
Passed in 1934 in response to the numerous foreclosures brought by the depression and has been amended many times.
Federal Housing Administration (FHA)
- a division of the department of housing and urban development (HUD)
- FHA does not make loans, but it insures loans made by lending institutions such as thrifts, banks, life insurance companies, mortgage companies and others
- for 60 years, FHA has been a major force in determining how lending practices are carried out.
- insures payment of loan principal
Department of veterans affairs (VA)
- Presently authorizes first mortgage loans as well as second-mortgage loans of less than 40% of property value.
- The VA guarantees payment of the remaining mortgage indebtedness, up to a maximum amount.
Fixed-term
Is a fully amortized mortgage for up to 30 years and 32 days.
Growing equity mortgage (GEM)
- Increases in payments with the increases applied to the principal balance.
- The GEM is a formalized way of making additional principal payments, which increases the accumulation of equity and shortens the overall loan term.
Graduated payment mortgage (GPM)
- Provides for Lower initial monthly payments, increasing at a rate of 7% annually for the first five years.
- From the 6th year to the end of the loan term, the payments remain the same.
- Unlike FHA, which allows 4 other variations of the GPM, the VA allows only this one form of graduated payment.
California Veterans Farms and Home purchase program (CalVet)
- created in 1921
- To assist California veterans in acquiring home or farm property
- uses land contract document
- interest rate may change annually
CalVet loans can be used to?
- purchase an existing home
- finance a lot purchase and new construction
- rehabilitate a home purchased “as-is”
- Make home improvements
California Housing Finance Agency (CalHFA)
-Was chattered in 1975 as a self-supported affordable housing bank to make low-interest loans funded by the sale of tax-exempt bonds.
Purchase-money trust deed or purchase-money mortgage
Is given by buyer to seller at the time of purchase to secure all or part of the purchase price.
Land contract
- aka “Contract If deed” or “installment sales contract”
- is a form of seller financing in which the buyer takes possession of property and makes payments on its purchase but does not receive legal title to the property for at least 1 year from the date of possession.
- an alternative for a buyer who does not qualify for a regular mortgage loan.
Wraparound or wraparound trust deed
- Aka overriding trust deed or all-inclusive trust deed (AITD)
- is a way to take advantage of a seller’s existing loan with a relatively low rate of interest.
Sale-leaseback or leaseback
-a method of property transfer
Fannie Mae (formerly the federal national mortgage association)
- was created in 1938 as a subsidiary of the reconstruction finance corporation.
- authorized by National Housing Act of 1934
- issues it’s own stock, and it also obtains capital from borrowing, selling notes and debentures, selling mortgage-backed securities, and money earned from its own mortgage portfolio.
Ginnie Mae
- created as the Government National Mortgage Association
- offering high-yield, risk-free, guaranteed securities.
- guarantees securities issued by FHA-approved home mortgage lenders.
Freddie Mac
- created in 1970 in direct response to the scarcity of mortgage funds.
- provides a secondary market for residential conventional mortgage loans by buying such loans and reselling them to individual investors and financial institutions.
Mortgage insurance premium (MIP)
-what is paid to FHA at closing
Purchase money mortgage
Credit extended by seller to buyer
Secondary mortgage market
Transfer of existing mortgages between investors
