9 Mortgage MarketsCHAPTER OBJECTIVESThe specific objectives of.docxblondellchancy
9 Mortgage Markets
CHAPTER OBJECTIVES
The specific objectives of this chapter are to:
· ▪ provide a background on mortgages,
· ▪ describe the common types of residential mortgages,
· ▪ explain the valuation and risk of mortgages,
· ▪ explain mortgage-backend securities, and
· ▪ explain how mortgage problems led to the 2008- 2009 credit crisis.
9-1 BACKGROUND ON MORTGAGES
A mortgage is a form of debt created to finance investment in real estate. The debt is secured by the property, so if the property owner does not meet the payment obligations, the creditor can seize the property. Financial institutions such as savings institutions and mortgage companies serve as intermediaries by originating mortgages. They consider mortgage applications and assess the creditworthiness of the applicants.
The mortgage represents the difference between the down payment and the value to be paid for the property. The mortgage contract specifies the mortgage rate, the maturity, and the collateral that is backing the loan. The originator charges an origination fee when providing a mortgage. In addition, if it uses its own funds to finance the property, it will earn profit from the difference between the mortgage rate that it charges and the rate that it paid to obtain the funds. Most mortgages have a maturity of 30 years, but 15-year maturities are also available.
9-1a How Mortgage Markets Facilitate the Flow of Funds
WEB
www.mbaa.org
News regarding the mortgage markets.
The means by which mortgage markets facilitate the flow of funds are illustrated in Exhibit 9.1. Financial intermediaries originate mortgages and finance purchases of homes. The financial intermediaries that originate mortgages obtain their funding from household deposits. They also obtain funds by selling some of the mortgages that they originate directly to institutional investors in the secondary market. These funds are then used to finance more purchases of homes, condominiums, and commercial property. Overall, mortgage markets allow households and corporations to increase their purchases of homes, condominiums, and commercial property and thereby finance economic growth.
Institutional Use of Mortgage Markets Mortgage companies, savings institutions, and commercial banks originate mortgages. Mortgage companies tend to sell their mortgages in the secondary market, although they may continue to process payments for the mortgages that they originated. Thus their income is generated from origination and processing fees, and not from financing the mortgages over a long-term period. Savings institutions and commercial banks commonly originate residential mortgages. Commercial banks also originate mortgages for corporations that purchase commercial property. Savings institutions and commercial banks typically use funds received from household deposits to provide mortgage financing. However, they also sell some of their mortgages in the secondary market.
Exhibit 9.1 How Mortgage Markets Facilitate t ...
9 Mortgage MarketsCHAPTER OBJECTIVESThe specific objectives of.docxblondellchancy
9 Mortgage Markets
CHAPTER OBJECTIVES
The specific objectives of this chapter are to:
· ▪ provide a background on mortgages,
· ▪ describe the common types of residential mortgages,
· ▪ explain the valuation and risk of mortgages,
· ▪ explain mortgage-backend securities, and
· ▪ explain how mortgage problems led to the 2008- 2009 credit crisis.
9-1 BACKGROUND ON MORTGAGES
A mortgage is a form of debt created to finance investment in real estate. The debt is secured by the property, so if the property owner does not meet the payment obligations, the creditor can seize the property. Financial institutions such as savings institutions and mortgage companies serve as intermediaries by originating mortgages. They consider mortgage applications and assess the creditworthiness of the applicants.
The mortgage represents the difference between the down payment and the value to be paid for the property. The mortgage contract specifies the mortgage rate, the maturity, and the collateral that is backing the loan. The originator charges an origination fee when providing a mortgage. In addition, if it uses its own funds to finance the property, it will earn profit from the difference between the mortgage rate that it charges and the rate that it paid to obtain the funds. Most mortgages have a maturity of 30 years, but 15-year maturities are also available.
9-1a How Mortgage Markets Facilitate the Flow of Funds
WEB
www.mbaa.org
News regarding the mortgage markets.
The means by which mortgage markets facilitate the flow of funds are illustrated in Exhibit 9.1. Financial intermediaries originate mortgages and finance purchases of homes. The financial intermediaries that originate mortgages obtain their funding from household deposits. They also obtain funds by selling some of the mortgages that they originate directly to institutional investors in the secondary market. These funds are then used to finance more purchases of homes, condominiums, and commercial property. Overall, mortgage markets allow households and corporations to increase their purchases of homes, condominiums, and commercial property and thereby finance economic growth.
Institutional Use of Mortgage Markets Mortgage companies, savings institutions, and commercial banks originate mortgages. Mortgage companies tend to sell their mortgages in the secondary market, although they may continue to process payments for the mortgages that they originated. Thus their income is generated from origination and processing fees, and not from financing the mortgages over a long-term period. Savings institutions and commercial banks commonly originate residential mortgages. Commercial banks also originate mortgages for corporations that purchase commercial property. Savings institutions and commercial banks typically use funds received from household deposits to provide mortgage financing. However, they also sell some of their mortgages in the secondary market.
Exhibit 9.1 How Mortgage Markets Facilitate t ...
A bond is a (written and signed promise) debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate (Coupon Rate).
Cracking the Vault: Challenges & Obstacles in Acquisition of Banks’ Real Estate Assets by Jon Winick, President, Clark Street Capital. Presented at GreenPearl Events' Distressed Real Estate Summit Chicago on May 13, 2010.
