Modern Real Estate Practice in Illinois Chapter 16

Modern Real Estate Practice in Illinois Chapter 16: Real Estate Financing: Practice

Introduction to the Real Estate Financing Market • The Federal Reserve System – Reserve requirements – Discount rates • Primary Mortgage Market – Made up of lenders that originate mortgage loans © 2008 Dearborn Real Estate Education

Introduction to the Real Estate Financing Market • Secondary Mortgage Market – Fannie Mae (formerly the Federal National Mortgage Association) – Ginnie Mae (formerly the Government National Mortgage Association) – Freddie Mac (formerly the Federal Home Loan Mortgage Corporation) © 2008 Dearborn Real Estate Education

Financing Techniques • Straight Loans – Essentially divides loan into two amounts (interest and principal) to be paid off separately; interest first • Interest Only Loans – Mortgage requires payment of the interest only for a stated period of time; principal due at end of the term © 2008 Dearborn Real Estate Education

Financing Techniques • Amortized Loans – Adjustable-Rate Mortgages (ARMs) – Balloon Payment Loan – Growing-Equity Mortgage (GEM) – Reverse-Annuity Mortgage (RAM) – Nonrecourse Loan © 2008 Dearborn Real Estate Education

Loan Programs • Conventional Loans • Private Mortgage Insurance • FHA-Insured Loans – Prepayment privileges – Discount points © 2008 Dearborn Real Estate Education

Loan Programs • VA-Guaranteed Loans – Certificate of eligibility – Certificate of reasonable value (CRV) – Reasonable discount points – Prepayment privileges – Assumption rules • Agricultural Loan Programs © 2008 Dearborn Real Estate Education

Other Financing Techniques • • • Purchase-Money Mortgages Package Loans Blanket Loans Wraparound Loans Open-end Loans Construction Loans (Interim Financing) Sale-and-Leaseback Buydown Home Equity Loan © 2008 Dearborn Real Estate Education

Financing Legislation • Truth-in-Lending Act and Regulation Z – Creditor – Three-day right of recission – Advertising – Penalties © 2008 Dearborn Real Estate Education

Financing Legislation • Equal Credit Opportunity Act (ECOA) • Community Reinvestment Act of 1977 (CRA) • Real Estate Settlement Procedures Act (RESPA) © 2008 Dearborn Real Estate Education

Computerized Loan Origination (CLO) and Automated Underwriting • A CLO is an electronic network for handling loan applications through remote computer terminals linked to several lenders’ computers. © 2008 Dearborn Real Estate Education