Term
| What is the difference between a fixed-rate and an adjustable rate mortgage? |
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Definition
FRM: interest rate is set when you take out the loan and will not change
ARM: Interest rate may change throughout the life of the loan |
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Term
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Definition
| Money paid up front at beginning of mortgage |
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Term
| Federal Mortgage Insurance |
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Definition
| Federal Housing Administration offered FHA insurance in 1930s to guarantee lenders against default on mortgage. |
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Term
| FHA refused to insure loans that: (2 things) |
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Definition
1) Were above a certain maximum size
2) Carried an interest rate above what the FHA appraisal and paperwork requirements
**These 2 things caused most problems** |
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Term
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Definition
Veterans Administration Insurance (1944)
Was allowed to insure mortgage loans to military veterans on even more lenient terms than the FHA. |
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Term
| Difference between FHA and VA |
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Definition
| VA-insured loans can be made for larger amounts and require no down payment. |
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Term
| Private Mortgage Insurance |
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Definition
-Insure a portion of the total mortgage debt (10 to 20 percent) in retrun for a relatively high premium on the insured portion.
-Allows a buyer to buy property for as little as 3 percent down |
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Term
GNMA (Ginnie Mae)
-Issuer
-Security
-Payments
-Insurance |
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Definition
-Issuer: Government National Mortgage Association
-Security: Pools of government issued securities
-Payments: All principal and interest payments are passed through to security holders
-Insurance: FHA and VA plus GNMA guarantee
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Term
FNMA (Fannie Mae)
-Issuer
-Security
-Payments
-Insurance |
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Definition
-Issuer: Federal National Mortgage Association
-Security: Pools of government insured or conventional mortgages
-Payments: All principal and interest payments are passed through to security holders
-Insurance: FNMA guarantees ultimate payment of principal and interest |
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Term
Participation Certificate
-Issuer
-Security
-Payments
-Insurance |
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Definition
-Issuer: Federal Home Loan Mortgage Corporation (FHLMC)
-Security: Pools of new convneitonal mortgages
-Payments: All principal and interest payments are passed through to security holders
-Insurance: FHLMC guarantees ulitmate payment of principal and interest |
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Term
| Mortgage Backed Securities |
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Definition
| Securities that pass through all or part of the principal and interest payments on "pools" of many mortgages to buyers of the mortgage-backed securities |
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Term
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Definition
| A trust comprised of mortgage-backed securities which are split into principal-only strips and interest-only strips. |
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Term
| Futures Contract Payoff Profile |
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Definition
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