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General Information

Course ID (CB01A and CB01B)
REST D053.
Course Title (CB02)
Real Estate Finance
Course Credit Status
Credit - Degree Applicable
Effective Term
Fall 2023
Course Description
Students in this course will examine regulations and procedures for financing real estate. Topics include types of lenders; primary and secondary investors; and methods and guidelines for qualifying for real property loans. This course is applied toward the educational requirements of the California Real Estate Salesperson and Broker license examinations. See DRE.ca.gov for current license requirements.
Faculty Requirements
Course Family
Not Applicable

Course Justification

This course serves as an elective, transferable to CSU for Business majors. This course belongs on the Real Estate A.A. degree. It is an acceptable course as one of three for anyone seeking to sit for the California Department of Real Estate license and one of eight statutory courses needed for the broker exam. This course emphasizes the financing of real estate in California which is highly regulated with significant risks and returns for lenders, investors, and buyers.

Foothill Equivalency

Does the course have a Foothill equivalent?
Yes
Foothill Course ID
R E F053.

Course Philosophy

Formerly Statement

Course Development Options

Basic Skill Status (CB08)
Course is not a basic skills course.
Grade Options
  • Letter Grade
  • Pass/No Pass
Repeat Limit
0

Transferability & Gen. Ed. Options

Transferability
Transferable to CSU only

Units and Hours

Summary

Minimum Credit Units
4.0
Maximum Credit Units
4.0

Weekly Student Hours

TypeIn ClassOut of Class
Lecture Hours4.08.0
Laboratory Hours0.00.0

Course Student Hours

Course Duration (Weeks)
12.0
Hours per unit divisor
36.0
Course In-Class (Contact) Hours
Lecture
48.0
Laboratory
0.0
Total
48.0
Course Out-of-Class Hours
Lecture
96.0
Laboratory
0.0
NA
0.0
Total
96.0

Prerequisite(s)

Corequisite(s)

Advisory(ies)

  • ESL D272. and ESL D273., or ESL D472. and ESL D473., or eligibility for EWRT D001A or EWRT D01AH or ESL D005.
  • Elementary algebra or equivalent (or higher), or appropriate placement beyond elementary algebra

REST D050.

Limitation(s) on Enrollment

Entrance Skill(s)

General Course Statement(s)

Methods of Instruction

Lecture and visual aids

Discussion of assigned reading

Discussion and problem solving performed in class

Quiz and examination review performed in class

Homework and extended projects

Assignments

  1. Required reading from text
  2. Written homework assignments
    1. Problem solving exercises involving discounting and costs of real property loans.
    2. Analysis of case studies.

Methods of Evaluation

  1. Objective examinations to evaluate mastery of key terms and concepts as well as application skills related to analysis and comprehension of the California real estate finance market. The tests may include essay questions on course objectives. The exams will be designed with an eye toward the CA Dept of Real Estate License exam and will cover the topics that are currently covered in the professional exam.
  2. Problem solving exercises to show comprehension and mastery of real estate quantitative issues the areas of financing, qualification, appraisal, deposit receipt, home buyer's analysis.
  3. Problem solving exercises in both homework and exams to demonstrate competence in calculations of loan to value, annual percentage rate financing, closing costs and related issues
  4. Comprehensive final exam to cover all major topics to show a broad understanding of real estate financing concepts with an eye toward the current broker and agent license exam in California.

Essential Student Materials/Essential College Facilities

Essential Student Materials: 
  • None.
Essential College Facilities:
  • None.

Examples of Primary Texts and References

AuthorTitlePublisherDate/EditionISBN
Baker, John Real Estate Finance, 10th ed, Cengage Publishers 2016

Examples of Supporting Texts and References

AuthorTitlePublisher
Financing Residential Real Estate, Rockwell Publishing, 19th ed, 2016

Learning Outcomes and Objectives

Course Objectives

  • Identify the major role players in the credit industry.
  • Define and assess the conventional loan.
  • Identify, compare and contrast institutional lenders and their areas of specialization.
  • Identify non-institutional lenders and explain their primary roles.
  • Identify, define and assess the use of the deed of trust in California as a credit instrument.
  • Recognize, compare and contrast alternative mortgage instruments.
  • Identify, define and assess government-backed loans: differentiate conventional loans from government-backed loans.
  • Illustrate how a loan is discounted and explain how the secondary market is involved in the discount.
  • Explain how a lender qualifies a borrower and the property in making a real estate loan.
  • Illustrate the processing, closing and servicing of real estate loans.
  • Recognize, compare and contrast primary lending problems and identify lender/borrower rights in dealing with these issues.
  • Discuss and explain creative financing and explain the nature of construction lending.
  • Explain the regulation of real estate lenders in California
  • Review, recognize, compare and contrast methods of holding title to real estate in California

CSLOs

  • Demonstrate knowledge of how real estate is financed in California from a lending, regulatory and borrowers perspective.

