Chapter 12 Sources of Financing

1
Chapter 12Sources of Financing

• ____________________________

2
Financing

• Primary Market where lenders originate loans.
• Secondary Market provides a way for lenders to
  sell a loan.

3
Primary Loan Sources

• Savings and Loan Associations
• Commercial Banks
• Life Insurance Companies
• Mortgage Companies
• Mortgage Brokers
• Computerized Loan Origination (CLO)
• Municipal Bonds

4
Secondary Loan Sources

• FNMA
• GNMA
• FHLMC
• Farmer Mac

5
The Secondary Mortgage Market
Primary Market
Secondary Market
Mortgage Investors
Borrowers
6
Mortgage Loan Delivery Systems
7
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.

8
Other Financing Conditions

• Due-on-Sale call clause.
• Prepayment - penalty for the right to repay a
  loan early.

9
Key Terms

• Alienation clause
• Automated underwriting system
• Computerized loan origination
• Disintermediation
• Fannie Mac
• Freddie Mac

• Mortgage broker
• Mortgage company
• Participation certificates
• Primary market
• Secondary market
• Usury