《债券市场：分析与策略（第七版）》Ch10

Chapter10

ResidentialMortgageLoans

10-1Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallLearningObjectivesAfterreadingthischapter,youwillunderstandwhatamortgageiswhothemajororiginatorsofresidentialmortgagesaretheborrowerandpropertycharacteristicsconsideredbyalenderinevaluatingthecreditriskofanapplicantforamortgageloanwhattheservicingofaresidentialmortgageloaninvolvesthetypesofresidentialmortgageloansbasedonlienstatus,creditclassification,interest-ratetype,amortizationtype,creditguarantees,loanbalances,andprepaymentsandprepaymentpenalties10-2Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallLearningObjectives(continued)Afterreadingthischapter,youwillunderstandwhataprepaymentisthecashflowofamortgageloanwhataprepaymentpenaltymortgageiswhatahomeequityloanistherisksassociatedwithinvestinginmortgagesthesignificanceofprepaymentrisk10-3Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoansTheoriginallenderiscalledthemortgageoriginator.Theprincipaloriginatorsofresidentialmortgageloansarethrifts,commercialbanks,andmortgagebankers.Mortgageoriginatorsmayservicethemortgagestheyoriginate,forwhichtheyobtainaservicingfee.10-4Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoans

(continued)Whenamortgageoriginatorintendstosellthemortgage,itwillobtainacommitmentfromthepotentialinvestor(buyer).Twogovernment-sponsoredenterprises(GSEs)andseveralprivatecompaniesbuymortgages.Becausetheseentitiespoolthesemortgagesandsellthemtoinvestors,theyarecalledconduits.Whenamortgageisusedascollateralfortheissuanceofasecurity,themortgageissaidtobesecuritized.10-5Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoans

(continued)UnderwritingStandardsOriginatorsmaygenerateincomeforthemselvesinoneormoreways.Theytypicallychargeanoriginationfee.Profitcanbegeneratedfromsellingamortgageatahigherpricethanitoriginallycost.Thisprofitiscalledsecondarymarketingprofit.Third,themortgageoriginatormayholdthemortgageinitsinvestmentportfolio.10-6Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoans

(continued)UnderwritingStandardsMortgageoriginatorscan:holdthemortgageintheirportfoliosellthemortgagetoaninvestorwhowishestoholdthemortgageorwhowillplacethemortgageinapoolofmortgagestobeusedascollateralfortheissuanceofasecurityusethemortgagethemselvesascollateralfortheissuanceofasecurityWhenamortgageisusedascollateralfortheissuanceofasecurity,themortgageissaidtobesecuritized.10-7Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoans

(continued)UnderwritingStandardsAconformingmortgageisonethatmeetstheunderwritingstandardsestablishedbytheseagenciesforbeinginapoolofmortgagesunderlyingasecuritythattheyguarantee.Ifanapplicantdoesnotsatisfytheunderwritingstandards,themortgageiscalledanonconformingmortgage.Mortgagesacquiredbytheagencymaybeheldasinvestmentsintheirportfolioorsecuritized.10-8Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoans

(continued)Payment-to-IncomeRatioThepayment-to-incomeratio(PTI)istheratioofmonthlypaymentstomonthlyincome,whichmeasurestheabilityoftheapplicanttomakemonthlypayments(bothmortgageandrealestatetaxpayments).ThelowerthePTI,thegreaterthelikelihoodthattheapplicantwillbeabletomeettherequiredmonthlymortgagepayments.10-9Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallOriginationofResidentialMortgageLoans

(continued)Loan-to-ValueRatioTheloan-to-valueratio(LTV)istheratiooftheamountoftheloantothemarket(orappraised)valueoftheproperty.Thelowerthisratiois,thegreatertheprotectionforthelenderiftheapplicantdefaultsonthepaymentsandthelendermustrepossessandselltheproperty.TheLTVhasbeenfoundinnumerousstudiestobethesinglemostimportantdeterminantofthelikelihoodofdefault.Therationaleisstraightforward:Homeownerswithlargeamountsofequityintheirpropertiesareunlikelytodefault.10-10Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoansTherearedifferenttypesofresidentialmortgageloans.Theycanbeclassifiedaccordingtothefollowingattributes:lienstatuscreditclassificationinterestratetypeamortizationtypecreditguaranteesloanbalancesprepaymentsandprepaymentpenalties10-11Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)LienStatusThelienstatusofamortgageloanindicatestheloan’sseniorityintheeventoftheforcedliquidationofthepropertyduetodefaultbytheobligor.Foramortgageloanthatisafirstlien,thelenderwouldhavefirstcallontheproceedsoftheliquidationofthepropertyifitweretoberepossessed.Amortgageloancouldalsobeasecondlienorjuniorlien,andtheclaimsofthelenderontheproceedsinthecaseofliquidationcomeaftertheholdersofthefirstlienarepaidinfull.10-12Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)CreditClassificationAloanthatisoriginatedwheretheborrowerisviewedtohaveahighcreditqualityisclassifiedasaprimeloan.Aloanthatisoriginatedwheretheborrowerisoflowercreditqualityorwheretheloanisnotafirstlienonthepropertyisclassifiedasasubprimeloan.Whilethecreditscoreshavedifferentunderlyingmethodologies,thescoresgenericallyarereferredtoas“FICOscores.”FICOscoresrangefrom350to850.ThehighertheFICOscoreis,thelowerthecreditrisk.10-13Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)CreditClassificationTheLTVhasproventobeagoodpredictorofdefault:ahigherLTVimpliesagreaterlikelihoodofdefault.Whentheloanamountrequestedexceedstheoriginalloanamount,thetransactionisreferredtoasacash-out-refinancing.Ifinstead,thereisfinancingwheretheloanbalanceremainsunchanged,thetransactionissaidtobearate-and-termrefinancing

