The majority of this course will involve a review of material, but with adjustments that are necessary in preparation for the AMP exam. The main areas of concentration will include real estate finance and professional responsibilities as a real estate agent.
Finance - With the economic adjustments within the lending industry over the past so many years, we have to adapt material to these changes. This includes lending procedures, loan terminology, and Federal and State financial laws, along with working knowledge.
Professional Responsibities - Some of the areas of emphasis on the AMP exam involve practical application of practicing professional real estate. This will include the interpretation of agent responsibility, actions of a fiduciary, proper dealings with all parties to a transaction, and legal responsibilities to your client and to your firm.
The following represents the AMP interpretation of lenders and their various functions.
Commercial Banks - Commercial banks are provided as standard banking services for individuals and for businesses such as checking accounts, saving accounts, credit cards, and wire transfers. These banks specialize in short term loans such as home improvement loans, business loans, mobile home loans, RV-s and automobiles. Note, AMP does not list them as a lender for residential homes with a standard mortgage.
Savings and Loans - These are shown to specialize in long term, single-family home loans. These institutions are shown to issue a conventional loans as well as non-conventional loans such as FHA and VA mortgages.
Mutual Savings Bank - AMP emphasizes that these institutions are state chartered and owned by their depositories. AMP also states that these lenders are primarily located in the northeast section of the United States such as New York and New England. These institutions mainly deal with FHA insured loans and VA guaranteed loans.
Insurance Companies - Insurance companies specialize in offering a large scale loans for commercial and industrial development. Their loans are usually long term and finance residential housing such as apartments. They also specialize in funding the construction of commercial buildings.
Mortgage Brokers vs. Mortgage Bankers
All State examinations try to take advantage of the confusion regarding mortgage brokers and mortgage bankers. The main differential between them is that the bankers utilize their own money in putting mortgage programs together. The broker, on the other hand, represents the buyer and shops around with the various lenders to put a mortgage program together. The brokers never utilize their own money.
Mortgage Banker - The mortgage banker originates loans, puts them into a package program, and sells the package in the open market. Buyers would include Fannie Mae and Freddie Mac as well as Wall Street firms putting together secured debt obligation products.
Mortgage Broker - The mortgage broker, in theory, is to keep abreast of the lending industry and find the best debt program for their buying customers. In short, they bring borrowers and lenders together in putting individual mortgage programs together. For this, they receive a percentage commission based on a percentage of the money borrowed.
Credit Unions and Pension Funds
Pension Funds - Pension funds look to invest in fixed interest mortgages as a source of earned interest for their pension participants. The concept is to invest into relatively safe investments secured by a lien on real property. Pension funds invest their money into mortgages provided by the mortgage bankers and mortgage brokers.
Credit Unions - State exams emphasize the lending practices of credit unions as a lender interested in only providing loans to their members of the credit union. Those individuals who are not members of the credit union are ineligible for a credit union loan.
Rural Economic and Community Development Agency
The RECD is handled under the Department of Agriculture and negotiates loans for people who live out in the rural areas. They offer programs that negotiate loans for the purchase of property, costs of operating farms, and the purchase of farm equipment.
The interest rates that are charged on loans are based on the income of the borrower. The RECD usually originates loans through a private lender. However, if lenders are not available the agency is allowed to make loans direct.
This program is also known as the Federal Farm Loan program.
The Federal Reserve
The Federal Reserve, commonly referred to as the Fed, was designed to keep the economy stable by controlling the money supply and the available credit within the United States. The powers of the Federal Reserve include the following:
1. Creating the Money Supply - The Federal Reserve determines how much money is to be printed by the Treasury Department and then sent to the financial community.
2. Establishing the Discount Rate - This is the rate of interest that banks can acquire funds from the government and pay low interest at a discounted rate.
3. Reserve Requirements - Regulating of the amount of money that lender-s must hold in reserve. The reserve amount cannot be utilized by the lender and must simply sit in a special account.
The effect of Federal Reserve actions:
1. Supply of Money - An oversupply of money can cause inflation. An undersupply of money can cause a recession. The Federal Reserve can move money into or out of commercial banks by buying or selling federal government bonds. Buying bonds puts money INTO THE ECONOMY. Selling bonds takes money OUT OF THE ECONOMY.
2. Discount Rate - Lowering the discount rate allows banks to acquire money at a lower rate. This way the banks can make loans to the general populace at a lower rate as well.
3. Reserve Requirements - When the Fed lowers the reserve requirement, the lenders have more money to get out into the economy. This increases the money supply and thus decreases interest rates.
The study of system of rules which a particular country or community recognizes as regulating the actions of its members and which it may enforce by the imposition of penalties.