Chapter 13

Sources of Financing

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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 • Mortgage Brokers • Computerized Loan Origination (CLO) • Municipal Bonds

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

The Secondary Mortgage Market

Primary Market Mortgage Lenders Secondary Market Financial Intermediaries Borrowers Mortgage Investors

Mortgage Loan Delivery Systems

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.

Other Financing Conditions • Due-on-Sale – call clause.

• Prepayment - penalty for the right to repay a loan early.