real estate finance - full book (500 pgs)

Real estate finance full book(500 pgs)

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Unformatted text preview: s from lenders such as savings banks, commercial banks, and mortgage companies. It then assembles a pool of mortgages and issues a Dynasty School ( 5-17 REAL ESTATE FINANCE security backed by the mortgages. The security is called a Participating Certificate, or Guaranteed Mortgage Certificate. The agency guarantees the full payment of principal and the timely payment of interest. The security is later sold to investors in the capital markets. For the guarantee, Freddie Mac receives a monthly fee paid by the investors. CHARACTERISTICS OF FREDDIE MAC Type of institution – Federally sponsored secondary mortgage market agency. Organization – FHLMC is owned by the twelve Federal Home Loan Banks which are in turn owned by the savings and loan associations making up the system's membership. FHLMC has a three–member board of directors who are also the three members of the Federal Home loan Bank Board appointed by the President. FHLMC may borrow from the Treasury indirectly through the consolidated borrowings of the FHLB system. FHLMC is a profit–making enterprise which is tax exempt because it is owned by a non–profit government enterprise (the FHLB system) and distributes all its dividends to the system. Functions – FHLMC's purpose is to increase the availability of credit in the secondary mortgage market by: • • Buying real estate loans and reselling them in mortgage pools. Financing its loan purchases through the sale of stocks to the Federal Home loan Banks and through the sale of bonds and notes on the open market. Mechanism – In late 1982, FHLMC was given permission to issue preferred stock in addition to the non–voting common stock held by the banks. Aside from issuing newly authorized preferred stock, FHLMC raises funds for its operations by issuance of bonds and notes through the FHLB consolidated debentures system (limited); by sales of securities backed by pools of mortgages; and through imposition of commitment and servicing fees on users of the corporation. Market Role – Althou...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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