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What is the growing need in urban society for households in the first half of the 20th century?
mobility
The existence of a well functioning secondary mortgage market ___________ the primary mortgage market.
amplifies
Which of these statements is (are) correct about conventional mortgage loans?
Loans eligible for purchase by Fannie Mae and Freddie Mac are much more _________ resulting in a lower contract ________ __________ _________ and more _________ terms across lenders and regions.
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Private mortgage insurance applies to _______ mortgage loans, and is generally required on mortgages with a loan-to-value ratio exceeding __________ percent of value.
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Before innovations (brought by FHA), what were typical features of a home loan?
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The largest participants in the secondary mortgage market are ______ _____ and ________ ______.
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What is the most important effect on housing when interest rates rise?
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Any standard home loan that is not insured or guaranteed by an agency of the US government is a _______ mortgage loan.
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A conventional mortgage loan that meets all the requirements of Fannie Mae and Freddie Mac except that it is too large is called a ______ conventional mortgage.
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Private mortgage insurance commonly protects the lender against the first _______ to __________ percent of losses on a mortgage loan due to default.
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Improving the housing finance system has which of these positive effects on society?
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When interest rates became very volatile in the 1970s, main home mortgage lenders faced a devastating maturity mismatch problem due to _____ term liabilities and _____ term home mortgage assets.
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Match the polar classes of conventional mortgage loans:
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Private mortgage insurance protects only a ________ and only against losses due to
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The predominant approaches to housing assistance by the U.S. government have been through:
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Valid statements about FHA insurance include:
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Department of Veterans Affairs (VA) loans can be up to __________ percent of value for qualified veterans.
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Housing assistance programs in the United States since World War II have been predominantly through:
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A purchase money mortgage, in general, is any mortgage loan created simultaneous with exchange of _________.
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If a borrower's house is worth $200,000, and the borrower has a first mortgage balance of $100,000, what is the maximum line of credit if a HELOC lender will give a home equity line of credit loan such that the total mortgage balance is 80 percent?
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The long-term fixed-rate level-payment home mortgage works best in an environment of __________ and _____________ interest rates.
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In the FHA Home Equity Conversion Mortgage (HECM) program, FHA commits to the lender that if the balance at sale exceeds the value of the house, FHA will pay the difference to the __________.
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Study Notes
Home Financing in the 20th Century
- The demand for efficient home financing systems escalated in urban areas due to increasing household mobility.
Secondary Mortgage Market
- A well-functioning secondary mortgage market amplifies the primary mortgage market.
Conventional Mortgage Loans
- Recent developments created three different qualities of conventional mortgage loans.
- Conventional mortgages are the oldest and most common home mortgage loans.
Loan Liquidity and Terms
- Loans eligible for purchase by Fannie Mae and Freddie Mac are more liquid, resulting in lower contract interest rates and more uniform lending terms.
Private Mortgage Insurance
- Private mortgage insurance applies to conventional loans and is generally required when the loan-to-value ratio exceeds 80%.
Features of Historical Home Loans
- Typical home loans before FHA innovations featured large balloon payments, a loan-to-value ratio of 50-60%, and short terms.
Major Players in Secondary Market
- The largest participants in the secondary mortgage market are Fannie Mae and Freddie Mac.
Impact of Interest Rates on Housing
- Rising interest rates make housing less affordable for buyers.
Types of Mortgage Loans
- A standard mortgage not insured or guaranteed by a U.S. government agency is classified as a conventional mortgage.
- A conventional mortgage exceeding the maximum size set by Fannie Mae and Freddie Mac is termed a jumbo mortgage.
Risk Coverage by Private Mortgage Insurance
- Private mortgage insurance protects lenders against losses of 25% to 35% due to default.
Benefits of a Better Housing Finance System
- Improvements in housing finance enable households to become homeowners earlier.
- Homeowners experience greater financial liquidity, improved ability to diversify wealth, and increased ease of selling homes.
Challenges in the 1970s
- During the 1970s, mortgage lenders confronted maturity mismatch issues due to short-term liabilities against long-term home mortgage assets, which could be mitigated by adopting adjustable-rate mortgages.
Classification of Conventional Mortgage Loans
- Conventional mortgage loans are categorized primarily into prime and subprime classifications.
Government Approaches to Housing Assistance
- The U.S. government primarily aids housing through guarantees against mortgage defaults, tax-free housing finance bonds, and insurance against mortgage defaults.
FHA Insurance Characteristics
- FHA loans feature more tolerant credit requirements and allow financing up to 96.5% of property value, targeting first-time buyers and moderate-income households.
VA Loans for Veterans
- Department of Veterans Affairs (VA) loans can cover up to 100% of the property's value for qualified veterans.
Housing Assistance Programs Post-World War II
- Housing assistance programs have predominantly been delivered through the home mortgage lending system.
Purchase Money Mortgage Definition
- A purchase money mortgage is created concurrently with the exchange of title.
Home Equity Line of Credit Calculation
- If a home is valued at $200,000 and the primary mortgage is $100,000, a HELOC can provide a maximum line of credit of $60,000 to maintain an 80% total mortgage balance.
Ideal Conditions for Fixed-Rate Mortgages
- Long-term fixed-rate mortgages perform best in stable and low-interest rate environments.
FHA Home Equity Conversion Mortgage Program
- Under the FHA HECM program, if the balance at sale exceeds the home value, the FHA commits to covering the difference to the lender.
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Description
Explore the evolution of home financing systems throughout the 20th century. This quiz covers various aspects including conventional mortgage loans, the secondary mortgage market, and features of historical home loans. Test your knowledge about how these factors influenced the real estate landscape.
