Chapter 23 Mortgage Market

1
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

2
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

3
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

4
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

5
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

6
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