real estate finance - full book (500 pgs)

If a mortgage banker believes that interest rates

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Unformatted text preview: ositors–members, often at below–market interest rates. For the most part, credit union lending in real estate has been short term. Some attempts at long–term loans have been tried and in some areas of California are working. 4-10 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 4: NONINSTITUTIONAL LENDERS TYPES OF LOANS Most mortgage bankers deal primarily in residential loans, the majority of which is single–family dwellings. However, some mortgage bankers handle a variety of property and might specialize in large commercial or industrial loans. They work with lenders who desire the highest interest possible from this type of loan. SERVICING LOANS Mortgage bankers generally want to service the loans they make and resell. Servicing loans means doing the accounting necessary for a loan. The one–quarter percent to one–half percent service fee can be a significant profit center for the mortgage banker when thousands of loans are serviced. With today's computer–servicing programs, servicing loans is no longer the labor– intensive activity that it was just two decades ago. Errors in computations have been virtually eliminated. An advantage of servicing the loans is the control of impound accounts for taxes and insurance when it is collected in advance with loan payments. These funds, when deposited in a bank give a mortgage banker tremendous clout when they are borrowers from banks holding such funds. They are able to borrow funds at extremely attractive interest rates. SPECULATING Mortgage bankers, like commercial bankers, speculate on interest rates. If a mortgage banker believes that interest rates will rise, the mortgage banker will want to resell loans in the shortest possible time. Should rates rise, the value of loans held at below–market rates of interest will fall. Such loans will have to be sold at a discount from face value unless the mortgage banker has a firm purchase commitment from an investor. If a mortgage banker believes that interest rates will fall, h...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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