FIM06C12金融机构vbl.pptx

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1、Chapter 12The Mortgage MarketsChapter PreviewPart of the American Dream is to own your own home.But the average price of a home is well over$140,000(and quite a bit higher is some areas,like California).For most of us,home ownership would be impossible without borrowing most of the cost of a home.2C

2、opyright 2009 Pearson Prentice Hall.All rights reserved.Chapter PreviewIn this chapter,we identify characteristics of typical residential mortgages and the usual term and types of mortgages available.We then review who provides and services the loans,along with the growth in the secondary mortgage m

3、arket.Topics include:What Are Mortgages?Characteristics of Residential MortgagesTypes of Mortgage LoansMortgage-Lending Institutions3Copyright 2009 Pearson Prentice Hall.All rights reserved.Chapter Preview(cont.)Loan ServicingSecondary Mortgage MarketSecuritization of MortgagesThe Impact of Securiti

4、zed Mortgages on the Mortgage Market4Copyright 2009 Pearson Prentice Hall.All rights reserved.What Are Mortgages?A long-term loan secured by real estateAn amortized loan whereby a fixed payment pays both principal and interest each month5Copyright 2009 Pearson Prentice Hall.All rights reserved.What

5、Are Mortgages?The next slide shows the total amount of mortgage debt outstanding in the U.S.during 2006.It further delineates by type of property.The table shows roughly$13 trillion outstanding.How does this compare to the value of all the stock on the NYSE?6Copyright 2009 Pearson Prentice Hall.All

6、rights reserved.What Are Mortgages?Mortgage Loan Borrowers7Copyright 2009 Pearson Prentice Hall.All rights reserved.What Are Mortgages?HistoryMortgages were used in the 1880s,but massive defaults in the agricultural recession of 1890 made long-term mortgages difficult to attain.Until post-WWII,most

7、mortgage loans were short-term balloon loans with maturities of five years or less.8Copyright 2009 Pearson Prentice Hall.All rights reserved.What Are Mortgages?HistoryBalloon loans,however,caused problems during the depression.Typically,the lender renews the loan.But,with so many Americans out of wo

8、rk,lenders could not continue to extend credit.As a part of the depression recovery program,the federal government assisted in creating the standard 30-year mortgage we know today.9Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential MortgageMortgages can be ro

9、ughly classified along the following three dimensions:Mortgage Interest RatesLoan TermsMortgage Loan Amortization 10Copyright 2009 Pearson Prentice Hall.All rights reserved.A variety of fun mortgage calculatorshttp:/ of the Residential Mortgage:Mortgage Interest RatesThe stated rate on a mortgage lo

10、an is determined by three rates:Market Rates:general rates on Treasury bondsTerm:longer-term mortgages have higher ratesDiscount Points:a lower rates negotiated for cash upfront11Copyright 2009 Pearson Prentice Hall.All rights reserved.A variety of fun mortgage calculatorshttp:/ of the Residential M

11、ortgage:Mortgage Interest RatesThe next slide shows the relationship between mortgage rates and long-term treasury rates.As can be seen,mortgage rates are typically higher than Treasury rates,but the spread(difference)between the two varies considerably.12Copyright 2009 Pearson Prentice Hall.All rig

12、hts reserved.Characteristics of the Residential Mortgage:Mortgage Interest Rates13Copyright 2009 Pearson Prentice Hall.All rights reserved.A variety of fun mortgage calculatorshttp:/ of the Residential Mortgage:Mortgage Interest Rates&PointsA difficult decision when getting a mortgage is whether to

13、pay points(cash)upfront in exchange for a lower interest rate on the mortgage.Suppose you had to choose between a 12%30-year mortgage or an 11.5%mortgage with 2 discount points.Which should you choose?Assume you wished to borrow$100,000.14Copyright 2009 Pearson Prentice Hall.All rights reserved.Char

14、acteristics of the Residential Mortgage:Mortgage Interest Rates&PointsFirst,examine the 12%mortgage.Using a financial calculator,the required payments is:n=360,i=1.0,PV=100,000,Calculate the PMT.PMT=$1,028.6115Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residentia

15、l Mortgage:Mortgage Interest Rates&PointsNow,examine the 11.5%mortgage.Using a financial calculator,the required payments is:n=360,i=11.5/12,PV=100,000,Calculate the PMT.PMT=$990.2916Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential Mortgage:Mortgage Interes

16、t Rates&PointsSo,paying the points will save you$38.32 each month.However,you have to pay$2,000 upfront.You can see that the decision depends on how long you want to live in the house,keeping the same mortgage.17Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Resident

