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Chapter 12

Sources of Financing

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Financing

• Primary Market – where lenders originate loans.

• Secondary Market – provides a way for lenders to sell a loan.

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Primary Loan Sources

• Savings and loan Associations• Commercial Banks• Life Insurance Companies• Mortgage Companies• Mortgage Brokers• Computerized Loan Origination• Municipal Bonds• Other Lenders

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Texas Loan Programs

• Texas Veterans Land Fund• Veterans’ Housing Assistance Program (VHAP)

• Texas Department of Housing and Community Affairs

• Housing Finance Corporation

• Fannie Mae Realtor® Programs

• Texas State Affordable Housing Corporation

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Secondary MarketPrimary Market

Mortgage Lenders

Borrowers

FinancialIntermediaries

MortgageInvestors

The Secondary Mortgage Market

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Mortgage Loan Delivery Systems

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Secondary Loan Sources

• FNMA - Fannie Mae

• GNMA - Ginnie Mae

• FHLMC - Freddie Mac

• FAMC - Farmer Mac

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Automated Underwriting Systems

• The computer age has introduced a whole new system in underwriting procedures as they apply to the relationship between the loan originator and the investor.

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Usury

• 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.

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Price to the Borrower

• The rate of interest the borrower must pay to obtain a loan is dependent on the cost of money to the lender,

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Other Financing Conditions

• Due-on-Sale – call clause.

• Prepayment- penalty for the right to repay a loan early.

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Key Terms• Alienation clause• Automated underwriting

system• Computerized loan

origination• Disintermediation• Fannie Mac• Federal National

Mortgage Association

• Freddie Mac• Mortgage broker• Mortgage company• Participation certificates• Primary market• Secondary mortgage

market• Usury