Overview
Chapter 3 entails a lot of information and detail about direct lenders and about indirect lenders. It also discusses the role of an private investor which I a interesting in learning about. Chapter 4 is a little smaller chapter, but still has important details such as the secondary mortgage market and the federal credit agencies.
Key Concept from Chapter 3
To discuss direct lenders, there is the forces of disintermediation, “which is a loss of savings deposits from financial institutions to higher yielding competitive investments (i.e., Money market funds, which are private investment accounts not insured by the FDIC” (pg. 47). Saving banks is an direct lender that lends to single family residences. Mutual saving banks plays an active role in real estate finance, it’s purpose is to provide long-term mortgage loans.
Key Concept from Chapter 4
Securities play an important role because it is an ownership interests in business, associations, or property. The FNMA and FHLMC are government charted private lenders, they were created to establish a strong secondary market. The FHA and the VA are important concepts to look over, the FHA insures as the VA guarantees residential mortgage loans. “While it is commonplace for brokers, borrowers, lenders, and investors to refer FHA loans or VA loans, neither of these government agencies buys or sells mortgage loans.” (pg.80).
Key Concept from Chapters 3
The role of the private investor entails the private individual who is forced into the world of real estate finance. The real estate investment trust (REIT) “is a stock corporation that owns and manages income-producing real estate for their stockholders” (pg.57). The real estate investment trust act, entails that congress makes it possible for investors to enjoy flow in tax advantages partnerships. Most people invest in REIT because they’re not taxed twice.
Summary
To conclude on this discussion, I enjoyed reading chapter 3 the most, I had a lot to learn about direct lenders and the role in private investing such as REIT stock corporation and the internet or direct and indirect lenders. Chapter 4 gave me insight on what securities are in real estate finance. I also connected the dots of the purpose and details on Fannie Mae and Freddie Mac agencies.