17、ial Mortgage:Mortgage Interest Rates&PointsIf you only want to live there 12 months,clearly the$2,000 upfront cost is not worth the monthly savings.Lets see how to determine the answer.18Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential Mortgage:Mortgage Int

18、erest Rates&PointsYou need to determine when the present value of the savings($38.32)equals the$2,000 upfront.Using a financial calculator,this is:i=1,PV=-2,000,PMT=38.32Calculate n.n=74 months,or about 6.2 years.19Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Resid

19、ential Mortgage:Mortgage Interest Rates&PointsSo,if you think you will stay in the house and not refinance for at least 6.2 years,paying the$2,000 for the lower payment is a sound financial decision.Otherwise,you should accept the 12%loan.20Copyright 2009 Pearson Prentice Hall.All rights reserved.Ch

20、aracteristics of the Residential Mortgage:Mortgage Interest Rates&PointsThe next table further illustrates this point,showing the effective rate on the 11.5%mortgage if the mortgage is paid in full at various points.Note that right around year 6,the effective annual rate on the 11.5%mortgage is abou

21、t the same as effective annual rate on the 12%mortgage(12.68%).21Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential Mortgage:Effective Rate of Interest22Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential Mortgage:Loan

22、TermsMortgage loan contracts contain many legal terms that need to be understood.Most protect the lender from financial loss.Collateral:usually the real estate being financeDown payment:a portion of the purchase price paid by the borrower23Copyright 2009 Pearson Prentice Hall.All rights reserved.Cha

23、racteristics of the Residential Mortgage:Loan TermsMortgage loan contracts contain many legal terms that need to be understood.Most protect the lender from financial loss.PMI:insurance against default by the borrowerQualifications:includes credit history,employment history,etc.,to determine the borr

24、owers ability to repay the mortgage as specified in the contact24Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential Mortgage:Loan TermsLenders will also order a credit report from one of the credit reporting agencies.The score reported is called the FICO.The

25、range is 300 to 850,with 660 to 720 being average.Payment history,debt,and even credit card applications can affect your credit score.25Copyright 2009 Pearson Prentice Hall.All rights reserved.Characteristics of the Residential Mortgage:Loan AmortizationMortgage loans are amortized loans.This means

26、that a fixed,level payment will pay interest due plus a portion of the principal each month.It is designed so that the balance on the mortgage will be zero when the last payment is made.The next table shows a typical amortization table for a 30-year mortgage at 8.5%.26Copyright 2009 Pearson Prentice

27、 Hall.All rights reserved.Characteristics of the Residential Mortgage:Loan Amortization Schedule27Copyright 2009 Pearson Prentice Hall.All rights reserved.Types of Mortgage LoansInsured vs.Conventional Mortgages:if the down payment is less than 20%,insurance is usually requiredFixed-Rate Mortgages:t

28、he interest rate is fixed for the life of the mortgageAdjustable-Rate Mortgages:the interest rate can fluctuate within certain parameters28Copyright 2009 Pearson Prentice Hall.All rights reserved.Types of Mortgage LoansOther TypesGraduated-Payment Mortgages(GPMs)Growing Equity Mortgages(GEMs)Shared-

29、Appreciation Mortgages(SAMs)Equity Participation MortgagesSecond MortgagesReverse Annuity Mortgages(RAMs)The following table lists additional characteristics on all the loans.29Copyright 2009 Pearson Prentice Hall.All rights reserved.Types of Mortgage Loans30Copyright 2009 Pearson Prentice Hall.All

30、rights reserved.Mortgage-Lending InstitutionsOriginally,thrift institutions were the primary originator of mortgages in the U.S.and,therefore,the primary holder of mortgage loans.As the next figure illustrates,this is not the case anymore.31Copyright 2009 Pearson Prentice Hall.All rights reserved.Mo

31、rtgage-Lending Institutions32Copyright 2009 Pearson Prentice Hall.All rights reserved.Loan ServicingMost mortgages are immediately sold to another investor by the originator.This frees cash to originate another loan and generate additional fee income.Still,someone has to collect the monthly payments

32、 and keep records.This is knows as loan servicing,and servicers usually keep a portion of the payments received to cover their costs.33Copyright 2009 Pearson Prentice Hall.All rights reserved.Loan ServicingIn all,there are three distinct elements in mortgage loans:The originator packages the loan fo

33、r an investorThe investor holds the loanThe servicing agent handles the paperwork34Copyright 2009 Pearson Prentice Hall.All rights reserved.Secondary Mortgage MarketThe secondary mortgage market was originally established by the federal government after WWII when it created Fannie Mae to buy mortgag

