REF CH 1

• Residential mortgages are divided into two broad categories:

  Conventional loans and Government loans
• Government loans include

  FHA

  VA

  USDA
• Conventional loans and other loans

  are loans that have no federal government guarantees or insurance.
• If a lender intends to sell a conventional loan to Fannie Mae or Freddie Mac

  the loan must conform to their standards for purchase
• Conventional loans that meet Fannie Mae or Freddie Mace standards

  Conventional Conforming Loans
• Four Cs” of good lending

  Character

  Capacity

  Capital

  Collateral
• Character


  Credit character is revealed in the borrower’s credit report.
• Capacity


  is a measure of the borrower’s ability to repay the debt
• Capital


  is the sum of all assets that the borrower has accumulated
• Collateral


  is something of value that can be pledged as security for repayment of the loan
• 3 major credit data repositories:

  Experian

  Equifax

  TransUnion
• Yield


  is the return the investor receives over the life of the loan
• A loan with no discount points that is made at the current market rate of interest

  Par Loan
• Discount points also known as

  Pre-paid interest
• Mortgage rates are affected by events in the global financial market
• ORIGINATION


  The process of creating a new mortgage loan, including all steps a lender takes to attract and qualify a borrower
• Mortgage Broker


  Typically functions as a middleman between the borrower and the lender, negotiating, selling, or arranging loans to be delivered to larger investors
• Mortgage Banker


  Entities that provide their funds to provide mortgage financing, as opposed to commercial banks/savings associations.
• Correspondent Lender


  Usually smaller in scale than mortgage bankers or brokers, these lenders typically extend loans with their funds at their own risk
• LOAN PROCESSING


  During this phase, the loan processor will “build a file” that will be used to make an underwriting decision
• UNDERWRITING


  The detailed process of evaluating a borrower’s loan application to determine the risk involved for the lender
• CLOSING


  The consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender
• FUNDING


  The process of transferring funds to a title or escrow company for disbursement
• SERVICING


  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.
• Supply and demand


  the primary determinants of real estate values.
• Supply can be restricted by several factors, including

  Land costs

  Construction

  Taxation

  Economics

  Local government building codes and zoning ordinances
• The demand for real estate is affected by:

  Growth in employment

  Transportation systems

  Personal preference

  The availability of credit

  Federal government policy
• Housing and Economic Recovery Act of 2008 


  HERA was designed to assist with the recovery and revitalization of America’s residential housing market, from the modernization of the Federal Housing Administration to foreclosure prevention and enhancing consumer protections
• When was the FHA created?

  1934
• Who funds the FHA

  The FHA funds itself