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    Essentials of Real Estate Finance

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    June Alapa
    The document provides an overview of real estate finance topics including the nature of real estate finance cycles, the money and monetary system, primary activities of government agencies involved in real estate lending, secondary mortgage markets, types of real estate loans, and processing and qualifying borrowers and properties for loans.

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    © All Rights Reserved
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    Essentials of Real Estate Finance

    Uploaded by

    June Alapa
    200 views46 pages
    The document provides an overview of real estate finance topics including the nature of real estate finance cycles, the money and monetary system, primary activities of government agencies involved in real estate lending, secondary mortgage markets, types of real estate loans, and processing and qualifying borrowers and properties for loans.

    Original Description:

    Reference Essentials of Real Estate Finance

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    The document provides an overview of real estate finance topics including the nature of real estate finance cycles, the money and monetary system, primary activities of government agencies involved in real estate lending, secondary mortgage markets, types of real estate loans, and processing and qualifying borrowers and properties for loans.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    200 views46 pages

    Essentials of Real Estate Finance

    Uploaded by

    June Alapa
    The document provides an overview of real estate finance topics including the nature of real estate finance cycles, the money and monetary system, primary activities of government agencies involved in real estate lending, secondary mortgage markets, types of real estate loans, and processing and qualifying borrowers and properties for loans.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 46

    ESSENTIALS OF

    REAL ESTATE FINANCE


    10th Edition Revised

    David Sirota
    Doris Barrell, Consulting Editor

    Nature of Real Estate Finance


    Construction Influence
    Credit System Economy
    Primary & Secondary Markets

    Cycles of Real Estate Finance


    Supply & Demand
    of Housing

    Supply & Demand


    of Money

    Factors Affecting Cycles

    Supply of
    Money
    Housing
    Supply

    Business
    Activities

    Factors Affecting Cycles

    Tax Rules
    Demographics

    Social
    Attitudes

    Money and the Monetary System

    The Federal Reservethe Monetary


    Manager of the Nations Economy

    Money and the Monetary System


    The Feds Functions
    Regulates Reserves
    Determines Discount Rates
    Balances Economy Through
    Open-Market Operations
    Supervises Truth-in-Lending Act

    United States Treasury


    The Nations Fiscal Manager
    FDIC
    BIF

    SAIF

    FIRREA
    OTS

    Treasury Bills, Notes, and Bonds

    Federal Home Loan Bank System


    Patterned After Federal Reserve
    12 District Banks
    Loans Money
    Sets Reserves
    Provides National Market for
    Member Securities

    Primary Activities of HUD


    H U D
    FHA

    F a n n ie M a e &
    F r e d d ie M a c

    CDBG &
    S e c tio n 8

    G in n ie M a e

    In d ia n H o u s in g

    RESPA &
    F a ir H o u s in g

    Interstate Land Sales


    Year-Round Sunshine

    Just
    sign
    here!

    Good
    soil for
    crops!

    Federal Legislation
    Equal Credit Opportunity Act
    Real Estate Settlement
    Procedures Act
    Community
    Reinvestment Act

    Agricultural Lending
    Cyclical Requirements
    Farm Credit System
    USDA Rural Development

    Secondary Mortgage Market


    Federal National Mortgage Association
    Fannie Mae
    Federal Home Loan Mortgage
    CorporationFreddie Mac
    Government National Mortgage
    AssociationGinnie Mae

    Fannie Mae
    Originated as Government Agency
    in 1934
    Reorganized as Private
    Corporation in 1968

    Fannie Mae
    Purchases Loan Packages Through
    Administered Price System
    Sells Mortgage-Backed Securities

    Fannie Mae Underwriting


    Conforming
    Desktop
    and
    Underwriter
    Nonconforming
    Loans

    Jumbo Loan

    Credit Scoring
    Perfect Score
    Optimum Score
    Preferred Score
    Marginal Score
    Questionable Score
    Forget It Score

    800-850
    High 700s
    680
    620
    Under 620
    Under 400

    Ways to Improve Score


    Pay Bills on Time
    Have Fewer Cards
    Do Not Max Out Cards
    Correct Errors on Credit
    Reports

    Freddie Mac
    Established in 1970 to Provide
    Secondary Market for Savings
    Associations
    Loan Prospector Electronic
    Underwriting
    Sells Participation Certificates

