Chapter 10

MORTGAGE MARKETS
AND DERIVATIVES
by: Evangeline T. Zomil
 Mortgage Market
is the underlying structure that supports home lending through
mechanisms that help with free flow of funds so that lending can
continue.

more secured than loans are provided

capital markets against mortgages by the
lenders
 Derivatives
are financial contracts, set between two or more
parties that derive their value from an underlying
asset, group of asset or benchmark.
 Capital Market Mortgage Market

Usual borrowers are Usual borrowers are

businesses and individuals.
government entities.
Made for changing amounts
Has an exchange rules of maturities, depending on
govern trading to ensure the borrowers’ needs, that
the efficient and legal causes problems for
operation of the exchange developing a secondary
and also to result in a market.
competitive trading.
 Mortgages
are long-term loan secured by real estate. Both
individuals and business obtain mortgages
loans to finance real estate purchases.
 Mortgage Loans
are used to buy a home or to borrow money
against the value of a home you already own.
Residential
Mortgage
- is a financial agreement between a
borrower and a lender. The lender
agrees to loan the borrower an
agreed amount of money so that they
can purchase a residential property to
live in.
The modern lender has continued to refine the long term
loan to make it more desirable to borrowers.

One of the biggest changes is the development of an

active secondary market for mortgage contracts.

Mortgage markets has become very competitive in

recent years.

Many loan productions offices that compete in real state

financing.
Characteristics
a. Mortage Interest Rates
of the
b. Loan Terms
Residential c. Collateral
Mortgage d. Down Payment

e. Private Mortgage Insurance

f. Borrower Qualification
 Mortgage
one of the most important factors in
Interest the decision of the borrower of how
much and from whom to borrow.
Rates
Three important factors that affect the interest rate on
the loan :

2. Term or Life of the

1. Current long-term market rates
Mortgage

3. Number of Discount Points

Paid
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