Questions and Answers
What distinguishes mortgage banking from other types of banking?
What is the term for the process when a mortgage banker borrows money secured by an inventory of mortgages?
What did the Garn-St. Germain Depository Institutions Act of 1982 allow chartered savings and loans to do?
How do mortgage bankers primarily generate profit?
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What did the Wellenkamp v. Bank of America case establish?
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Which agency was previously federal but was privatized under a federal charter?
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What are securities issued by Fannie Mae known as?
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What is the conforming loan limit for a single-family residence in Butte County for 2023?
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What are securities that are backed by mortgages commonly referred to as?
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What is one key feature of the SWAP program for lenders?
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Study Notes
Mortgage Banking Overview
- Mortgage banking specializes in real estate loans, differentiating them from traditional banking.
- Unlike other banks, mortgage bankers do not rely on depositors for funding but secure capital from different sources.
- Mortgage banks can sell the loans they originate, providing liquidity and capital utilization.
Mortgage Warehousing
- When mortgage bankers secure loans backed by their mortgage inventory, it is termed mortgage warehousing.
- This method allows banks to finance their operations more flexibly and manage their cash flow effectively.
Garn-St. Germain Depository Institutions Act of 1982
- This Act enabled federally chartered savings and loan institutions to offer interest-bearing checking accounts.
- It allowed these institutions to increase interest rates on savings accounts and provide commercial loans, broadening their financial services.
Profit Mechanisms for Mortgage Bankers
- Mortgage bankers generate profits through various streams, including loan points, service fees, and arbitrage.
- Each of these elements contributes to their overall revenue, emphasizing the diverse avenues for profitability in mortgage banking.
Wellenkamp v. Bank of America Case
- The ruling in this case allowed lenders to impose prepayment penalties, which had no limits.
- It addressed the practices surrounding loan assumption and established parameters for lender operations.
Privatized Federal Agency
- Fannie Mae, a former federal agency, was privatized under a federal charter, altering its operation dramatically.
- Ginnie Mae and the Federal Reserve are not privatized entities under similar circumstances.
Fannie Mae Securities
- Securities issued by Fannie Mae are known as Pass Through Certificates or Mortgage Backed Securities.
- These instruments are crucial for investors seeking to invest in the mortgage market.
Conforming Loans in Butte County (2023)
- The conforming loan limit for a single-family residence in Butte County for the year 2023 is $548,250.
- Understanding local limits is critical for compliance in mortgage lending practices.
Mortgage-Backed Securities
- Securities that are supported by mortgages legally and are typically termed as collateralized or secured.
- These financial products play a significant role in the mortgage finance ecosystem.
SWAP Program for Lenders
- The SWAP program allows lenders to trade loans issued by others for more widely sellable participation certificates.
- This program aims to enhance liquidity and facilitate the management of non-performing loans.
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Description
Explore the key concepts of mortgage banking, including its differences from traditional banking and the significance of mortgage warehousing. Understand the impact of the Garn-St. Germain Depository Institutions Act of 1982 on financial services provided by savings and loan institutions. Delve into how mortgage bankers generate profits and navigate their operations effectively.
