Chapter 12The Mortgage Markets Copyright 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 $1!"!!! #an$ %uite a &it higher is some areas" like California'.(or most of us" home ownership woul$ &e impossi&le without &orrowing most of the cost of a home. Copyright 2009 Pearson Prentice Hall. All rights reserved.12-3Chapter Preview)n this chapter" we i$entify characteristics of typical resi$ential mortgages an$ the usual term an$ types of mortgages availa&le.*e then review who provi$es an$ services the loans" along with the growth in the secon$ary mortgage market.Topics inclu$e+*hat Are Mortgages,Characteristics of -esi$ential MortgagesTypes of Mortgage .oansMortgage/.en$ing )nstitutions Copyright 2009 Pearson Prentice Hall. All rights reserved.12-4Chapter Preview #cont.'.oan 0ervicing0econ$ary Mortgage Market0ecuriti1ation of MortgagesThe )mpact of 0ecuriti1e$ Mortgages on the Mortgage Market Copyright 2009 Pearson Prentice Hall. All rights reserved.12-5*hat Are Mortgages,A long/term loan secure$ &y real estateAn amorti1e$ loan where&y a fi2e$ payment pays &oth principal an$ interest each month Copyright 2009 Pearson Prentice Hall. All rights reserved.12-*hat Are Mortgages,The ne2t sli$e shows the total amount of mortgage $e&t outstan$ing in the 3.0. $uring 4!!5.)t further $elineates &y type of property.The ta&le shows roughly $16 trillion outstan$ing.7ow $oes this compare to the value of all the stock on the 890:, Copyright 2009 Pearson Prentice Hall. All rights reserved.12-!*hat Are Mortgages,Mortgage .oan Borrowers Copyright 2009 Pearson Prentice Hall. All rights reserved.12-"*hat Are Mortgages, 7istoryMortgages were use$ in the 1;;!s" &ut massive $efaults in the agricultural recession of 1; Points(irst" e2amine the 14? mortgage.3sing a financial calculator" the re%uire$ payments is+n A 65!" i A 1.!" PB A 1!!"!!!" Calculate the PMT.PMT A $1"!4;.51 Copyright 2009 Pearson Prentice Hall. All rights reserved.12-1Characteristics of the -esi$ential Mortgage+ Mortgage )nterest -ates > Points8ow" e2amine the 11.@? mortgage.3sing a financial calculator" the re%uire$ payments is+n A 65!" i A 11.@=14" PB A 1!!"!!!" Calculate the PMT.PMT A $