real estate finance - full book (500 pgs)

The promissory note also lists other conditions such

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Unformatted text preview: ect property. The practice of redlining is prohibited. This is a form of economic discrimination that operates by not lending in areas which are “declining”–and which usually need the money most. CHARACTERISTICS OF UNDERWRITING The purpose of underwriting is to determine if the property is acceptable by lender standards, if the market value supports the loan requested, and if the loan meets the lender's policies. The lender may alter the terms or conditions of the loan to comply with standards and policies. For example, if the appraisal indicates that the roof leaks, the lender may add a condition to the loan approval that the roof be repaired. The lender also has an interest in the future value of the property, because, in case of foreclosure, there must be sufficient value to cover the loan. On one– to four–unit properties, estimating future value becomes very subjective and imprecise. Therefore, lenders are concerned about only the early years of the mortgage. If the underwriter is certain, and able to document, that value will likely decrease during the first one to five years, then the terms of the loan may be adjusted (such as reducing the loan amount). The adjustments should not exceed the minimum required for the property to be an adequate security. Underwriters are very careful not to violate State of California regulations when making adjustments or in their general underwriting. 14-26 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 14: THE LOAN PROCESSING CONVENTIONAL LOANS Conventional loans are approved either by authorized individuals or by a committee. If it is an individual, she or he will have the authority to approve loans up to a specified amount. For example, a branch manager of a commercial bank or savings bank may approve home loans up to conforming limits. Any loan exceeding these amounts would be referred to the next level. FHA AND DVA LOANS FHA and DVA operate in a similar manner. After the lender has assembled the loan package...
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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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