Federally Related Mortgage

Definition

A Federally Related Mortgage is a mortgage loan that is, in some way, subject to federal law because it is guaranteed, insured, or otherwise regulated by a federal government agency. These agencies include but are not limited to:

Federal Deposit Insurance Corporation (FDIC)
Federal Home Loan Mortgage Corporation (FHLMC)
Federal Housing Administration (FHA)
Federal National Mortgage Association (FNMA)
Board of Governors of the Federal Reserve System
National Credit Union Association (NCUA)
Office of the Comptroller of the Currency (OCC)
Office of Thrift Supervision (OTS)
Department of Veterans Affairs (VA)

The involvement of these agencies typically entails adherence to specific regulatory standards and guidelines to ensure proper lending practices, borrower protections, and overall market stability.

Examples

Example 1: FHA-Insured Loan

An FHA loan, insured by the Federal Housing Administration, qualifies as a federally related mortgage. These loans are designed to help low- to moderate-income individuals attain home ownership by providing lower down payment requirements and flexible credit criteria.

Example 2: VA-Guaranteed Loan

Veterans Affairs (VA) loans are federally related mortgages provided to eligible veterans. VA loans come with no down payment requirements and favorable loan terms for veterans or their surviving spouses.

Example 3: FNMA (Fannie Mae) Mortgage

A mortgage sold to the Federal National Mortgage Association, commonly known as Fannie Mae, falls under the category of federally related mortgages. Fannie Mae purchases and guarantees mortgages to expand affordable lending options.

Example 4: FHLMC (Freddie Mac) Mortgage

Similar to Fannie Mae, the Federal Home Loan Mortgage Corporation, known as Freddie Mac, buys and guarantees mortgages from lenders, making it a federally related mortgage.

Frequently Asked Questions

A mortgage becomes federally related if a federal agency guarantees, insures, or regulates the loan in some way, ensuring adherence to federal lending guidelines and protections.

Federally related mortgages provide protections for borrowers and lenders by ensuring adherence to federal standards, helping promote stability, transparency, and trust in the mortgage market.

No, not all mortgages are federally related. Mortgages that do not involve federal insurance, guarantees, or regulations fall outside of this category.

FHA Loan

A loan insured by the Federal Housing Administration, designed to help low- to moderate-income buyers by offering lower down payments and easier qualification criteria.

VA Loan

A loan program for veterans, offering favorable terms and guaranteed by the Department of Veterans Affairs, aimed at helping veterans and their families attain home ownership.

Fannie Mae

The Federal National Mortgage Association, a government-sponsored enterprise that buys and guarantees mortgages, expanding the availability of affordable lending.

Freddie Mac

The Federal Home Loan Mortgage Corporation, another government-sponsored enterprise that buys and guarantees mortgages to support home ownership and rental housing.

Mortgage Insurance

Insurance that protects the lender in case the borrower defaults on the loan; often federally related if provided through FHA or other federal programs.

FDIC

The Federal Deposit Insurance Corporation insures deposits at banks and savings institutions and plays a role in regulating federally related mortgages.

Online Resources

References

Real Estate Principles: A Value Approach by David C. Ling and Wayne R. Archer
Essentials of Real Estate Finance by David Sirota
Investing in Income Properties: The Big Six Formula for Achieving Wealth in Real Estate by Kenneth D. Rosen

Suggested Books for Further Studies

“Real Estate Finance and Investments” by William Brueggeman and Jeffrey Fisher
“Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer
“Guide to Buying Your First Home” by Edith Lank
“The Book on Rental Property Investing” by Brandon Turner
“Principles of Real Estate Practice” by Stephen Mettling and David Cusic

### What qualifies a mortgage as federally related? - [ ] It is a loan from a local credit union only. - [x] It is guaranteed, insured, or regulated by a federal agency. - [ ] It has a term longer than 30 years. - [ ] It requires private mortgage insurance. > **Explanation:** A mortgage qualifies as federally related if it is guaranteed, insured, or regulated by a federal agency like the FHA, VA, or Fannie Mae. ### Which of the following is NOT a federal agency involved in federally related mortgages? - [ ] Federal Housing Administration (FHA) - [ ] Federal Home Loan Mortgage Corporation (FHLMC) - [ ] Office of Thrift Supervision (OTS) - [x] Local Homeowner Associations (HOAs) > **Explanation:** Local Homeowner Associations (HOAs) are not federal agencies involved in mortgage regulation. Federally related mortgages involve agencies like FHA, FHLMC, and others listed. ### What is one of the benefits of a VA-guaranteed loan? - [ ] High down payment requirements - [x] No down payment requirement - [ ] Limited to non-veterans - [ ] Provides only short-term financing > **Explanation:** VA-guaranteed loans provide the benefit of no down payment requirement, specifically aimed at eligible veterans or their surviving spouses. ### How does the FHA benefit low- to moderate-income buyers? - [ ] By offering unstable loan terms - [ ] By increasing the interest rates - [x] By providing lower down payment requirements and flexible credit criteria - [ ] By excluding them from mortgage eligibility > **Explanation:** The Federal Housing Administration helps low- to moderate-income buyers with lower down payment requirements and flexible credit criteria, making home ownership more accessible. ### Which government-sponsored enterprise expands affordable lending by purchasing mortgages? - [ ] U.S. Department of Agriculture (USDA) - [x] Federal National Mortgage Association (Fannie Mae) - [ ] Federal Bureau of Investigation (FBI) - [ ] Internal Revenue Service (IRS) > **Explanation:** The Federal National Mortgage Association, known as Fannie Mae, is a government-sponsored enterprise that expands affordable lending by purchasing and guaranteeing mortgages. ### What does FDIC stand for in the context of federally related mortgages? - [ ] Federal Drive for Inspection and Compliance - [x] Federal Deposit Insurance Corporation - [ ] Federal Department of Interbank Coordination - [ ] Federal Data and Investment Council > **Explanation:** FDIC stands for Federal Deposit Insurance Corporation, which insures deposits at banks and savings institutions and plays a role in regulating federally related mortgages. ### Who benefits directly from the protections of federally related mortgages? - [x] Both lenders and borrowers - [ ] Only lenders - [ ] Only property appraisers - [ ] Only state governments > **Explanation:** Both lenders and borrowers benefit from the protections and standards enforced through federally related mortgages, promoting stability and trust in the market. ### In what way are federally related mortgages important for market stability? - [ ] They eliminate the need for state licensing. - [ ] They allow unrestricted lending practices. - [x] They ensure adherence to federal standards and protections. - [ ] They focus solely on increasing loan amounts. > **Explanation:** Federally related mortgages are important for market stability because they ensure adherence to federal standards and protections, promoting transparency and trust. ### Which agency insures VA loans? - [ ] HUD - [ ] FHA - [x] Department of Veterans Affairs (VA) - [ ] RD > **Explanation:** The Department of Veterans Affairs (VA) insures VA loans provided to eligible veterans and their families with favorable terms. ### Under what condition must a state-licensed or certified appraiser be used? - [ ] Only when a property’s value exceeds $1 million. - [x] When the property is for a federally related mortgage. - [ ] For any property transaction, regardless of the mortgage type. - [ ] When the borrower is under 21 years old. > **Explanation:** A state-licensed or certified appraiser must be used when a property is involved in a federally related mortgage to ensure proper valuation for regulatory compliance.