34、es from thrifts.The market experienced tremendous growth in the early to mid-1980,and has continued to remain a strong market in the U.S.35Copyright 2009 Pearson Prentice Hall.All rights reserved.Securitization of MortgagesThe securitization of mortgages developed because of problems dealing with si

35、ngle mortgages:risk of either default or prepayment and servicing.Pools of mortgages eliminated part of this problem through diversification.36Copyright 2009 Pearson Prentice Hall.All rights reserved.Securitization of MortgagesThe mortgage-backed security(MBS)was created.Pools including hundreds of

36、mortgages were gathered,and the rights to the cash flows generated by the mortgages were sold as separate securities.At first,simple pass-through securities were designed.37Copyright 2009 Pearson Prentice Hall.All rights reserved.Securitization of Mortgages:The Mortgage Pass-ThroughDefinition:A secu

37、rity that has the borrowers mortgage payments pass through the trustee before being disbursed to the investorsThis design did eliminate some risk,but investors still faced prepayment risk.38Copyright 2009 Pearson Prentice Hall.All rights reserved.Securitization of Mortgages:CMOsDefinition:A CMO is a

38、 structured MBS where investor pools have different rights to different sets of cash flows.This design structured the prepayment risk.Some classes had little,while other had a lot.39Copyright 2009 Pearson Prentice Hall.All rights reserved.The Impact of Securitization on the Mortgage MarketAs the nex

39、t figure shows,the value of mortgages held in pools is reaching$6.4 trillion near the end of 2006.The securities compete for funds along with all other bond market participants.40Copyright 2009 Pearson Prentice Hall.All rights reserved.Mortgage Pools41Copyright 2009 Pearson Prentice Hall.All rights

40、reserved.The Impact of Securitization on the Mortgage MarketBenefits1.Reduces the problems caused by regional lending institutions sensitivity to local economic fluctuations2.Borrowers have access to a national capital market3.Investors have low-risk and long-term investments in mortgages without ha

41、ving to service the loan42Copyright 2009 Pearson Prentice Hall.All rights reserved.The Impact of Securitization on the Mortgage MarketHowever,this is not without its costs.Because of securitization,mortgage rates have become more national in nature,and this has lead to increased volatility in mortga

42、ge rates.43Copyright 2009 Pearson Prentice Hall.All rights reserved.The Subprime Mortgage MarketIn 2000,only 2%of mortgages were subprime.This climbed to 17%by 2006.The average FICO score was 624 for subprime borrowers.Prime mortgage borrowers were 742.Mortgage products became more complicated,and i

43、ncome requirements for these mortgages became very lax.44Copyright 2009 Pearson Prentice Hall.All rights reserved.The Subprime Mortgage MarketSubprime mortgages have become quite controversial.Although predatory advertising and“bait and switch”tactics were all-too-common,home ownership did increase

44、because of subprime lending.45Copyright 2009 Pearson Prentice Hall.All rights reserved.Chapter SummaryWhat Are Mortgages?Loans made for the purchase on real property,and usually collateralized by the purchased property.Characteristics of Residential Mortgages:includes the length of the mortgage,the

45、terms,and the rate charges for the loan46Copyright 2009 Pearson Prentice Hall.All rights reserved.Chapter Summary(cont.)Types of Mortgage Loans:includes conventional,insured,fixed and variable rate,and a variety of other designs.Mortgage-Lending Institutions:the primarily originator and holder of mo

46、rtgages is no longer thrift institutions as other attempt to generate fees47Copyright 2009 Pearson Prentice Hall.All rights reserved.Chapter Summary(cont.)Loan Servicing:the fees generated by collecting,distributing,and recording paymentsSecondary Mortgage Market:the active market for mortgages afte

47、r the mortgage has been originated48Copyright 2009 Pearson Prentice Hall.All rights reserved.Chapter Summary(cont.)Securitization of Mortgages:growing in popularity,causing mortgages to complete with both Treasury and corporate debtThe Impact of Securitized Mortgages on the Mortgage Market:although

48、many benefits can be noted,increased rate volatility is also a side-effect49Copyright 2009 Pearson Prentice Hall.All rights reserved.Additional Chapter Art51Copyright 2009 Pearson Prentice Hall.All rights reserved.谢谢观看/欢迎下载BY FAITH I MEAN A VISION OF GOOD ONE CHERISHES AND THE ENTHUSIASM THAT PUSHES ONE TO SEEK ITS FULFILLMENT REGARDLESS OF OBSTACLES.BY FAITH I BY FAITH