Chapter 15 Definitions
Chapter 15 Definitions
Terms
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- Regulation Z
- Implements Truth in Lending Act requiring credit institutions to inform borrowers of true cost of obtaining a load (APR); certain advertising "triggers" disclosure in ads
- Truth in Lending Act
- Consumer protection act intended to force lenders to be truthful in their advertising; implemented by Regulation Z
- Package Loan
- Real estate loan secured by both real and personal property; i.e., new home that includes window treatments and major appliances
- Loan to Value Ratio
- Relationship between amount of mortgage loan and value of the real estate being pledged as collateral
- FHA Loan
- Loan insured by Federal Housing Administration; made by approved lender with FHA's regulation; borrowers pay mortgage insurance premium (MIP)
- Reverse Annuity Mortgage (RAM)
- RAM; homeowner receives monthly payments based on accumulated equity rather than one lump sum; repaid at certain date or owner's death or sale of property
- Primary Mortgage Market
- Mortgage market in which loans are originated; includes commercial banks, savings banks, mutual banks; the market that meets borrowers face to face
- Conventional Loan
- Loan that is neither FHA nor VA; does not require insurance or guarantee, although today high LTV loans are made along with PMI (private mortgage insurance
- Secondary Mortgage Market
- Market for purchase and sale of existing mortgages; designed to provide greater liquidity for mortgages; generally does not deal directly with borrowers
- Federal Home Loan Mortgage Corporation
- Corporation buys primarily conventional mortgage loans in secondary market, does not guarantee principal and interest payments of these mortgages
- Ginnie Mae
- HUD division, corporation without stock; administers special-assistance programs and works in tandem with Fannie Mae by guaranteeing payments
- Balloon Payment
- Final payment of mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized
- Equal Credit Opportunity Act (ECOA)
- Federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, receipt of public assistance, age, marital status
- Straight Loan
- Loan in which only interest is paid during term of loan with entire principal amount due with the final interest payment
- Real estate Settlement Procedures Act (RESPA)
- Federal law requires certain disclosure to consumers about mortgage loan closings; prohibits kickbacks, certain referral fees, requires good faith estimate in 3 business day
- Federal Reserve System
- Country's central banking system, responsible for nations monetary policy by regulating supply of money and interest rates; requires member banks to keep a reserve
- Fannie Mae
- Quasi-government agency buys any kind of mortgage loans in secondary market from primary lenders; guarantees timely principal and interest to security holders
- Purchase Money Mortgage
- Form of seller financing; note and mortgage from buyer are given to seller (lender) as part of the purchase price of the real estate
- Blanket Loan
- Mortgage loan secured by more than one parcel of real estate, provides for each parcel's partial release for mortgage lien upon some repayment; used by developers
- Sales - Leaseback
- Transaction in which owner sells improved property and as part of transaction, signs a long term lease to remain in possession of premises; permits owner to "pull out" equity
- Amortized Loan
- Loan in which the monthly payment consists of principal and interest that partially pay off both each month over the term of the loan
- Adjustable Rate Mortgage (ARM)
- Loan that has a fluctuating interest rate, usually one tied to a cost-of-funds index; the cost of doing business is the margin that stays fixed and is added to the base rate
- Private Mortgage Insurance
- PMI; insurance provided by private carrier that protects a lender against loss if a foreclosure and deficiency; usually insures top 10 - 20 percent of the loan
- VA Loan
- ortgage to qualified veteran by authorized lender; guaranteed by Department of Veteran Affairs; up to 100% LTV based on certificate of reasonable value (CRV)