orno-cashrefinancing.10-14Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)CreditClassificationThefrontratioiscomputedbydividingthetotalmonthlypayments(whichincludeinterestandprincipalontheloanpluspropertytaxesandhomeownerinsurance)bytheapplicant’spre-taxmonthlyincome.Thebackratioiscomputedinasimilarmanner.Themodificationisthatitaddsotherdebtpaymentssuchasautoloanandcreditcardpaymentstothetotalpayments.Thecreditscoreistheprimaryattributeusedtocharacterizeloansaseitherprimeorsubprime.Prime(orA-grade)loansgenerallyhaveFICOscoresof660orhigher,frontandbackratioswiththeabove-notedmaximumof28%and36%,andLTVslessthan95%.10-15Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)InterestRateTypeTheinterestratethattheborroweragreestopay,referredtoasthenoterate,canbefixedorchangeoverthelifeoftheloan.Forafixed-ratemortgage(FRM),theinterestrateissetattheclosingoftheloanandremainsunchangedoverthelifeoftheloan.10-16Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)InterestRateTypeForanadjustable-ratemortgage(ARM),asthenameimplies,thenoteratechangesoverthelifeoftheloan.Thenoterateisbasedonboththemovementofanunderlyingrate,calledtheindex

orreferencerate,

andaspreadovertheindexcalledthemargin.TwocategoriesofreferencerateshavebeenusedinARMs:market-determinedratescalculatedratesbasedonthecostoffundsforthrifts10-17Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)InterestRateTypeThebasicARMisonethatresetsperiodicallyandhasnoothertermsthataffectthemonthlymortgagepayment.Typically,themortgagerateisaffectedbyothertermsthatinclude:periodicratecapslifetimeratecapandfloorAperiodicratecaplimitstheamountthattheinterestratemayincreaseordecreaseattheresetdate.MostARMshaveanupperlimitonthemortgageratethatcanbechargedoverthelifeoftheloan.Thislifetimeratecapisexpressedintermsoftheinitialrate.ARMsmayalsohavealowerlimit(floor)ontheinterestratethatcanbechargedoverthelifeoftheloan.10-18Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)AmortizationTypeTheamountofthemonthlyloanpaymentthatrepresentstherepaymentoftheprincipalborrowediscalledtheamortization.Traditionally,bothFRMsandARMsarefullyamortizingloans.Whatthismeansisthatthemonthlymortgagepaymentsmadebytheborroweraresuchthattheynotonlyprovidethelenderwiththecontractualinterestbutalsoaresufficienttocompletelyrepaytheamountborrowedwhenthelastmonthlymortgagepaymentismade.10-19Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)AmortizationTypeFullyamortizingfixed-rateloanshaveapaymentthatisconstantoverthelifeoftheloan.Forexample,supposealoanhasanoriginalbalanceof$200,000,anoterateof7.5%,andatermof30years.Thenthemonthlymortgagepaymentwouldbe$1,398.43.TheformulaforcalculatingthemonthlymortgagepaymentiswhereMP

=monthlymortgagepayment($),MB0=originalmortgagebalance($),i=noteratedividedby12(indecimal),andn

=numberofmonthsofthemortgageloan.10-20Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)AmortizationTypeTocalculatetheremainingmortgagebalanceattheendofanymonth,thefollowingformulaisused:whereMBt=mortgagebalanceaftert

months,MB0=originalmortgagebalance($),i=noteratedividedby12(indecimal),andn

=numberofmonthsofthemortgageloan.10-21Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)AmortizationTypeTocalculatetheportionofthemonthlymortgagepaymentthatisthescheduledprincipalpaymentforamonth,thefollowingformulaisused:whereSPt=scheduledprincipalrepaymentformontht,MB0=originalmortgagebalance($),i=noteratedividedby12(indecimal),andn

=numberofmonthsofthemortgageloan.10-22Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)AmortizationTypeEXAMPLE.Supposethatformonth12(t=12),wehaveMB0

