3. Residential Mortgage Loans
d. describe types and characteristics of residential mortgage loans that are typically securitized;
What is a mortgage?
A mortgage is a loan secured by the collateral of a specified real estate property. It obligates the borrower to make a predetermined series of payments. If the borrower fails to make the contracted payments, the lender can seize the property in order to ensure that the debt is paid off.
What is loan-to-value ratio?
The ratio of the property's purchase price to the amount of the mortgage is called the loan-to-value ratio.
What is it called when a mortgage prepayment does not cover the entire outstanding mortgage balance?
What is prepayment risk for a bank?
Since mortgage borrowers can prepay their mortgage balance at any time, banks can't know with certainty the timing or amount of their cash flows.
What is a lockout period?
Lockout period is a period of time after getting a mortgage that the client cannot prepay the loan.