fin 3353 exam 2 key terms

8/14/2019 FIN 3353 Exam 2 Key Terms

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Hint Answer

Chapter 6Adjustable-Rate Mortgage (ARM)

Chapter 6 Adjustment rate cap

Chapter 6 Convertible

Chapter 6

Constant Maturity Treasury (CMT) Indexes

Chapter 6 Frequency of rate change

Chapter 6Graduated-payment mortgage (GPM)

Chapter 6 Index

Chapter 6 Initial-period discount/Teaser Rate

Chapter 6 Interest rate caps

Chapter 6 Life-of-loan cap

Chapter 6 London Interbank Offered Rate (LIBOR)

Chapter 6 Margin

Chapter 6 Negative AmortizationChapter 6 Periodic Adjustment rate cap

Chapter 6 Reverse Mortgage

Chapter 8 Moral Hazard

Chapter 8Federal Housing Administration (FHA)

Chapter 8 Mortgage Insurance

Chapter 8 Private Mortgage Insurance (PMI)

Chapter 8 Community Development Block Grants (CDBG)

Chapter 8 HOME Program

Chapter 8 HOPE Program

Chapter 8 Securitization

Chapter 8 Right of Recission

Chapter 8 Good Faith Estimate

Chapter 8 Uniform Settlement Statement (HUD-1)

Chapter 8 Section 8 Housing

Chapter 8Mortgage Insurance Premium (MIP)

Chapter 9

Fair Housing Act (1968)

Chapter 9

Blockbusting

Chapter 9 Effects Method

Chapter 9 Intent Approach

Chapter 9 Practices Approach

Chapter 9Home Mortgage Disclosure Act (1975)


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Chapter 9Community Reinvestment Act (1978)

Chapter 9 Redlining

Chapter 9 FHAing

Chapter 9

Housing for Older Persons Act (1995)

Chapter 9Equal Credit Opportunity Act (ECOA)

Chapter 9 Reasonable Accomodations

Chapter 10 Secondary Mortgage Market

Chapter 10 Credit Enhancement

Chapter 10 Double Taxation

Chapter 10 Pass-Through Securities

Chapter 10 Mortgage-Backed Bonds

Chapter 10Collateralized Mortgage Obligations (CMOs)

Chapter 10Real Estate Mortgage Investment Conduit Security (

Chapter 10 Credit Default Swap (CDS)

Chapter 10 Counterparty Risk

Chapter 10Fannie Mae

Chapter 10

Ginnie Mae

Chapter 10

Freddie Mac

Chapter 10 Government Sponsored Enterprises (GSEs)

Chapter 10

Federal Housing Finance Agency

Chapter 10 Mortgage-Backed Security

Chapter 13 Uniform Residential Loan Application

Chapter 13 Full Doc

Chapter 13Stated Income (Verified or Stated Assets)

Chapter 13 No Doc

Chapter 13

Uniform Residential Appraisal Report (URAR)

Chapter 13 Financial Institution Reform, Recovery, and Enforce

Chapter 13 Yield Spread Premium (YSP)

Chapter 14 Mortgage Default Insurance

Chapter 14Partial Coverage

Chapter 14 Full Coverage


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Chapter 14Co-Insurance

Chapter 14 Certificate of Eligibility (COE)

Chapter 14 Entitlement

Chapter 14 Private Mortgage Insurance (PMI)

Chapter 14 Foreclosure

Chapter 14 Judicial Foreclosure

Chapter 14Power of Sale

Chapter 14Equitable Right of Redemption

Chapter 14 Statutory Right of Redemption

Chapter 14Deficiency Judgement


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DefinitionA type of mortgage in which the interest rate adjusts periodically according to a preselected index, such as

Treasury Bill rates, and a margin. This adjustment results in the mortgage payment either increasing or

A cap (usually one or two percent) on the change in the interest rate on an adjustable rate mortgage.

within a given window of time, the ARM can be converted to a fixed-rate mortgage.

An a justment or equiva ent maturity, use y t e Fe era Reserve Boar to compute an in ex ase on t e

average yield of various Treasury securities maturing at different periods. Constant maturity yields on Treasuries

are obtained by the U.S. Treasury on a daily basis through interpolation of the Treasury yield curve, which in turn

How frequently the lender can adjust the contract rate on the loan.

