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Unformatted text preview: l as well as some of the non–traditional sources of real estate finance. In this chapter we will talk about the meaning of institutional lender, the relative impact of these principal lenders in the real estate financing and what influences the lending policies of California real estate lenders. INSTITUTIONAL LENDERS
An institutional lender is a lender that meets the following two criteria: (1) the lender is highly regulated by either federal or state agencies and, in some cases, by both agencies; and (2) it is an institution or depository that pools funds from individuals and/or companies and reinvests these funds in some type of securities, such as real estate loans. In other words, an institutional lender uses its deposits, or income, to make real estate loans. They generally perform as a financial intermediary as outlined in Chapter 2. There are several major types of institutions which participate in mortgage finance: commercial banks, mutual savings banks, savings and loan associations, life insurance companies, private pension funds, public pension funds, mortgage companies (mortgage bankers or brokers), real estate investment trusts, federal credit agencies, and mortgage pools. These institutions may be private, governmental, or quasi– governmental. Private individuals become important as (non–institutional) lenders when interest rates are high and alternative or junior financing is necessary to secure property transfers. Dynasty School (www.dynastySchool.com) 3-1 REAL ESTATE FINANCE COMMERCIAL BANKS
The forerunners of today's banks were first established in the Colonies in the 1660s. Banks have historically focused on commercial lending–that is, lending for commerce and industry–and residential mortgage lending has generally been a relatively small activity. A commercial bank functions as a depository for funds and a place from which to borrow money. They are not to be confused with “industrial banks” or so–called finance companies. Commercial banks have two different forms of deposits, demand deposits and time deposits. The bulk of their funds are in demand deposits, whic...
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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