Chapter Eleven THE MORTGAGE MARKETS. Chapter Eleven The Mortgage Markets.

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Presentation transcript:

Chapter Eleven THE MORTGAGE MARKETS

Chapter Eleven The Mortgage Markets

Copyright © 2004 Pearson Education Canada Inc. Slide 11–3 What Are Mortgages? A long-term loan secured by real estate

Copyright © 2004 Pearson Education Canada Inc. Slide 11–4 Characteristics of the Residential Mortgage Mortgage Interest Rates Loan Terms Mortgage Loan Amortization

Copyright © 2004 Pearson Education Canada Inc. Slide 11–5 Mortgage Interest Rates Market Rates Term Discount Points A variety of fun mortgage calculators

Copyright © 2004 Pearson Education Canada Inc. Slide 11–6 Current mortgage interest rates Mortgage Rates versus Canada Bonds

Copyright © 2004 Pearson Education Canada Inc. Slide 11–7 Loan Terms Collateral Down Payments Mortgage Default Insurance Borrower Qualification

Copyright © 2004 Pearson Education Canada Inc. Slide 11–8 Distribution of Principal and Interest

Copyright © 2004 Pearson Education Canada Inc. Slide 11–9 Types of Mortgage Loans Insured and Conventional Mortgages Fixed- and Variable-Rate Mortgages Other Types –Open and Closed –Second Mortgages –Reverse Mortgages –Graduated-Payment Mortgages (GPMs) –Growing Equity Mortgages (GEMs) –Shared-Appreciation Mortgages (SAMs) –Equity Participation Mortgages

Copyright © 2004 Pearson Education Canada Inc. Slide 11–10 Share of the Mortgage Market Held by Major Mortgage-Lending Institutions

Copyright © 2004 Pearson Education Canada Inc. Slide 11–11 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

Copyright © 2004 Pearson Education Canada Inc. Slide 11–12 Mortgage Pass-Through Definition: A security that has the borrower’s mortgage payments pass through the trustee before being disbursed to the investors

Copyright © 2004 Pearson Education Canada Inc. Slide 11–13 Mortgage Pools

Copyright © 2004 Pearson Education Canada Inc. Slide 11–14 Mortgage-Backed Securities

Copyright © 2004 Pearson Education Canada Inc. Slide 11–15 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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