chapter 12 answers - TUTORIAL FOR CHAPTER 12: THE MORTGAGE...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
TUTORIAL FOR CHAPTER 12: THE MORTGAGE MARKETS 1. What distinguishes the mortgage markets from other capital markets? Securities in the mortgage markets are collateralized by real estate. 2. Most mortgage loans once had balloon payments; now most current mortgage loans fully amortize. What is the difference between a balloon loan and an amortizing loan? Balloon loans require that a large final payment be made to pay off the remaining principal balance. Amortizing loans are structured so that equal monthly payments are made such that the total of all payments cover both interest and principal over the lifetime of the loan. 3. What are discount points and why do some mortgage borrowers choose to pay them? Discounts points paid when a loan is initiated result in a reduced interest rate. If the borrower plans to hold on to the loan long enough for the value of the reduced interest rate to exceed the up-front cost of the points, it is a good idea to elect to pay them. 4. Distinguish between conventional mortgage loans and insured mortgage loans The Veterans Administration and the Federal Housing Administration guarantee lenders
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

chapter 12 answers - TUTORIAL FOR CHAPTER 12: THE MORTGAGE...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online