Chapter 23 – Mortgage Market Property Backed Loans Residential Loans Commercial Loans Process Originators Origination Fee – Points Servicing Fee PTI – Payment to Income LTV- Loan to Value

Chapter 23 – Mortgage Market Commitment Letter Offered by Originator Borrower has options Lock in date of interest rate  At Loan Application  At Letter Acceptance  At Closing Pays a fee to Originator for Option Conforming vs. Non-Conforming Loans Federal Sponsored Agency Requirements

Chapter 23 – Mortgage Market Mortgage Designs Traditional – Fixed Rate and Equal Payments for Life of Loan Amortized Fully Paid at the End No Prepayment Penalty Adjustable Rate Mortgages (ARMs) Balloon Resets (Promised Funds with varying Rates over Life of Mortgage) Graduated Payment, Price-Level, & Duals

Chapter 23 – Mortgage Market Non-Conforming Loans Alt-A Borrower can not meet qualifying standard Example, self employed and short on PTI Subprime Loans History of bad credit Recent “catastrophic” event (medical) Commercial Loans Based on income from the property not from the individual Prepayment Protection

Chapter 23 – Mortgage Market Example of a Traditional Loan Process, Rates, Payments Prepayments Moving, Refinancing Foreclosure Missed Payments Insurance (PMI) Amortization Schedule Interest paid in arrears EXCEL SPREADSHEET - CALCULATOR

Chapter 23 – Mortgage Markets More Topics Reverse Mortgages High LTV Commercial Loans Debt-to-service ratio Pre-payment lockout Defeasance of debt Cash Flow Uncertainty