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T HE C OLUMBIA I NSTITUTE Welcome!

T HE C OLUMBIA I NSTITUTE Welcome!. The Mortgage Loan System, No. 015. T HE C OLUMBIA I NSTITUTE. Objectives Development of Real Estate Finance Types of mortgages and terms Primary Market Lenders Secondary Market Lenders Government Insurance/Guarantees Reviewing the Appraisal Process.

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T HE C OLUMBIA I NSTITUTE Welcome!

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  1. THECOLUMBIAINSTITUTEWelcome! The Mortgage Loan System, No. 015

  2. THECOLUMBIAINSTITUTE Objectives Development of Real Estate Finance Types of mortgages and terms Primary Market Lenders Secondary Market Lenders Government Insurance/Guarantees Reviewing the Appraisal Process

  3. Institutions • Commercial Banks • Investment Banks • Mortgage Banks • Credit Unions/community (Comm’l) Banks

  4. Mortgage Banking Income • Origination Fee 1% of loan • Marketing Overages (selling loan for more than face value—ie, premium) • Warehousing Income—holding high-rate mortgages for a few months to benefit over the lender’s cost of funds (risky) • Can also make money servicing loan

  5. Earlier Fannie Mae Activities • Government Agency • Issued bonds to buy FHA/VA loans • Privatized in 1968 and bought conventional loans • Securitized loans in 1990s • Lowered standards in 2000s, to compete with sub-prime lenders, and failed.

  6. Freddie Mac came out of the S&L system, but securitized as opposed to purchasing • The collapse of S&Ls resulted in Freddie becoming a Fannie competitor • The collapse of the S&Ls and big, national companies became primary lenders

  7. AMCs • Created by national lenders • Select appraisers • Communicate with them • Review reports

  8. HVCC/FHA Appraiser Independence • HVCC Agreement: NYAG, Fannie, Freddie, FHFA • FHA Mortgagee Letter • Many more lenders went to AMCs • Plus: Appraiser Independence • Minus: Appraisal Fees

  9. Pending Changes • Regulation of AMCs by State Appraisal Boards • Regulation oversight—HB 1728 would move the ASC to the newly formed Consumer Financial Protection Agency

  10. Real Estate Finance Today • Needs Update • Current on instruments & Players • Terminology • Understanding the primary and secondary market participants

  11. Government Influences • Federal Reserve • Department of the Treasury • Credit Union Administration • HUD/FHA/RESPA • Federal Acts

  12. Current Issues • The subprime crisis • Foreclosures and Reactive Programs • Credit Scores

  13. Conventional Loans • Conforming • Affordable Programs • Non-conforming loans • Adjustable Rate Mortgages • Mortgage Calculations

  14. Government Loan Programs • Federal Housing Administration • 203(b) Program • Other FHA programs • Department of Veterans’ Affairs • State/local programs

  15. Financing Alternatives • Seller • Low doc/no doc loans • Self employed/Cash sources • Reverse Annuity Mortgage

  16. Re-engineering the Appraisal Process • Introduction - Who and Why? • The Valuation Question “Form Fillers” • Theory v. Practice • Single point of value or range? • Practice • Technology • Regulation/Legislation

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