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Mortgage

Mortgage

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Published by Ashish Walle

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Published by: Ashish Walle on Oct 17, 2010
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11/08/2010

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Mortgage

 Mortgages :loan To Individuals or Businesses To purchase a home ,land or other real property.  Securitization :Securities are packaged and sold as assets backing a publicly traded or privately held debt instrument

g.. with the proceeds from the MBS sale being used to finance the purchase of the mortgages. MBS). or investment company buys up mortgages of a certain type (e. bank. mortgage banker.e.Mortgage Back Securities ‡ Creation: A federal agency.. . FHA or VA insured). then sells claims on the cash flows from the portfolio (I.

.Mortgage Back Securities Mortgage-Backed Securities ‡ Mortgage-backed securities (MBS) are debt obligations that represent claims to the cash flows from pools of mortgage loans. most commonly on residential property.

Catagories ‡ Pass Through Securities ‡ CMO-Collateralized mortgage obligation ‡ Mortgage Backed Bonds .

‡ Cash flow is uncertain .Pass Through Securities ‡ Pass through to ultimate investor a fractional share of share of monthly payment received . ‡ Consisting of principal of principal amortization and interest as these are received or scheduled to be received.

CMO-Collateralized mortgage obligation ‡ segmentation of irregular mortgages cash flows into sucurities Short term Medium term Long term Mortgages collateralized bonds ‡ Series of bonds with varying Maturities to attract investors .

CMO-Classes or tranches ‡ Standard CMO Has four tranches ‡ First three class received interest as it is accrued 1st Class recd. All principal payment till entirely paid Move to 3rd 3rd Class recd. All principal payment till entirely paid Move to 2nd 2nd Class recd. All principal payment till entirely paid .

 Z Bond class :‡ Holder receive No interim interest payments.Cont . ‡ Interest accrues at stated coupon rate  Residual class :- .

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