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The best real estate pros know a top deal when they see one. What is their secret? First, they have an exit plan the best deals are the ones where you realize you can walk away from.
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This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
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It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
A bond is a (written and signed promise) debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate (Coupon Rate).
Cracking the Vault: Challenges & Obstacles in Acquisition of Banks’ Real Estate Assets by Jon Winick, President, Clark Street Capital. Presented at GreenPearl Events' Distressed Real Estate Summit Chicago on May 13, 2010.
jimmy stepanian | Real estate commercial financing ideas | Jim stepanian |Jimmy Stepanian
The best real estate pros know a top deal when they see one. What is their secret? First, they have an exit plan the best deals are the ones where you realize you can walk away from.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Attending a job Interview for B1 and B2 Englsih learnersErika906060
It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
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Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
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𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
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"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
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Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
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2. CAST
• Directed by Adam mckay
• Screenplay by Charles Randolph
• Based on “The Big Short” by Michael Lewis
• Starring Christian Bale
Brad Pitt
Carell
Rayan Gosling
• Production Company Regency Enterprises
Plan B Entertainment
• Distributed by Paramount Pictures
• Budget $50 million
• Box office $133.4 million
3. Publisher W.W. Norton & Company
Author Michael Lewis
Publication date March 15, 2010
The Big Short describes several of the main players in the creation of the credit default swap market that
sought to bet against the collateralized debt obligation (CDO) bubble and thus ended up profiting from the
financial crisis of 2007–08. The book also highlights the type of person who bets against the market or goes
against the grain.
6. Summary
In 2005, eccentric hedge fund manager Michael Burry (Christian Bale) discovers that the United
States housing market is extremely unstable, being based on high-risk subprime loans.
Anticipating that the market will collapse in
2007, as interest rates would rise from
adjustable-rate mortgages, he envisions an
opportunity to profit.
7. • His plan is to create a credit default swap market, allowing him to bet against market-based
mortgage-backed securities .
• He proposes his idea to several major investment and commercial banks who readily accept.
Burry's huge long-term bet, exceeding $1 billion, entails paying substantial monthly premiums to
the banks.
8. • This requirement sparks his clients' vocal unhappiness, believing he is "wasting" capital, but Burry
refuses.
• He later discovers that the banks collude with a major bond-rating company to maintain ratings
on worthless bonds, allowing them to sell off their losing positions before the true values became
known.
• Under pressure, Burry restricts withdrawals from his fund, angering his investors.
9. • Eventually the housing market collapses and his fund's value
increases by 489% with an overall profit of over $2.69 billion.
11. • Treasury bond (T-Bond)
• marketable,
• fixed-interest U.S. government debt security
with a maturity of more than 10 years.
• T - bonds make interest payments semi-annually
• primarily risk-free.
• they are issued by the U.S. government
• very little risk of default.
12. Different Credits
AAA
AA
A
BBB
BB
B
Most senior
Least senior
• A tranche is a common financial structure for debt
securities such as mortgage-backed securities.
• These are made up of multiple mortgage pools
that have a variety of mortgages, from safe loans
with lower interest rates to risky loans with higher
rates.
• Each mortgage pool has its own time to maturity,
with its own risk factors and reward benefits.
• Therefore, tranches are made to divide up the
different mortgage profiles into slices that have
financial terms suitable for specific investors.
• If an investor wants to invest in an MBO, he can
choose the tranche type most applicable to his
risk aversion and desired return.
13. • A Mortgage-backed security (MBS) is a type of asset-backed security
• It is secured by a mortgage or collection of mortgages.
• This security must also be grouped in one of the top two ratings as determined by an accredited
credit rating agency
• Usually pays periodic payments that are similar to coupon payments.
• When an investor invests in a MBS, he is essentially lending money to a home buyer or business.
• An MBS is a way for a smaller regional bank to lend mortgages to its customers without having to
worry about whether the customers have the assets to cover the loan.
• Instead, the bank acts as a middleman between the home buyer and the investment market
participants.
14.
15. • A subprime loan is a loan offered to people who
do not qualify for a conventional loan, either
because of low income, a high loan-to-value
ratio, or poor credit history.
• Borrowers considered risky to lenders can
receive financing for a home mortgage through a
subprime loan, but the loan generally carries a
higher interest rate.
• Their Fico score will be less than 600.
16. Subprime lending
Banks
Subprime Lenders
Prime loans
Low interest
Subprime Borrowers
People With Bad Credit
rating/unstable income
Take high interest loans to
buy home
Subprime loan
High interest
wants to make more
money
17. • A collateralized debt obligation (CDO) is a type of structured (ABS).
• Originally developed for the corporate debt markets, over time CDOs evolved to encompass
the mortgage and mortgage-backed security (MBS) markets.
• Like other private label securities backed by assets, a CDO can be thought of as a promise to
pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool
of bonds or other assets it owns.
• The CDO is "sliced" into "tranches", which catch the cash flow of interest and principal
payments in sequence based on seniority.
• Consequently, coupon payments vary by tranche with the safest/most senior tranches
receiving the lowest rates and the lowest tranches receiving the highest rates to compensate
for higher default risk.
18. Mortgages
House loans
Repackages and sells them to
investors as CDOs
Hedge funds
&
Other investors
Lends
Sells
Collateralized debt obligations - CDO