A residential mortgage designed to overcome the tilt effect. The monthly mortgage payments that start at a

level below that on a FRM and increase at a predetermined rate with later payments above that on a FRM. They

A rate of interest, such as a T-bill rate, used to measure periodic interest rate adjustments for an adjustable rate

an initial contract rate on the loan that is less than the index plus the margin at that time. AKA Teaser Rate

A provision in an adjustable rate mortgage that limits the increase in the rate of interest at each anniversary date

The maximum rate of interest allowed under the terms of an adjustable rate mortgage.

An average of daily lending rates from several major London banks, used as a common international interest rate

The number of basis points a lender adds to an index to determine the interest rate of an adjustable rate

A loan payment schedule in which the outstanding principal balance goes up, rather than down, because theplaces a limit on how much the contract rate can change at each date of adjustment (anniversary date).

Refers to a mortgage with falling equity, rising debt, in which the lender makes payments to the borrower for a

The tendency of insured parties to take on more risk than they would if they hadn't been indemnified against lossA federal agency whose main activity is the insuring of residential mortgage loans made by private lenders. FHA

is a division of HUD which sets standards for construction and underwriting and charges a fee, generally 3.8

A policy that protects lenders against losses that result from defaults on home mortagage.

Insurance written by a private (nongovernmental) company protecting the mortgage lender against loss caused

Grants from the Department of Housing and Urban Development to allow communities to carry out a wide

Set up a trust fund to increase the supply of low-income housing

Issues grants to rehab public housing

The process of creating new securities backed (collateralized) by a package of other securities or assets.

The right to rescind (undo) a contract if certain legal requirements are not fulfilled. Right to recind such as in case

An approximation of the fees due at closing for a mortgage loan that must be provided by a lender to a borrower

A standard form required by HUD that stipulates the fees and charges to be paid by the buyer and seller at a loan

A HUD subsidy program whereby the department pays a portion of housing costs for low-income families. AKA

The charge paid by a mortgagor for mortgage insurance either to FHA or to a private mortgage insurance (PMI)

company. On an FHA loan, the payment is 3.8 percent of the loan balance. Up-front payment plus an annual

This prohibits discrimination in the sale or rental of residential dwellings (or vacant land intended to be used as

such) on the basis of race, color, religion, or national origin. Gender was added as a protected class by the

Housing and Community Development Act of 1974. Families (those with children under 18) and the handicapped

The illegal practice of inducing panic selling in a neighborhood for financial gain. Lowering the value of housebased on a group of people moving in to the surrounding area. The criminal will typically make a statement that

certain minority groups are moving into the neighborhood and that property owners should sell quickly at a

A form of identifying discrimination. Minority groups are under represented in the class of credit recipients relativ

A rule by the Federal Reserve System that attempts to measure potential discrimination in mortgage lending by

A form of identifying discrimination. Discriminatory behavior exists when a lender fails to adhere to a set of

A federal act passed in 1975 that requires disclosure of an institutions loans by census tract or by zip code.

Requires financial institutions of a cretain size to compile a report on the distribution of its loans where it does


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An act passed by Congress in 1978 that requires federally insured thrifts to adopt a community reinvestment

statement that defines the community in which the institution makes loans and maintains a file of loans for

The practice by lenders of refusing to make loans in certain risky or transitional neighborhoods.

The practice by lenders of making only FHA loans in certain risky or transition neighborhoods. Lenders suffer no

This act eliminated the requirement that the housing had to meet the significant facilities and services

designed for the elderly. A HUD rule (April 2, 1999) in the Federal register implements the this act and details

those provision of the Fair Housing Act that pertain to senior housing. Relief under the act has beenA federal law that requires lenders to make credit equally available without discrimination based on race, color,

religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. Also

Accommodations that would be considered reasonable to the typical renter. They are those that are not

Market where existing mortgages are bought and sold.