=$200,000;i

=0.00625;n

=360,thenthescheduledprincipalrepaymentformonth12is:10-23Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)AmortizationTypeForanARM,themonthlymortgagepaymentadjustsperiodically.Thus,themonthlymortgagepaymentsmustberecalculatedateachresetdate.Thisprocessofresettingthemortgageloanpaymentisreferredtoasrecastingtheloan.Inrecentyears,severaltypesofnontraditionalamortizationschemeshavebecomepopularinthemortgagemarket.Themostpopularistheinterest-onlyproduct

(orIOproduct).Withthistypeofloan,onlyinterestispaidforapredeterminedperiodoftimecalledthelockoutperiod.10-24Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)CreditGuaranteesMortgageloanscanbeclassifiedbasedonwhetheracreditguaranteeassociatedwiththeloanisprovidedbythefederalgovernment,agovernment-sponsoredenterprise,oraprivateentity.LoansthatarebackedbyagenciesofthefederalgovernmentarereferredtounderthegenerictermofgovernmentloansandareguaranteedbythefullfaithandcreditoftheU.S.government.

TheDepartmentofHousingandUrbanDevelopment(HUD)overseestwoagenciesthatguaranteegovernmentloans.ThefirstistheFederalHousingAdministration(FHA.ThesecondistheVeteransAdministration(VA).

10-25Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)CreditGuaranteesIncontrasttogovernmentloans,thereareloansthathavenoexplicitguaranteefromthefederalgovernment.Suchloansaresaidtobeobtainedfrom“conventionalfinancing”andthereforearereferredtointhemarketasconventionalloans.Aconventionalloancanbeinsuredbyaprivatemortgageinsurer.10-26Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)LoanBalancesForgovernmentloansandtheloansguaranteedbyFreddieMacandFannieMae,therearelimitsontheloanbalance.Theloanlimits,referredtoasconforminglimits,forFreddieMacandFannieMaeareidenticalbecausetheyarespecifiedbythesamestatute.Loanslargerthantheconforminglimitforagivenpropertytypearereferredtoasjumboloans.10-27Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)PrepaymentsandPrepaymentPenaltiesHomeownersoftenrepayallorpartoftheirmortgagebalancepriortothescheduledmaturitydate.Theamountofthepaymentmadeinexcessofthemonthlymortgagepaymentiscalledaprepayment.Thistypeofprepaymentinwhichtheentiremortgagebalanceisnotpaidoffiscalledapartialpaymentorcurtailment.Whenacurtailmentismade,theloanisnotrecast.Instead,theborrowercontinuestomakethesamemonthlymortgagepayment.10-28Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallTypesofResidentialMortgageLoans

(continued)PrepaymentsandPrepaymentPenaltiesThemorecommontypeofprepaymentisonewheretheentiremortgagebalanceispaidoff.Allmortgageloanshavea“dueonsale”clause,whichmeansthattheremainingbalanceoftheloanmustbepaidwhenthehouseissold.Effectively,theborrower’srighttoprepayaloaninwholeorinpartwithoutapenaltyisacalledanoption.Amortgagedesignthatmitigatestheborrower’srighttoprepayistheprepaymentpenaltymortgage.10-29Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallConformingLoansFreddieMacandFannieMaearegovernment-sponsoredenterprises(GSEs)whosemissionistoprovideliquidityandsupporttothemortgagemarket.WhileFannieMaeandFreddieMaccanbuyorsellanytypeofresidentialmortgage,themortgagesthatarepackagedintosecuritiesarerestrictedtogovernmentloansandthosethatsatisfytheirunderwritingguidelines.Theconventionalloansthatqualifyarereferredtoasconformingloans.AconformingloanissimplyaconventionalloanthatmeetstheunderwritingstandardofFannieMaeandFreddieMac.Thus,conventionalloansinthemarketarereferredtoasconformingconventionalloansandnonconformingconventionalloans.10-30Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallConformingLoans(continued)Qualifyingforaconformingloanisimportantforboththeborrowerandthemortgageoriginator.ThisisbecausethetwoGSEsarethelargestbuyersofmortgagesintheUnitedStates.Hence,loansthatqualifyasconformingloanshaveagreaterprobabilityofbeingpurchasedbyFannieMaeandFreddieMactobepackagedintoanMBS.Asaresult,theyhavelowerinterestratesthannonconformingconventionalloans.10-31Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallRisksAssociatedwithInvestinginMortgageLoansTheprincipalinvestorsinmortgageloansincludethriftsandcommercialbanks.Pensionfundsandlifeinsurancecompaniesalsoinvestintheseloans,buttheirownershipissmallcomparedtothatofthebanksandthrifts.Investorsfacefourmainrisksbyinvestinginresidentialmortgageloans:creditriskliquidityriskpriceriskprepaymentrisk10-32Copyright©2010PearsonEducation,Inc.PublishingasPrenticeHallRisksAssociatedwithInvestinginMortgageLoans(continued)CreditRiskCreditriskistheriskthatthehomeowner/borrowerwilldefault.ForFHA-andVA-insuredmortgages,thisriskisminimal.TheLTVratio