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Chapter 13 ________________ Sources of Financing

Chapter 13 ________________ Sources of Financing. Financing. Primary Market – where lenders originate loans. Secondary Market – provides a way for lenders to sell a loan. Primary Loan Sources. Savings and Loan Associations Commercial Banks Life Insurance Companies Mortgage Companies

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Chapter 13 ________________ Sources of Financing

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  1. Chapter 13________________Sources 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 • Municipal Bonds • Computerized Loan Origination (CLO)

  4. Secondary Loan Sources • FNMA • GNMA • FHLMC • Farmer Mac

  5. Financial Intermediaries Mortgage Lenders Primary Market Secondary Market Mortgage Investors Borrowers The Secondary Mortgage Market

  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

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