4.2 Loan Programs (Conventional, FHA, VA), Secondary Markets & Federal Regulations

🎯 Key Florida Real Estate Statutory Takeaways

• FHA INSURES loans (min 3.5% down, upfront + annual MIP); VA GUARANTEES loans for veterans (0% down, funding fee, no monthly MIP).
• Ginnie Mae (GNMA) is a wholly-owned HUD government agency that guarantees mortgage-backed securities backed by FHA/VA/USDA loans.
• Truth in Lending Act (Reg Z) requires APR disclosure; stating any financing number (down payment, monthly payment) triggers full credit disclosures.
• Under RESPA and TRID, the lender must provide the Closing Disclosure (CD) to the borrower at least 3 business days prior to closing.

Mortgage financing falls into conventional and government-backed categories. Conventional mortgages are neither insured nor guaranteed by the federal government; when LTV exceeds 80%, lenders require Private Mortgage Insurance (PMI) to protect against default. FHA loans, operated under HUD, insure private lenders against loss, requiring a minimum 3.5% down payment, an Upfront Mortgage Insurance Premium (UFMIP), and annual monthly MIP. VA loans guarantee loans for eligible military veterans, permitting 100% financing (0% down payment) with a one-time VA funding fee and no recurring monthly mortgage insurance.

The primary mortgage market originates loans to consumers (commercial banks, savings associations, mortgage bankers). The secondary mortgage market purchases mortgages to replenish primary lender liquidity. Key secondary entities include Fannie Mae (FNMA) and Freddie Mac (FHLMC), which purchase conforming conventional loans, and Ginnie Mae (GNMA), a government agency within HUD that guarantees mortgage-backed securities backed exclusively by government loans (FHA, VA, USDA).

Federal lending regulations protect consumers: (1) Truth in Lending Act (TILA / Regulation Z) requires disclosure of the Annual Percentage Rate (APR), reflecting the true annual cost of credit. Mentioning an advertising 'trigger term' (down payment %, monthly payment amount, repayment period) mandates disclosure of down payment %, repayment terms, and APR. (2) Real Estate Settlement Procedures Act (RESPA / Regulation X) prohibits kickbacks and unearned referral fees between settlement service providers (Section 8).

The TILA-RESPA Integrated Disclosure (TRID) rule enforces delivery of the Closing Disclosure (CD) at least 3 business days prior to loan consummation, allowing borrowers time to compare final charges against their initial Loan Estimate.

⚠️ Common Pearson VUE / FREC Exam Traps

• Believing the government lends money for FHA and VA mortgages — private approved lenders originate the loans; FHA insures and VA guarantees.
• Assuming pre-payment penalties are permitted on government loans — prepayment penalties are illegal on FHA and VA residential mortgages.
• Thinking a broker can receive a referral fee from a title company — RESPA Section 8 criminalizes all unearned kickbacks from settlement service providers.