This document outlines the key topics covered in Unit 3 of a Real Estate Principles II course, which focuses on real estate finance. The unit discusses the government's influence on the money supply through the Federal Reserve System and its tools. It also examines the primary and secondary mortgage markets as well as the various types of lenders and loans available, including conventional, government-backed, and alternative financing options. Additionally, it covers underwriting borrowers and properties, common real estate financial instruments, and important consumer protection laws.

1. Real Estate Principles II
Unit 3: Real Estate Finance

2. Unit 3: Real Estate Finance
• Government Influence on the Money Supply
▫ Money Supply
 Categories of the Money Supply
 Supply of and Demand for Money
 Supply of Money
 Demand of Money
▫ Government Influence on the Money Supply
 The Federal Reserve System
 Structure of the Federal Reserve System
▫ Board of Governors
▫ Federal Reserve Banks
▫ The Twelve Federal Reserve Districts

3. Unit 3: Real Estate Finance
• Government Influence on the Money Supply
▫ Government Influence on the Money Supply
 The Federal Reserve System
 Tools of the Federal Reserve System
▫ Reserve Requirements
▫ Discount Rates
▫ Open Market Operations
 U.S. Department of the Treasury

4. Unit 3: Real Estate Finance
• Primary Mortgage Market - Lenders
▫ Fiduciary Lenders
 Commercial Banks
 Thrifts
 Savings and Loan Associations
 Savings Banks
 Mutual Savings Banks
 Credit Unions
 Life Insurance Companies
 Pension Funds

5. Unit 3: Real Estate Finance
• Primary Mortgage Market - Lenders
▫ Semi-Fiduciary Lenders
 Mortgage Companies
 Warehouse Line of Credit
 Real Estate Investment Trusts
▫ Non-Fiduciary Lenders
 Finance Companies
 Private Individuals
▫ Third Party Originators
 Mortgage Brokers
 Loan Correspondents

6. Unit 3: Real Estate Finance
• Secondary Mortgage Market
▫ Participants in the Secondary Mortgage Market
▫ Housing GSEs
 Fannie Mae
 Freddie Mac
 Federal Home Loan Banks
▫ Ginnie Mae
▫ Types of Mortgage-Backed Securities
 Pass-Through Securities
 Collateralized Mortgage Obligation
 Default Risk
 Process

7. Unit 3: Real Estate Finance
• Classifying Types of Loans
▫ Purpose of the Loan
▫ Types of Repayment
 Single Principal and Interest Payment
 Interest-Only Payments
 Amortized (Installment) Payments
 Fixed-Rate Fully Amortized Loans
 Partially Amortized Loans
 Adjustable Rate Mortgage Loans
 Graduated Payment Mortgage Loans

8. Unit 3: Real Estate Finance
• Conventional Loans
▫ Conventional Loan Guidelines
 Loan-to-Value Ratios
 Down Payment
▫ Conforming Loans
 Conforming Loan Guidelines
 Suitable Property
 Loan Limits
 Debt-to-Income Ratios
 Private Mortgage Insurance

9. Unit 3: Real Estate Finance
• Conventional Loans
▫ Non-Conforming Loans
 Jumbo Loans
 Subprime Loans
• Federal and State Government-Backed Loans
▫ Federal Housing Administration
 FHA Guidelines
 Selected FHA Loan Programs
▫ Department of Veteran Affairs

10. Unit 3: Real Estate Finance
• Federal and State Government-Backed Loans
▫ Department of Veteran Affairs
 Benefits of VA-Guaranteed Loans
 VA Loan Process
 Fees and Closing Costs
 Selected VA Loan Programs
▫ USDA Guaranteed Loan Program
 USDA Guidelines
 Income and Credit Guidelines
 Property Guidelines

11. Unit 3: Real Estate Finance
• Federal and State Government-Backed Loans
▫ Texas Veteran’s Land Board
 Veteran’s Housing Assistance Program
 Veteran’s Land Program
 Home Improvement Loan Program
▫ Texas Department of Housing and Community
Affairs
▫ Texas State Affordable Housing Corporation

12. Unit 3: Real Estate Finance
• Alternative Financing
▫ Secondary Financing
 Hard-Money Loan
 Swing Loan
 Home Equity Loan
 Home Equity Line of Credit Loan
▫ Financing Different Types of Property
 Financing Manufactured (Mobile) Homes
 Financing Co-Ops
 Financing Construction Projects
 Interim Loan
 Takeout Loan
 Blanket Loan

13. Unit 3: Real Estate Finance
• Underwriting: Qualifying the Borrower and the
Property
▫ Qualifying the Borrower
 Underwriting Guidelines
 Loan-to-Value Ratios
 Down Payment Guidelines
 Debt-to-Income Ratios
▫ Qualifying the Property

14. Unit 3: Real Estate Finance
• Real Estate Financial Instruments
▫ What is a Promissory Note
 Typical Clauses Found in Promissory Notes
 Interest Rate
▫ Limits on Interest Rates – Usury
 Payments
 Negotiability of a Promissory Note
▫ What is a Security Instrument?
 Types of Security Instruments
 Deed of Trust
▫ Title
▫ Reconveyance
▫ Remedy for Default

15. Unit 3: Real Estate Finance
• Real Estate Financial Instruments
▫ What is a Security Instrument?
 Types of Security Instruments
 Mortgage
▫ Title
▫ Reconveyance
▫ Remedy for Default
 Contract of Sale
 Priority of Recording Security Instruments

16. Unit 3: Real Estate Finance
• Real Estate Financial Instruments
▫ Terms Found in Financial Instruments
 Prepayment Clauses
 Alienation Clause
 Loan Assumption
 Subject To
 Borrower’s Failure to Pay as Required
 Late Charges
 Acceleration Clause
▫ Default and Foreclosure
 Non-Judicial Foreclosure
 Foreclosure by Court Proceeding (judicial)
 Deficiency Judgments

17. Unit 3: Real Estate Finance
• Financing Legislation to Protect Consumers
▫ Consumer Credit Protection Act
 Truth-in-Lending Act (Regulation Z)
 Regulation Z
▫ Disclosures
▫ Loan Estimate
▫ Closing Disclosure
▫ Financing Charge and Annual Percentage Rate
▫ Advertising
▫ Right of Rescission
 Adjustable Rate Loan Disclosure

18. Unit 3: Real Estate Finance
• Financing Legislation to Protect Consumers
▫ Real Estate Settlement Procedures Act
 RESPA-Required Disclosures
▫ Equal Credit Opportunity Act
▫ Community Reinvestment Act
▫ Financial Disclosures Required by Texas Law
 Spanish Disclosure