Some initial excerpt: The Handbook of Mortgage-Backed Securities

자료: Google books

제목	The handbook of mortgage-backed securities
저자	Frank J. Fabozzi
편집자	Frank J. Fabozzi
에디션	6, 일러스트
발행인	McGraw-Hill Professional, 2005
ISBN	0071460748, 9780071460743
길이	1238페이지

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Section 1 / Chapter 1

The mortgage market in the United States has emerged as one of the largest asset classes. As of the end of 2004, the total face of one- to four-family residential mortgage debt outstanding was approximately $8.1 trillion, with roughly 60% of the outstanding balance securitized into a variety of investment vehicles. By way of comparison, at the same point in time, the outstanding amount of U.S. Treasury notes and bonds totaled $3.9 trillion. (중략)

PRODUCT DEFINITION AND TERMS

A mortgage is a loan that is secured by an underlying asset that can be repossessed in the event of default. For the purpose of this chapter, a mortgage is defined as a loan made to the owner of a one- to four-family residential dwelling and secured by the underlying property. Such loans traditionally hace been level-pay "fully amortizing" mortgages, indicating that principal and interest payments are calculated in equal increments to pay off the loan over the stated term. There are, however, a number of key characteristics differentiated along the following attributes that are considered critical in understanding these instruments.

1. Lien Status

The ^lien status^ dictates the seniority of the loan in the event of forced liquidation of the property owing to the default by the obligor. Most mortage loans that are originated have the first-lien status, implying that the lender would have first call on the proceeds of the liquidation of the property if it were to be repossessed. A second lien, by contrast, suggests that the creditor has access to the proceeds of liquidation only when the first-lien balance is extinguished. Second liens can either be closed-end loans that amortize over a given term or can be structured as home equity lines of credit(HELOCs) that are revolving debts similar in concept to credit card accounts.

Borrowers often use second-lien loans as a means of liquefying the equity in a home for the purpose of expenditures (such as medical bills or college tuitions) or investments (such as home improvements). A second-lien loan also may be originated simultaneously with the first lien in order to maintain the first lien loan-to-value(LTV) ration below a certain level (typically 80%). This allows the obligor to avoid the need for mortgage insurance, which is required for loans with LTVs greater than 80% (and hence increases the monthly payment). This type of transaction (often referred to as a "piggyback loan") has become increasingly commonplace since 2000. The mortgage insurance payment either may be an "add-on" amount to the mortgage payment or may take the form of a higher interest rate. To the extent that the mortgage insurance payment is an add-on amount to the mortage payment, it is not a tax-deductible payment.

2. Original Loan Term

Most mortgage loans are originated with 30-year original terms and amortize on a monthly basis. Loans with stated shorter terms ranging from 10, 15, 20 years are also used borrowers motivated by the desire to build equity more quickly. Among these mortgages, where the monthly mortgage payment is inversely related to the term of the loan, the 15-year mortgage is the most common instrument. Note that a borrower always can make a partial prepayment(a curtailment) to reduce the loan balance and build equity. Other structures used include:

-Loans with balloon payments: (중략)

- Biweekly loans: (중략)

3. Interest-Rate type (Fixed versus Adjustable Rate)

As indicated by the nomenclature, fixed-rate mortgages have an interest rate that is set at the closing of the loan (or, more accurately, when the rate is ^locked^) and is constant for the term of the laon. (중략)

Adjustable-rate mortgage(ARMs), as the name implies, have note rates that are subject to change over the life of the loan. The vast majority of adjustable-rate loans have 30-year terms. The periodic contractual rate is based on both the movement of an underlying rate(^index^) and the spread over the index (the ^margin^) required for the particular loan program. (중략)

3. Credt Guarantees

While our discussion has centered on the fundamentals of mortgage loans, one of the considerations that also distinguishes various mortgages is the form of the eventual credit support required to enhance the liquidity of the loan. While a complete discussion of secondary markets is beyond the scope of this chapter, the ability of mortgage banks to continually originate mortgages is heavily dependent on the ability to create fungible assets from a disparate group of loans made to a multitude of individual obligors. Therefore, mortgage loans can be classfied further based on whether the loan is underwritten and funded under the premise that some form of governemntal or quasi-governmental credit guaranty is associated with the loan. Alternatively, to the extent that the loan does not qualify for such guarantees, the liquidity enhancement process may involve credit insurance obtained from private entities or may be structurally enhanced through cash-flow subordination. (중략)

4. Loan Balance (Conforming versus Nonconforming) (중략)

5. Loan Credit and Documentation Characteristics

Mortgage lending traditinally has focused on borrowers of strong credit quality who were able (or willing) to provide extensive documentation of their income and assets. However, owing to technological and methodological advances with respect to pricing the inherent risk in mortgage loans, the industry increasingly has expanded product offerings to consumers who have been outside the boundaries of the traditional credit paradigm. For instance, some of the fastest-growing sectors of the mortgage markets are the so-called subprime and alternative-A(alt-A) sectors. ^Subprime^ refers to borrowers whose credit has been impaired, in some cases owing to life events such as unemployment or illness, while generally having sufficient equity in their homes to mitigate the credit exposure. This allows the lender to place less weight on the credit profile in making the lending decision. The ^alt-A^ category refers to loans made to borrowers who generally have high credit scores but who have variable incomes, are unable or unwilling to document a stable income history, or are buying second homes or investment properties. The distinciton between these categories, however, is becoming somewhat fuzzy. At this writing, for example, a fast-growing priduct area consists of loans to borrowers with both modestly impaired credit and less rigorous documentation, categorized under the general umbrella of alt-B. (중략)

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