Post on 03-Jan-2016
Primary Market – where lenders originate loans.
Secondary Market – provides a way for lenders to sell a loan.
FINANCIN
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Savings and Loan AssociationsCommercial BanksLife Insurance CompaniesMortgage CompaniesMortgage BrokersMunicipal BondsComputerized Loan Origination (CLO)
PRIMARY LOAN SOURCES
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The result created when lenders are required to pay high rates of interest for deposits while receiving long-term income from low-interest rate mortgage loans. © OnCourse Learning
DISINTERMEDIATION
Originating loans through the use of a networked computer system.provides information on current mortgage loan terms and loan types available on the market.
conveys loan application information electronically.
monitors the loan approval process so that the practitioner can check on the progress of the loan application at any time. © OnCourse Learning
COMPUTERIZED LOAN ORIGINATION
Mortgage Lenders
Borrowers
FinancialIntermediaries
MortgageInvestors
Primary Market Secondary Market
The Secondary Mortgage Market
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established as an independent entity within the Department of Housing and Urban Development.
purpose is to ensure the capital adequacy and financial soundness of Fannie Mae and Freddie Mac
requires Fannie Mae and Freddie Mac to meet certain affordable housing goals set annually
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OFHEO
This process is very streamlined. The regular uniform residential loan application is submitted to the lender and the lender then verifies the applicant’s employment, income, and assets. This information is fed into the computer and is promptly analyzed by the computer program. If the borrower is accepted and if the loan-to-value ratio is greater than 80%, the application is then forwarded to a private mortgage insurer. Those that are not accepted are considered as “refer” or “caution” and sent to the underwriting department.© OnCourse Learning
AUTOMATED UNDERWRITING SYSTEMS
State legislation that imposes an interest rate ceiling on loans.
U.S. Congress passed legislation that exempts from state usury limits most first lien home loans made by institutional lenders.
USURY
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Price to BorrowerDue-on-Sale – call clause.Prepayment - penalty for the right to
repay a loan early.
OTHER FINANCING CONDITIONS
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