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Unformatted text preview: reas of the United States, particularly in California, there is a high demand for loans that exceed these loan limits. These loans are commonly referred to as jumbo loans or nonconforming loans. 4-12 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 4: NONINSTITUTIONAL LENDERS
Mortgage bankers will only make a nonconforming loan when they either have a buyer for such a loan or know that a resale will not create a problem. Examples of such loans would be larger residential loans which exceed Fannie Mae and Freddie Mac maximums. Because of the demand, private corporations were formed to issue mortgage–backed securities backed by these loans. The corporations are usually subsidiaries of large financial institutions and operate in much the same manner as Freddie Mac and Fannie Mae. They purchase loans, put them into pools, issue securities, and sell these securities to investors. MULTIPLE LENDERS
Mortgage bankers will at times put together large commercial loans as either the lender or loan arranger which is divided among several lenders. Sometimes the reason for such a loan is sheer size. Many lenders would shy away from a billion dollar commercial loan for a new mall, but they might like a piece of the action because of the desirable interest rate. Mortgage bankers are often able to put together a consortium of lenders to handle such a loan. Another multiple–lender loan is a piggyback loan, where a single loan is divided into parts and the parts have varying degrees of risk. As an example, assume a million dollar loan is sought on a project valued at $1.3 million. One lender might agree to take $700,000 of the loan as the bottom portion at 9 1/2 percent interest. A second lender might agree to take the top portion of the loan ($300,000) at 12 1/2 percent interest. It is like a first and second trust deed written as a single loan. The second lender is subordinated to the first lender. CHAPTER QUIZ
1. Mortgage companies: A...
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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.
- Spring '10