The process whereby the issuer of a mortgage-related security adds support to the underlying assets by

Refers to the taxation of a C-corporation at the corporate level and then taxation of the dividends and capital

Securities issued by the Government National Mortgage Association (Ginnie Mae) which provides for the interest

A bond or debt instrument which is backed by a pool (large group) of mortgages and for which the cash flow of

Multiple-class, pay-through bonds, first issued by the FHLMC in June 1983. They are secured by a pool of

mortgages or a portfolio of pass-through securities. The CMO provides a type of call protection and pays

A type of mortgage-backed security that allows for income to be taxed only to the holders of the bond and not

to the entity holding the mortgages. Consists of a fixed pool of mortgages broken apart and marketed to

An instrument that insures a bondholder against a loss in the value of those bonds.

The risk of the swapper not having the money to cover your 'insurance.'

A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and

sells residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages. Under

This HUD agency operates as a participant in the secondary mortgage market. It is involved with special

government financing programs for urban renewal projects, elderly housing, and other high-risk mortgages. It

also carries out the liquidation and special assistance functions performed by the Federal National Mortgage

A private corporation authorized by Congress with an independent board of directors to provide secondary

mortgage market support for conventional mortgages. It also sells participation certificates secured by pools ofExamples are Freddie Mac, Fannie Mae, and Ginnie Mae.

A U.S. government agency created by the Housing and Economic Recovery Act of 2008 that regulates the

secondary mortgage market by overseeing the activities of Fannie Mae, Freddie Mac and the 12 federal home

loan banks. This new agency was established to act like a bank-regulator in order to strengthen and improve

A security purchased by investors that are secured by mortgages. Such securities are also known as pass-through

All the information needed to analyze the borrower is contained within this document.

the information provided by the borrower is verified from various sources.

the borrowers income is stated by the borrower in good faith (may be popular with tip-based and bonus-

based income) and assets are verified or the borrowers income and assets are stated by the borrower in good

no information is provided relative to the borrowers income and assets and the loan is based primarily on the

One of the most common forms used in real estate appraisal which was created to allow for standard reporting

and analysis of single-family dwellings or single-family dwellings with an "accessory unit". has been used for

nearly all loans, including those intended for sale to Fannie Mae or Freddie Mac and those insured by the FHA or

An act passed in 1989 to help bail out the failing savings and loan industries. It established the Resolution Trust

Putting on extra value to give the broker extra money to steer the broker to them; for no reason other than to pa

Insures the lender against losses that result from foreclosure.

Type of mortgage default insurance which covers losses up to a certain percentage of the original loan amount.

Refers, usually, to mortgage insurance where the insurer will reimburse the lender for only a portion of the debt.

Type of mortgage default insurance in which all lender losses are covered. A mortgage insurance program where


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Type of mortgage default insurance which covers losses up to a certain percentage of the original loan amount

then splits it between the lender and FHA. A sharing of insurance risk between insurer and owner depending on

Veterans eligible for VA loans receive this.

Establishes the maximum loan amount for VA loans

Insurance written by a private (nongovernmental) company protecting the mortgage lender against loss caused

A legal procedure taken by a mortgagee or lender under the terms of a mortgage or deed of trust for the

A foreclosure process that involves a court proceeding (as opposed to a power-of-sale foreclosure that avoids aA process of foreclosure that allows the lender to avoid court costs by presenting evidence to a trustee who

holds the title to the property and receives title in return. Foreclosure proceeds without a court order; usually

The common law right to redeem property during the foreclosure period by paying past due amounts. In some

states the mortgagor has a statutory right to redeem property after a foreclosure sale. This is limited to several

The right of a borrower after a foreclosure sale to reclaim his property by repaying his defaulted loan. Redeem th

A judgment levied against the borrower personally (personal assets) for the difference between the mortgage

debt (including payments in arrears) and the liquidation value of the property. Court ordered judgement against


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es.

of buyers remorse.

within three days of the lender taking a borrower's loan application. It is required by the Real Estate Set

e to the general population.


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the broker.


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property after the sale.


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lement Procedures Act (RESPA). While the form of the it is standardized across the industry to allow bo


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rrowers to compare costs between lenders, it is key to note that it is only an estimate, and the true figu


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re can sometimes be different.

fin 3353 exam 2 key terms

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