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

2. © 2008 Dearborn Real Estate Education 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

3. © 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)

4. © 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

5. © 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

6. © 2008 Dearborn Real Estate Education Loan Programs Conventional Loans Private Mortgage Insurance FHA-Insured Loans –Prepayment privileges –Discount points

7. © 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

8. © 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

9. © 2008 Dearborn Real Estate Education Financing Legislation Truth-in-Lending Act and Regulation Z –Creditor –Three-day right of recission –Advertising –Penalties

10. © 2008 Dearborn Real Estate Education Financing Legislation Equal Credit Opportunity Act (ECOA) Community Reinvestment Act of 1977 (CRA) Real Estate Settlement Procedures Act (RESPA)

11. © 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.