1、Chapter 12The Mortgage MarketsCopyright 2009 Pearson Prentice Hall. All rights reserved.12-2Chapter 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
2、 would be impossible without borrowing most of the cost of a home.Copyright 2009 Pearson Prentice Hall. All rights reserved.12-3Chapter Preview In this chapter, we identify characteristics of typical residential mortgages and the usual term and types of mortgages available. We then review who provid
3、es and services the loans, along with the growth in the secondary mortgage market. Topics include: What Are Mortgages? Characteristics of Residential Mortgages Types of Mortgage Loans Mortgage-Lending InstitutionsCopyright 2009 Pearson Prentice Hall. All rights reserved.12-4Chapter Preview (cont.) L
4、oan Servicing Secondary Mortgage Market Securitization of Mortgages The Impact of Securitized Mortgages on the Mortgage MarketCopyright 2009 Pearson Prentice Hall. All rights reserved.12-5What Are Mortgages? A long-term loan secured by real estate An amortized loan whereby a fixed payment pays both
5、principal and interest each monthCopyright 2009 Pearson Prentice Hall. All rights reserved.12-6What 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.
6、How does this compare to the value of all the stock on the NYSE?Copyright 2009 Pearson Prentice Hall. All rights reserved.12-7What Are Mortgages?Mortgage Loan BorrowersCopyright 2009 Pearson Prentice Hall. All rights reserved.12-8What Are Mortgages? History Mortgages were used in the 1880s, but mass
7、ive defaults in the agricultural recession of 1890 made long-term mortgages difficult to attain. Until post-WWII, most mortgage loans were short-term balloon loans with maturities of five years or less.Copyright 2009 Pearson Prentice Hall. All rights reserved.12-9What Are Mortgages? History Balloon
8、loans, however, caused problems during the depression. Typically, the lender renews the loan. But, with so many Americans out of work, 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.Copyright 2009 Pearson Prentice Hall. All rights reserved.12-10Characteristics of the Residential Mortgage Mortgages can be roughly classified along the following three dimensions: Mortgage Interest Rates Loan Terms Mortgage Loan Amortization
