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					Chapter 23




       THE MORTGAGE
             MARKET
                           MORTGAGE

z A pledge of property to secure payment of
  a debt.
  y Property pledged as collateral is real estate.
  y Debt is the loan.
z Conventional Mortgage
           Mortgage Insurance

z U.S. Government Mortgage Insurers
  y Federal Housing Administration (FHA)
  y Veterans Administration (VA)
  y Rural Housing Service (RHS)
z Private Mortgage Insurers
  y Mortgage Guarantee Insurance Company
  y PMI Mortgage Insurance Company
   Acceptable Collateral for
                Mortgages

z Residential Properties
  y houses, condominiums, cooperatives,
    apartments
z Commercial Properties
  y multifamily properties, office buildings,
    industrial properties, shopping centers,
    hotels, health care facilities
           Mortgage Originator

z Principal originators of residential
  mortgage loans
  y Thrifts
  y Commercial banks
  y Mortgage banks
z Other private mortgage originators
  y Life insurance companies
  y Pension funds
               Revenue Sources

z Origination Function
  y Origination fee
  y Secondary marketing profits
z Other Revenue Sources
  y Servicing fee
  y Income from holding mortgages in an
    investment portfolio
         Mortgage Origination
                     Process

z Evaluating Credit Risk
  y Payment-To-Income Ratio
  y Loan-To-Value Ratio
z Commitment Letter form Lender
z Choice of Type of Mortgage
  y Fixed-rate mortgage
  y Adjustable-rate mortgage
           Use of Mortgages by
                    Originators

z Mortgage originators can either:
  y hold the mortgage in their portfolio
  y sell the mortgage to an investor
  y use the mortgage as collateral for the
    issuance of a security called securitization
                Sale of Mortgage

z Conforming mortgages meet agency
  underwriting standards.
  y Maximum PTI
  y Maximum LTV
  y Maximum loan amount
z Nonconforming mortgages do not meet
  agency underwriting standards.
  y Can be held as portfolio investment
  y Can be securitized
        Risks Associated with
         Mortgage Origination

z Pipeline Risk
  y risk associated with originating mortgages
z Price Risk
  y risk of adverse effect on value of pipeline if
    mortgage rates rise
z Fallout Risk
  y risk that applicants with commitment letters
    will not close
         Traditional Mortgage
                      Designs

z Fixed-Rate
z Level-Payment
z Fully-Amortized Mortgages
     New Mortgage Designs

z Adjustable-Rate Mortgage (ARM)

z Balloon/Reset Mortgage
    Other Mortgage Designs

z Prepayment Penalty Mortgage
z Growing-Equity Mortgage
z Reverse Mortgage
  Mortgage Designs to Deal
             With Inflation

z Graduated-Payment Mortgages (GPM)
z Price-Level-Adjusted Mortgages
z Dual-Rate Mortgages
                   Investment Risks

z Credit Risk
z Liquidity Risk
z Price Risk
z Prepayments Risk
       Commercial Mortgage-
          Backed Securities

z Commercial mortgage loans are non-
  recourse loans.
z Evaluating credit risk
  y debt-to-service coverage ratio
  y loan-to-value ratio
 Prepayment protection for
                 Lenders

z Prepayment Lockout
z Defeasance
z Prepayment Penalty Points
z Yield Maintenance Charge

				
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posted:9/27/2012
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