Ginnie Mae guarantees mortgage-backed securities (MBS) made up exclusively of mortgages insured or guaranteed by the federal government. Other financial institutions also issue MBS, known as private-label securities (PLS). The mortgage market is very large and can impact the wider U.S. economy.

When financial institutions originate residential mortgages the mortgage contract should not specify?

Question 9When financial institutions originate residential mortgages, the mortgage contract should not specifyCorrect Answer: whether the mortgage is federally insured.

What type of mortgage adjusts the interest rate?

adjustable-rate mortgage
An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate is lower than that of a comparable fixed-rate mortgage.

Why would a home buyer choose an adjustable-rate mortgage?

Pros of an adjustable-rate mortgage It has lower rates and payments early in the loan term. Because lenders can consider the lower payment when qualifying borrowers, people can buy more expensive homes than they otherwise could. It allows borrowers to take advantage of falling rates without refinancing.

What is considered a GSE loan?

Government-sponsored enterprises (GSEs) do not lend money to the public directly; instead, they guarantee third-party loans and purchase loans in the secondary market, ensuring liquidity. Mortgage issuers Fannie Mae and Freddie Mac are examples of government-sponsored enterprises (GSEs).

Which is an example of a secondary mortgage market lender?

The secondary mortgage market works by connecting home buyers, lenders and investors. It can recoup this money by selling your mortgage to a GSE, like Fannie Mae or Freddie Mac, or other financial institutions.

What do federally insured mortgages guarantee?

Federally insured mortgages guarantee: A) loan repayment to the lending financial institution. At a given point in time, the interest rate offered on a new fixed-rate mortgage is typically _______ the initial interest rate offered on a new adjustable-rate mortgage.

Why do mortgage lenders prefer ARMs while many borrowers prefer fixed-rate mortgages?

ARMs are also attractive because their low initial payments often enable the borrower to qualify for a larger loan and, in a falling-interest-rate environment, allow the borrower to enjoy lower interest rates (and lower payments) without the need to refinance the mortgage.

What is better variable or fixed mortgage?

Generally speaking, if interest rates are relatively low, but are about to increase, then it will be better to lock in your loan at that fixed rate. On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan.

How much of a down payment do I need to avoid paying mortgage insurance on my mortgage?

One way to avoid paying PMI is to make a down payment that is equal to at least one-fifth of the purchase price of the home; in mortgage-speak, the mortgage’s loan-to-value (LTV) ratio is 80%. If your new home costs $180,000, for example, you would need to put down at least $36,000 to avoid paying PMI.

What might a GSE do with a loan after they buy it from a lender?

Fannie Mae When a GSE buys a mortgage from a lender, they get their money back by turning around and selling it as a mortgage-backed security to mortgage investors.

What is it called when another lender buys a mortgage loan?

Buyers of the loan on the secondary market can include Freddie Mac, Fannie Mae and Ginnie Mae. It may sell some 30-year loans and buy 5-year loans to balance itself. Selling your mortgage allows your lender to “receive an up-front cash payment instead of waiting for you to make payments,” Whitman says.

What is the best source of secondary mortgage money?

These can be pension funds, mutual funds, insurance companies and banks. Investors buy shares of these bundled mortgages because they’re a near-guaranteed source of steady income. This steady income is due to homeowners like yourself making regular mortgage payments.

How do you tell if a mortgage is federally backed?

Nearly half of the nation’s mortgages are owned or backed by Fannie Mae or Freddie Mac. If you do not know who owns or backs your mortgage, you can ask your servicer. Your servicer is obligated to provide you, to the best of their knowledge, with the name, address, and telephone number of who owns your loan.

What are the 4 types of caps that affect adjustable rate mortgages?

Initial cap: Your interest rate can only change by up to 2% the first time it adjusts. Periodic cap: Each change after that is limited to 1% every 6 months. Lifetime cap: Throughout the rest of the loan term, the most the interest rate can increase or decrease is 5% from the fixed rate.

What are the disadvantages of a fixed rate mortgage?

The downside to fixed-rate mortgages is that when interest rates are high, qualifying for a loan is more difficult because the payments are less affordable. Although the rate of interest is fixed, the total amount of interest you’ll pay depends on the mortgage term.