essentials of real estate finance
TRANSCRIPT
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ESSENTIALS OFREAL ESTATE FINANCE
10th Edition Revised
David SirotaDoris Barrell, Consulting Editor
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Nature of Real Estate Finance
• Construction Influence
• Credit System Economy
• Primary Secondary !ar"ets
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Cycles of Real Estate Finance
Su##ly Demand
of $ousing
Su##ly Demand
of !oney
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Factors Affecting Cycles
$ousing
Su##ly
Su##ly of
!oneyBusiness
%ctivities
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Factors Affecting Cycles
Demogra#hics
&a' Rules
Social
%ttitudes
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Money and the Monetary System
&he (ederal Reserve)the !onetary!anager of the *ation+s Economy
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Money and the Monetary System
&he (ed+s (unctions
• Regulates Reserves• Determines Discount Rates• Balances Economy &hrough
#en-!ar"et #erations• Su#ervises &ruth-in-.ending %ct
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United States Treasury
&he *ation+s /(iscal !anager
&reasury Bills, *otes, and Bonds
(IRRE%(DIC
BI( S%I(&S
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Federal ome Loan !an" System
• Patterned %fter (ederal Reserve
12 District Ban"s .oans !oney Sets Reserves
• Provides *ational !ar"et for!em3er Securities
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#rimary Acti$ities of U%
F H A
G i n n i e M a e
F a n n i e M a e &F r e d d i e M a c
I n d i a n H o u s i n g
C D B G &S e c t i o n 8 R E S P % ( a i r $ o u s i n g
$ 4 D
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Interstate Land Sales
/5ear-Round Sunshine
/6ood
soil for
cro#s7
/8ustsign
here7
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Federal Legislation
• E9ual Credit ##ortunity %ct
• Real Estate Settlement
Procedures %ct
• Community
Reinvestment %ct
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Agricultural Lending
• Cyclical Re9uirements
• (arm Credit System
• 4SD% Rural Develo#ment
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Secondary Mortgage Mar"et
• (ederal *ational !ortgage %ssociation
)/(annie !ae
• (ederal $ome .oan !ortgage
Cor#oration)/(reddie !ac
• 6overnment *ational !ortgage
%ssociation)/6innie !ae
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Fannie Mae
• riginated as 6overnment %gency
in 1:;<
• Reorgani=ed as Private
Cor#oration in 1:>?
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Fannie Mae
• Purchases .oan Pac"ages &hrough
%dministered Price System
• Sells !ortgage-Bac"ed Securities
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Fannie Mae Under&riting
• Conforming
and *onconforming
.oans
• Des"to#
4nder@riter A
/8um3o .oan
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Credit Scoring
/Perfect Score ?00-?0
#timum Score $igh 00sPreferred Score >?0
!arginal Score >20
uestiona3le Score 4nder >20/(orget It Score 4nder
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'ays to Im(ro$e Score
• Pay Bills on &ime
• $ave (e@er Cards• Do *ot /!a' ut Cards
• Correct Errors on CreditRe#orts
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Freddie Mac
• Esta3lished in 1:0 to Provide
Secondary !ar"et for Savings%ssociations
• .oan Pros#ector A Electronic
4nder@riting
• Sells Partici#ation Certificates
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Afforda)le Loan #roducts
(annie !ae
• Community$ome BuyerA
• (annie :
• (le' :
(reddie !ac
• %fforda3le6oldA
• %lt :
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Secondary Mar"et #artici(ants
• /6innie !ae)6uarantees
($% and % !ortgage-Bac"edSecurities
•/(armer !ac)4nder@rites(arm .oans
• RE!IC)!ulticlass Securities
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Financial Fiduciaries
• Commercial Ban"s
• Savings%ssociationsF&hrifts
• .ife Insurance Com#anies
• Pension (unds
• Credit 4nions
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Semi and Nonfiduciaries
• !ortgage Bro"ers and Ban"ers
• REI&s and RE!&s• Real Estate Bonds
• IndividualsFSellers• Private .oan Com#anies
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Instruments of Real Estate
• Encum3rances and .iens
Easements Covenants
oluntary and Involuntary .iens
S#ecific and 6eneral .iens
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S(ecial #ro$isions
• .ate Payment Penalty
• Pre#ayment Privilege
• Pre#ayment Penalties
• %ssum#tion vsG Su3Hect to
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S(ecial #ro$isions *cont+,
• .oc"-in Clause
• Due-on-Sale Clause• Su3ordination Clause
• Release Clause
• E'cul#atory Clause
• *onrecourse Clause
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S(ecial Con$entional #rograms
• Community $ome BuyerA
• %fforda3le 6oldA
• ero Do@n Payment
• %utomatic Rate Reduction
0J7
?J
>J
J
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FA-Insured Loans
• S#ecial ProgramsK 20;L3M,
20;LvM, 21, 20;L"M
• 4nder@riting 6uidelines
• !ortgage Insurance20;L"M
CandidateN
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.A-/uaranteed Loans
• Eligi3ilityFEntitlement
• 6uarantee• Partial Entitlement
• Certificate of
Reasona3le alue
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.A-/uaranteed Loans *cont+,
• Income ualifying Re9uirementsK
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#rocessing Real Estate Loans
& h e P r o c e s s
P r o c e s s o r 4 n d e r @ r i t e r C l o s i n g
. o a n , f f i c e r
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ualifying the Borro@er
• .oan %##lication
%ssets, .ia3ilities De#osits, Em#loyment
• Credit Re#ort
• ualifying Ratios
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0ualifying the Title
• %3stract and #inion
• &itle Insurance• &orrens System
• &itle (aults
• Survey
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Closing the Loan
• Costs at Settlement Points
Escro@ %ccount Pro#erty &a'es,
Insurance, Interest Prorations (ees
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Interest #ayments on a Loan
I = PRT
&erm .oan• Interest nly
• BalloonPayment
%morti=ed .oan• E9ual Payments
• Princi#al andInterest
• .oan /Dies at End
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Re$erse Annuity Mortgage
• .ender Pays Borro@er7
!onthly Chec"s
Initial .um# Sum
.ine of Credit
• $4D-Insured R%!
• (annie !ae Senior Programs
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.ariations in Format
• #en End !ortgage
• Construction !ortgage• Blan"et !ortgage
• Pac"age !ortgage
• !o3ile $ome !ortgage
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%efaults
• Delin9uencies Princi#al and Interest, Pro#erty
&a'es, Insurance• %dHustments
!oratorium Recasting
• Deed in .ieu
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