Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Lenders in the US insist upon some kind of mortgage insurance. There are broadly two types of mortgage insurance - one is originated by the borrower while the other by the lender. The borrower usually arranges the insurance with a life insurance company and such policy provides for the continuing payment of the mortgage after the death of the insured person. This kind of an insurance is cheaper than ordinary life insurance because the death benefit, which is equal to the outstanding mortgage loan, declines over time. The other type of mortgage insurance is taken out by the lender and the premia are paid by the borrower. This policy usually covers only a percentage of the loan amount and the insurance company undertakes to pay the lender the amount insured or the loan amount in full on default by the borrower. If the insurance company pays the loan amount in full, it has the right to seize the property and sell it and retain the sale proceeds.
Mortgage lenders send payment notices reminding borrowers about overdue payments; they record payments, keep records of mortgage balances, administer escrow accounts for payment of property taxes or insurance, send out tax information at year end and initiate foreclosure proceedings in the event of a default. All these functions the lender performs are collectively known as servicing the loans and the fee they collect to perform the function is known as servicing fee. The mortgage rate usually includes the servicing fee. If a mortgage is sold to someone else, the original lender or the originator may still continue to service the loan. The originator would collect the servicing fee from the second lender whose rate of return on the mortgage would be lowered to the extent of the servicing fees.
Lenders usually insist upon a down payment on the loan which may range between 5-25% of the purchase price. The down payment creates a margin of safety for the lender and in case the borrower defaults and the property has to be sold, any shortfall in realization does not adversely affect the lender. The term Loan-to-Value ratio or LTV is used by the lenders to indicate the percentage of down payment required by them. Thus, an LTV of 85% means that the borrower would have to make a down payment of 15% of the value of the property. Over a period of time, as the mortgage balance declines, the LTV declines too. High LTVs are quoted only for newer, readily marketable properties and in times of lower interest rates and easy money conditions.
A borrower may sometimes want to make a monthly payment that is higher than the agreed upon monthly payment. The excess so paid is towards repayment of principal and is referred to as a prepayment. When this prepayment is not for the entire amount, then it is known as curtailment. Due to these reasons, mortgages may differ in terms of timing and amount of cash flows.
As mortgages are sensitive to interest rates, like bonds, its yields, duration and convexity can be calculated even for a mortgage loan.
Explain what a bond is and discuss its nature as a "fixed income" security.Discuss important terms in relation to bonds as the "price", "maturity", "current yield", "yield to matu
1. role financial intermediaries 2. nature and role of money markets
At the end of the fiscal year ending June 30, 2003, Microsoft reported common equity of $64.9 billion on its balance sheet, with $49.0 billion invested in financial assets (in the
State the term- Pass Through Certificates (PTCs) Pass through Certificates (PTCs) are debt securities which pass through income from debtors through intermediaries to investors
At the end of 1922, your great grandfather (g.g.f.) established a trust fund to be used in order to help a later generation of the family obtain a university education. The ultimat
Q. Define Finance Function and discuss its nature and scope Ans. Meaning of Finance: - Finance is defined as the provision of funds at the time when it is required. The role of
What is nondiversifiable risk? How is it measured? But for the returns of one-half the assets in a portfolio are flawlessly negatively correlated with the other half-which is e
what is financial management?
Q. What do you understand by Business cycle? Business cycle: business cycle refers to the alternate expansion and contraction in the general business activity. in a period of t
What is Walter Model? Please provide me report on Estimation of Walter Model. It is about 2000 words count report on topic Walter Model.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd