FMI7e_ch09Mortgage Markets(金融市场好机构—7e, by Jeff Madura)).pdf

Chapter 9 Mortgage Markets Financial Markets and Institutions, 7e, Jeff Madura Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved. 1 Chapter Outline  Background on mortgages  Residential mortgage characteristics  Creative mortgage financing  Institutional use of mortgage markets  Valuation of mortgages  Risk from investing in mortgages  Mortgage-backed securities  Globalization of mortgage markets 2 Background on Mortgages  A mortgage is a form of debt that finances investment in property  The debt is secured by the property  The mortgage is the difference between the down payment and the value to be paid for the property  Financial institutions such as savings institutions and mortgage companies originate mortgages  They accept mortgage applications and assess the creditworthiness of the applicants  The mortgage contract specifies the mortgage rate, the maturity, and the collateral that is backing the loan  The originator charges an origination fee  The originator may earn a profit from the difference between the mortgage rate and the rate that it paid to obtain funds 3 Background on Mortgages (cont’d)  The level of mortgage debt has risen over time Mortgage debt rises at a slower rate during recessions  The majority of mortgage debt outstanding is on one- to four-family properties 4 Residential Mortgage Characteristics  The mortgage contract should specify: Whether the