Financing 1

qualifying the buyer, property, and title, and servicing the loan

FED- help maintain sound credit conditions

Funtions of the FED- control reserve requirmens, regulation discount rate, open market operations

• banks keep more money- rate increase
• banks keep less money- rates decrease

discount rate- the interest rate the FED charges its member banks to borrow money

Prime Rate- is a short term interest rate charged by banks to its most credit worthy customers

The primary mortgage market is made up of intermediaries (Lenders) who place money into the market.

Primarly specialize in conventional loans made to borrowers who purchase residential property. The deposits made into savings and loans are insured by the Federal Deposit insurance

specialize in short term commercial loans

invest in long-term real estate projects, thereby making money available for financing.

credit union participates in the money market by providing financing for its members

act as middleman, they bring borrowers and lenders together. Mortgage brokers are not lenders, they arrange financing an charge a finders's fee for their services.

act as loan originators and sell the mortgages they make

provide a place where mortgages could be bought and sold

is largest member of secondary market. Originally created to buy FHA/VA mortgages, Fannie mae will by any mortgage that meets its specifications.

is owned by the United States Goverment and is under the department of housing and urban development (HUD)

Was created 1968 to buy mortgages made by Savings and Loans. Freddie Mac is a government sponsored under HUD. Freddie Mac buys and then pools mortgages, and sells bonds in the marketplace with the mortgages used as securities

is one where the borrower makes interest payments only during the term of the loan

means to reduce the debt with payment that covers both the principal and interest. If a loan is fully amortized, at the end of the loan term, the balance will be zero.

• is one that is tied to a money market index which allows the interest rates to fluctuate with market. 
• A margin is a premium that is figured into adjustable mortgages. the margin represents lender's cost of doing buisness.

• Adjustable rate mortgages also contain rate caps. A rate cap limits the amount of interest that can be charged periodically.
• Payment caps sets the max amount for a payment
• adjustment period indicates how often the rate can be changed

tied to a ARM allows the mortgagor to convert from the adjustable rate to a fixed rate mortgage at certain intervals

Is one where the payments are not sufficient to pay the principal. At the end of the term, a ballon payment is required.

is one that requires periodic increases in the payment; the increase applies to the principal, thus reducing the term of the loan.

the mortgagee sends a monthly payment to the mortgagor. reverse annuity mortgages would be expected to have compund interest because no payments are made on the loan

is one where payments start out low, step up over a period of years, then increase and level out for the remainder of the loan term.

the lendeer originates a loan at a below market rate in return for a guaranteed share of the appreciation the borrower will realize when the property is eventually sold. type of participation mortgages

is one where the lender participates (shares or receves) in the equity or inmcomea property produces