    Affordable Loan Products


    Fannie Mae
    Community
    Home Buyer
    Fannie 97
    Flex 97

    Freddie Mac
    Affordable
    Gold
    Alt 97

    Secondary Market Participants


    Ginnie MaeGuarantees
    FHA and VA Mortgage-Backed
    Securities
    Farmer MacUnderwrites
    Farm Loans
    REMICMulticlass Securities

    Financial Fiduciaries
    Commercial Banks
    Savings
    Associations/Thrifts
    Life Insurance Companies
    Pension Funds
    Credit Unions

    Semi and Nonfiduciaries

    Mortgage Brokers and Bankers


    REITs and REMTs
    Real Estate Bonds
    Individuals/Sellers
    Private Loan Companies

    Instruments of Real Estate


    Encumbrances and Liens
    Easements
    Covenants
    Voluntary and Involuntary Liens
    Specific and General Liens

    Instruments of Real Estate


    Interests Secured
    Note and Deed of Trust
    Note and Mortgage
    Mortgage
    Contract for Deed
    Junior Instruments

    Special Provisions
    Late Payment Penalty
    Prepayment Privilege
    Prepayment Penalties
    Assumption vs. Subject to

    Special Provisions (cont.)

    Lock-in Clause
    Due-on-Sale Clause
    Subordination Clause
    Release Clause
    Exculpatory Clause
    Nonrecourse Clause

    Conventional Loans
    30-Year Fixed Rate
    Adjustable-Rate
    Private Mortgage
    Insurance
    Buydowns

    Special Conventional Programs


    Community Home Buyer
    Affordable Gold
    Zero Down Payment 0%!
    Automatic Rate Reduction

    8%
    7%
    6%

    More Special Programs


    Subprime Loan
    Track Record Adjusted
    Refinancing
    Electronic Loan Services

    FHA-Insured Loans
    Special Programs: 203(b),
    203(v), 251, 203(k)
    Underwriting Guidelines
    Mortgage Insurance

    203(k)
    Candidate?

    VA-Guaranteed Loans

    Eligibility/Entitlement
    Guarantee
    Partial Entitlement
    Certificate of
    Reasonable Value

    VA-Guaranteed Loans (cont.)


    Income Qualifying Requirements:
    41% of Gross Monthly Income
    Closing Costs (May Not Be
    Included in VA Loans)
    Funding Fee (May Be Paid in
    Cash or Included in Loan Amount)

    Processing Real Estate Loans

    T h e P ro c e ss
    L o a n O ffic e r
    P ro c e sso r

    U n d e r w rite r

    C lo s in g

    Qualifying the Borrower


    Loan Application
    Assets, Liabilities
    Deposits, Employment
    Credit Report
    Qualifying Ratios

    Qualifying the Collateral


    Definition of Value
    The Appraisal Process
    Direct Sales Comparison
    Cost Approach
    Income Approach
    Gross Rent Multiplier
    Reconciliation

    Qualifying the Title


    Abstract and Opinion
    Title Insurance
    Torrens System
    Title Faults
    Survey

    Closing the Loan


    Costs at Settlement
    Points
    Escrow Account
    Property Taxes,
    Insurance, Interest
    Prorations
    Fees

    Interest Payments on a Loan

    I = PRT
    Term Loan
    Interest Only
    Balloon
    Payment

    Amortized Loan
    Equal Payments
    Principal and
    Interest
    Loan Dies at End

    Adjustable-Rate Mortgage

    Adjustment Period
    Initial Rate, Qualifying Rate
    Index, Margin
    Note Rate
    Rate Caps, Payment Caps

    Reverse Annuity Mortgage


    Lender Pays Borrower!
    Monthly Checks
    Initial Lump Sum
    Line of Credit
    HUD-Insured RAM
    Fannie Mae Senior Programs

    Variations in Format

    Open End Mortgage


    Construction Mortgage
    Blanket Mortgage
    Package Mortgage
    Mobile Home Mortgage

    Tax-Free Mortgage Lending


    Refinance
    Installment Sale
    Option to Buy
    1031 Exchange

    Defaults
    Delinquencies
    Principal and Interest, Property
    Taxes, Insurance
    Adjustments
    Moratorium
    Recasting
    Deed in Lieu

    Foreclosures
    Judicial
    Conventional, FHA-Insured,
    VA-Guaranteed
    Power-of-Sale
    Deed of Trust, Mortgage
    Strict Foreclosure
    Tax Impact

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