  • Demonstrate knowledge as to the real estate lending/borrowing process from underwriting and qualifying through funding and loan retirement.

Outline

  1. Identify the major role players in the credit industry.
    1. Overview of mortgage market
    2. Flow of money and credit
      1. Federal Reserve - Monetary and Fiscal Policy
      2. Institutional lenders
    3. Instruments of real estate finance
  2. Define and assess the conventional loan.
    1. Lender policies
    2. Buy down loans
    3. Federal and state fair lending laws
    4. Mortgage insurance - credit risks - lender requirements
    5. Loan to value ratios
  3. Identify, compare and contrast institutional lenders and their areas of specialization.
    1. Savings and Loans
      1. Residential specialty
      2. Qualifying
    2. Commercial Banks
      1. Construction specialty
      2. Qualifying
    3. Insurance companies
      1. Commercial specialty
      2. Qualifying
    4. Mutual savings banks
    5. Pension and retirement funds
    6. Depository institutions and the Monetary Control Act
    7. Government agencies
      1. FHA
      2. VA
      3. Cal Vet
  4. Identify non-institutional lenders and explain their primary roles.
    1. Real property loan law
    2. Private lenders
    3. Mortgage bankers
    4. Real estate investment trusts
      1. Junior lien role
      2. REIT as an investment vehicle
      3. Minimum REIT requirements
    5. Credit unions
    6. Finance companies
    7. Financial advisory role of the broker
      1. Fiduciary responsibility
      2. Disclosure requirements
  5. Identify, define and assess the use of the deed of trust in California as a credit instrument.
    1. California law
    2. Foreclosure process
  6. Recognize, compare and contrast alternative mortgage instruments.
    1. Fixed rate mortgages
    2. Variable and adjustable rate mortgages
    3. Graduated payment mortgage
    4. Dual rate, variable rate mortgage
    5. Reverse annuity mortgage
    6. Shared appreciation mortgage
    7. Balloon payments
  7. Identify, define and assess government-backed loans: differentiate conventional loans from government-backed loans.
    1. Federal Housing Authority (FHA)
    2. Veterans Administration (VA)
    3. California Veterans (Cal-Vet)
  8. Illustrate how a loan is discounted and explain how the secondary market is involved in the discount.
    1. Points
    2. Secondary market
    3. Government agencies and the secondary market
  9. Explain how a lender qualifies a borrower and the property in making a real estate loan.
    1. Capacity of borrower
    2. The "C's of credit"
    3. Qualifications for government loans
    4. Co-borrowing
    5. Property appraisal
    6. Loan underwriting
    7. Credit scores
  10. Illustrate the processing, closing and servicing of real estate loans.
    1. Loan origination
    2. Loan approval
    3. Loan processing and close
    4. After the loan: servicing
      1. Rights and responsibilities of lender and borrower
      2. Loan takeover
      3. Loan assumption
  11. Recognize, compare and contrast primary lending problems and identify lender/borrower rights in dealing with these issues.
    1. Foreclosure under the deed of trust
      1. Lender rights
      2. Trustor rights
      3. Trustee rights
    2. Collateral provisions of deeds of trust
    3. Loan default
    4. Default minimization
  12. Discuss and explain creative financing and explain the nature of construction lending.
    1. Secondary financing techniques
    2. Land contracts
    3. Installment sale
    4. Wraparound and piggyback loans
    5. Sale leaseback
    6. Take out loans
    7. Public construction loans
  13. Explain the regulation of real estate lenders in California
    1. Mortgage Loan Broker Law
    2. Disclosure - Regulation Z - Truth in Lending - Real Estate Settlement Procedures Act (RESPA)
    3. License requirement
    4. Commissions
    5. Threshold Reporting
  14. Review, recognize, compare and contrast methods of holding title to real estate in California
    1. Real vs personal property
    2. Tests for ownership
    3. Methods of holding title
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