Transcript ch11_final.ppt

Chapter Eleven
THE MORTGAGE MARKETS
Chapter Eleven
The Mortgage Markets
What Are Mortgages?
• A long-term loan secured by real estate
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Slide 11–3
Characteristics of the Residential Mortgage
• Mortgage Interest Rates
• Loan Terms
• Mortgage Loan Amortization
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Slide 11–4
Mortgage Interest Rates
• Market Rates
• Term
• Discount Points
A variety of fun mortgage calculators
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Mortgage Rates versus Canada Bonds
Current mortgage interest rates
http://www.canadamortgage.com
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Slide 11–6
Loan Terms
• Collateral
• Down Payments
• Mortgage Default Insurance
• Borrower Qualification
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Slide 11–7
Distribution of Principal and Interest
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Slide 11–8
Types of Mortgage Loans
• Insured and Conventional Mortgages
• Fixed- and Variable-Rate Mortgages
• Other Types
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Open and Closed
Second Mortgages
Reverse Mortgages
Graduated-Payment Mortgages (GPMs)
Growing Equity Mortgages (GEMs)
Shared-Appreciation Mortgages (SAMs)
Equity Participation Mortgages
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Share of the Mortgage Market Held by Major
Mortgage-Lending Institutions
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Three Distinct Elements to Mortgage Loans
• The originator packages the loan for
an investor
• The investor holds the loan
• The servicing agent handles the paperwork
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Slide 11–11
Mortgage Pass-Through
• Definition: A security that has the borrower’s
mortgage payments pass through the trustee
before being disbursed to the investors
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Slide 11–12
Mortgage Pools
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Slide 11–13
Mortgage-Backed Securities
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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
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Slide 11–15