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Financial Institutions and Markets FIN 304 Dr. Andrew L. H. Parkes Day 9 How do financial markets work? Slide 2 Dec. 29, 2009Financial Institutions & Markets, Day 92 Chapter 11: Mortgages For the Midterm Exam: Make sure to study mortgages! Be able to calculate a payment on a conventional mortgage See Example #1, p. 316 Know how to do the Discount Points calculations as done in PPT and in class see notes 12/27 Home Mortgages Slide 3 Dec. 29, 2009Financial Institutions & Markets, Day 93 Chapter 11: Mortgages continued Make sure to study mortgages! Fixed rate mortgages vs. ARMs What are they? Other types pp. 319-20 What is Loan Servicing? Explain the Secondary Mortgage Market briefly! Home Mortgages Slide 4 Dec. 29, 2009Financial Institutions & Markets, Day 94 Chapter 11: Mortgages continued Make sure to study mortgages! Define Mortgage Backed Security Be able to discuss what the three U. S. agencies do and their names: FNMA 1934 GNMA late 1960s FHLMC late 1960s Home Mortgages Slide 5 Dec. 29, 2009Financial Institutions & Markets, Day 95 Chapter 11: Mortgages continued Pass Through Securities too! What is a Pass Through Security? GNMA Pass-Through FHLMC Pass-Through CMO Collateralized Mortgage Obligation KNOW THIS ONE!! Money, money MONEY! Slide 6 Dec. 29, 2009Financial Institutions & Markets, Day 96 Chapter 11: Mortgages continued What is a Securitized Mortgage? See page 327 What are the benefits? Side effect? Housing in the U.S. Slide 7 Dec. 29, 2009Financial Institutions & Markets, Day 97 Slide 8 Dec. 29, 2009Financial Institutions & Markets, Day 98 "If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan." STEVEN M. KNOBEL, a founder of an appraisal company, on lax lending standards at Washington Mutual. STEVEN M. KNOBEL, From October 2008 Financial Crisis Fiasco