1. © OnCourse Learning Chapter 13 : Sources of Financing

2.  Primary Market – where lenders originate loans.  Secondary Market – provides a way for lenders to sell a loan. FINANCING © OnCourse Learning

3.  Savings and Loan Associations  Commercial Banks  Life Insurance Companies  Mortgage Companies  Mortgage Brokers  Municipal Bonds  Computerized Loan Origination (CLO) PRIMARY LOAN SOURCES © OnCourse Learning

4.  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

5.  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

6. Mortgage Lenders Borrowers Financial Intermediaries Mortgage Investors Primary MarketSecondary Market The Secondary Mortgage Market © OnCourse Learning

7. Mortgage Loan Delivery Systems © OnCourse Learning

8.  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 © OnCourse Learning OFHEO

9.  FNMA  GNMA  FHLMC  Farmer Mac SECONDARY LOAN SOURCES © OnCourse Learning

10.  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

11.  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 © OnCourse Learning

12.  Price to Borrower  Due-on-Sale – call clause.  Prepayment - penalty for the right to repay a loan early. OTHER FINANCING CONDITIONS © OnCourse Learning

13. Alienation clause Automated underwriting system Computerized loan origination Disintermediation Fannie Mac Freddie Mac Mortgage broker Mortgage company Participation certificates Primary market Secondary mortgage market Usury Key Terms © OnCourse Learning