copyright © 2000 addison wesley longman slide #11-1 chapter eleven the mortgage markets

Copyright © 2000 Addison Wesley Longman Slide #11-1

Chapter Eleven

THE MORTGAGE MARKETS


What Are Mortgages?

A long term loan secured by real estate.


Mortgage Loan Borrowers


Characteristics of the Residental Mortgage

Mortgage Interest Rates

Loan Terms

Mortgage Loan Amortization


Mortgage Interest Rates

Market Rates

Term

Discount Points


Mortgage Rates vs. Treasury Bonds


Effective Rate of Interest


Loan Terms

Collateral

Down Payments

Private Mortgage Insurance

Borrower Qualification


Distribution of Principal and Interest


Present Value Interest Factor at Various Rates of Interest


Types of Mortgage Loans

Insured and Conventional Mortgages

Fixed-Rate Mortgages

Adjustable-Rate Mortgages

Other TypesGraduated-Payment Mortgages (GPMs)

Growing Equity Mortgages (GEMs)

Shared-Appreciation Mortgages (SAMs)

Equity Participation Mortgages

Second Mortgages

Reverse Annuity Mortgages (RAMs)


Major Mortgage-Lending Institutions’ Share of Mortgages


Three Distinct Elements to Mortgage Loans

1. The originator packages the loan for an investor.

2. The investor holds the loan.

3. The servicing agent handles the paperwork.


Mortgage-Backed Security

What is it?

The different types of Government Agencies

Most common type of security

Mortgage pass-through


Mortgage Pass-Through

Definition: A security that has the borrower’s mortgage payments pass through the trustee before being disbursed to the investors.


Mortgage Pools


Securitized Mortgages

Benefits

1. Reduces the problems caused by regional lending institution’s sensitivity to local economic fluctuations.

2. Borrowers have access to a national capital market.

3. Investors have low-risk and long-term investments in mortgages without having to service the loan.

copyright © 2000 addison wesley longman slide #11-1 chapter eleven the mortgage markets

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