Understanding Mortgage Basics: Types, Markets, and Loans

Government Loans are specifically backed or insured by the government, such as VA, FHA, and USDA loans. Conventional, Private, and Home Equity Loans are not government-backed.

Participants in the Primary Market deal with the issuance of new securities for the first time, while Investment Banks, Hedge Funds, and Insurance Companies typically operate in the Secondary Market or provide other financial services.

USDA Loan specifically refers to Section 502 Rural Development Loans, which have different criteria and benefits compared to the other types of loans mentioned in the incorrect answers.

Fannie Mae, or the Federal National Mortgage Association, is a government-sponsored enterprise (GSE) that is known for purchasing Conventional loans in the housing market to provide liquidity and stability. It does not deal with highway infrastructure, health insurance, or environmental conservation.

Freddie Mac, also known as the Federal Home Loan Mortgage Corporation, is a government-sponsored enterprise that buys loans from commercial banks, state-licensed lenders, and savings banks to promote homeownership and affordable housing.

The entities that participate in the Secondary Market involve government agencies like FNMA / FHLMC, GNMA, and private investors who buy and sell real estate mortgages. Banks, credit unions, real estate agents, brokers, and insurance companies are not typically involved in the Secondary Market for mortgages.

A mortgagor is the borrower in a mortgage agreement, not the lender, realtor, or appraiser.

Licensee usually refers to individuals or entities that have been granted a license to engage in a specific activity regulated by a governing authority. In this context, 'Licensee' specifically refers to MLOs (Mortgage Loan Originators) and State Licensed Lenders & Brokers in the mortgage industry.

The NMLS, or Nationwide Multistate Licensing System & Registry, is responsible for issuing and maintaining licenses for mortgage loan originators. The SEC (Securities and Exchange Commission), FHA (Federal Housing Administration), and FDIC (Federal Deposit Insurance Corporation) do not oversee the licensing of mortgage loan originators.

Disclosures for Subprime + Non-Traditional loans focus on terms and conditions that may impact the borrower financially, such as prepayment penalties, balloon payments, and escrows.

Non Prime Section 35 Loans are essentially higher priced mortgage loans without any loan amount limits, unlike FHA, VA, and Conventional loans which have their own specific criteria and limitations.

A mortgagee is the lender in a mortgage agreement who loans the money to the borrower to purchase real estate. The borrower then becomes the mortgagor.

Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac are regulated by the Federal Housing Finance Agency (FHFA) to ensure their safety and soundness in the financial market.

Jumbo loans refer to Non Conforming loans that exceed the FNMA / FHLMC limits. The loan amount for jumbo loans could be higher than the usual loan limits, such as $715,000 in 2023.

Jumbo Prime loans refer to conventional loans for 2023 with loan amounts over $715,000. They are not government-backed loans, short-term loans, or loans for commercial real estate purchases.

Conventional loans follow the guidelines set by Fannie Mae and Freddie Mac, while the incorrect answers provide misinformation about conventional loans.

The Deed Grantor is the party who is transferring ownership of the property, commonly known as the Seller in a real estate transaction. The Buyer is known as the Grantee who receives the property. The Real estate agent acts as a mediator between the Buyer and Seller, and the Lender provides financing for the purchase.

Fannie Mae, or the Federal National Mortgage Association, is the largest Government Sponsored Enterprise and the largest investor in Residential Mortgages. Freddie Mac, Ginnie Mae, and Sallie Mae are also Government Sponsored Enterprises, but they do not hold the same title as Fannie Mae when it comes to the largest investor in Residential Mortgages.

Investors in the secondary market include various institutional entities such as insurance companies, REITs, mutual funds, pension funds, and commercial banks. Individual retail investors usually participate in the primary market while government entities and non-profit organizations may have different investment objectives.

Mortgage Bankers primarily act as intermediaries between funding sources and investors to facilitate mortgage loans.

HUD stands for Department of Housing & Urban Development, which regulates the FHA (Federal Housing Administration). The incorrect answers do not accurately represent the functions of HUD.

An assignor is the person or entity who is transferring or assigning rights or property to another party, typically in a sales transaction. Therefore, the correct term for Assignor is Seller.

The Deed Grantee is the individual or entity who is receiving the property through a deed, typically the buyer in a real estate transaction. The seller is the individual or entity who is transferring ownership of the property. The real estate agent facilitates the transaction between the buyer and seller. The lender is the financial institution or entity providing the mortgage loan.

Service Release Premium (SRP) is a payment received by the lender for selling the servicing rights of a mortgage loan. It is not related to property appraisal fees, mortgage insurance costs, or the interest rate on the loan.

Ginnie Mae, short for Government National Mortgage Association, plays a key role in the housing finance system by guaranteeing mortgage-backed securities that are backed by federally insured or guaranteed loans such as FHA, VA, and USDA loans.

An assignee in a contractual agreement is typically a buyer who is receiving the rights or obligations of the original party to the contract. The assignee essentially steps into the shoes of the original party.

Seller concessions represent the percentage of the sale price that can be used by the seller to assist with the buyer's closing costs. For an FHA loan, the maximum allowable seller concessions is 6% of the sale price.

Seller concessions for VA loans are limited to a maximum of 4% of the home's purchase price. This means that the seller can contribute up to 4% towards the buyer's closing costs and pre-paid expenses.

Interest rate caps for ARM loans determine the maximum allowable increase in interest rates over time. These caps provide protection to borrowers against significant payment increases and help in managing risk for lenders.