Mortgages types

Mortgage Type Interest-only mortgages that are not linked to a repayment vehicle will have the base case default probability increased by a factor up to 1.33, dependent on the time to maturity of the loan. 

Capital Investment. Erom the viewpoint of a project, all of the capital that must be raised is external capital. Equity capital is the ownership capital, eg, common and preferred stocks or retained cash, whereas debt capital consists of bonds, mortgages, debentures, and loans. Nearly all investment involves a mixture of both types so as to maximize the return on investment (21). The debt ratio (debt/total capital) for the chemical industry is typically over 30%. Because financial details are not well known during the preliminary phases of project analysis, the investment is viewed simply as the total capital that must be expended to design and build the project. 

Charge it Put it on my account Add it to my student loan As these statements indicate, buying on credit is a way of life in the United States. Simply stated, credit is an arrangement to receive cash, goods, or services now and pay for them in the future (Rejda and McNamara, 1998). Consumer credit is differentiated from other types of credit (i.e., business credit) in that it is credit for personal and family needs (except a home mortgage). According the 2004 Survey of Consumer Finance, the median value of credit-card balances and installment loans for a typical family in 2004 was 13,700 (Bucks et al., 2006). Installment loans describe consumer loans that require fixed payments and a fixed term (e.g., an automobile loan). 

Pub. L. No. 103-325 (Sept. 23,1994). The Act also amends the Secondary Mortgage Enhancement Act of 1984 to add commercial real estate related securities to the types of mortgage related securities that are accorded relief from certain trading and investment restrictions. 

Some bonds include a provision in their offer particulars that gives either the bondholder and/or the issuer an option to enforce early redemption of the bond. The most common type of option embedded in a bond is a call feature. A call provision grants the issuer the right to redeem all or part of the debt before the specified maturity date. An issuing company may wish to include such a feature as it allows it to replace an old bond issue with a lower coupon rate issue if interest rates in the market have declined. As a call feature allows the issuer to change the maturity date of a bond it is considered harmful to the bondholder s interests therefore the market price of the bond at any time will reflect this. A call option is included in all asset-backed securities based on mortgages, for obvious reasons. 

The Hypothekenbankgesetz (Mortgage Bank Act) states that mortgage banks may only be engaged in two types of business ... 

The type of issuer is naturally a major influence and as an example of the impact this can have, covered bonds issued by the Landesbanken, which profit from state guarantees and from the fact that they are eligible assets for the covered bonds of the private mortgage banks, trade on average 6 to 8 basis points more expensive than the other issues. 

The type of mortgage can also influence the credit quality of the loan. In summary, mortgage products that exaggerate payment shocks are likely to experience increased levels of defaults, whereas those that provide a degree of stability or payment shock protection are likely to see fewer defaults. 

Principal and interest are separated and the principal component may be used to redeem notes, to purchase additional collateral or returned to the mortgage originator depending on the type of structure involved. The nonprincipal amount, or revenue component, is used to pay any necessary fees and expenses for the transaction, the interest on the notes, and to cover losses. 

There are two main types of reverse mortgage. The shared appreciation mortgage is structured so the mortgage lender receives back the original loan amount and a proportion of the increase in property value. This has certain advantages but does mean that the proceeds are entirely dependent on house prices. The Millshaw SAMS No.l transaction is backed by this type of mortgage collateral. The notes do not pay interest but pass these cash flows directly on to investors. 

The second type of reverse mortgage, securitised in Equity Release Funding (ERF) transactions, accrue interest at a rate set out in the mortgage agreement. The notes in these transactions pay interest, but in the early stages of the transaction these payments are met by borrowing... 

Commercial mortgage-backed securities (CMBS) represent an important and growing sector of the European securitisation market. However, in many cases there are significant differences between transactions, even those backed by collateral from the same originator, and it is these differences, in both collateral types and structural features, that make European CMBS such an interesting asset class. This chapter focuses on some of the more important aspects that investors should consider when analysing the collateral supporting these transactions and briefly looks at the key features of the common transaction structures. 

An ABS is a bond issued by a single purpose vehicle (SPV) that is secured with a large number of assets (the Assets ) of one same type pooled in a portfolio. These Assets are usually the sole recourse the investors will have for repayment of the bonds. Examples of Assets are residential mortgages, commercial mortgages, credit card receivables, aircraft leases, and the like. 

The flexibility of securitization is a key advantage for both issuers and investors. Financial-engineering techniques employed by investment banks today enable bonds to be created from any type of cash flow. The most typical such flows are those generated by high-volume loans such as residential mortgages and car and credit card loans, which are recorded as assets on bank or financial-house balance sheets. In a securitization, the loan assets are packaged together, and their interest payments are used to service the new bond issue. 

In addition to the more traditional cash flows from mortgages and loan assets, investment banks underwrite bonds secured with flows received by leisure and recreational facilities, such as health clubs, and other entities, such as nursing homes. Bonds securitizing mortgages are usually treated as a separate class, termed mortgage-backed securities, or MBSs. Those with other underlying assets are known as asset-backed securities, or ABSs. The type of asset class backing a securitized bond issue determines the method used to analyze and value it. 

Using a projected prepayment rate enables analysts to evaluate mortgage-backed bonds. The original PSA benchmarks were based on the observation that prepayment rates tend to stabilize after the first thirty months of a mortgage and assumed a linear increase in these rates. They do not reflect seasonal variations in prepayment patterns nor the different behavior patterns of different types of mortgages. 

Residential MBSs are characterized as prime and sub-prime, depending on the credit quality of the underlying mortgages. A credit quality score known as FICO measures whether the loan is prime or sub-prime. Home equity, while previously referring to a different type of RMBS, now refers to a sub-prime RMBS transaction. 

The appeal of a partnership is that it combines the financial assets, facilities, equipment, and talents of two or more individuals who are interested in engaging in the same type of business. On the negative side, particularly when compared to a sole proprietorship, individual partners are restricted in their business actions although they typically have more latitude than owners of a corporation. For example, a partner cannot sell or mortgage his or her share of the partnership s assets without permission of the other partners. Furthermore, in a fashion similar to the sole proprietorship, each partner is financially responsible for the acts of all the partners to the full extent of his or her personal assets. 

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