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Very simply, the Mortgage is a loan granted to people to
purchase
a landed property, that is secured by the property. The amount of
the loan usually granted is less than the actual value of
the property. The borrower is often required to pay a down-payment,
a portion of the selling price of the property, to force the buyer
assume some risk and so be motivated to continue making
payments to the lender so as not to loose the down-payment.
Sources of Mortgages
There are two sources of mortgage products to which a borrower may
go to secure a mortgage for the purchase of a landed property. These
are the Commercial Bank, and the Mortgage Banking Company
(also sometimes called a Mortgage Banker). In majority of the case,
the loan product is designed by the commercial bank but with
the Mortgage Banker serving as a sales representative of the
commercial bank.
Remarkably,
there are now Internet variant of the same form of services that are
sort of offered by the loan officers.
Mortgage
Origination
Although most people simply go to a bank to ask for loan, but
actually mortgage, to buy a property, the commercial bank may also undertake
creating market-wide awareness of it mortgage products by direct
sales activities. In such cases the bank employs workers whose task
to engage in the sales of its loan product directly to the consumer, who most often
are the customers of the bank. The direct sales-force of the bank
usually include the customer service representatives of the bank and
are usually salary-paid. On the other hand, the sales-force of the Mortgage banker is
one or more on-commission employee(s), who actually make direct contact
with all potential homebuyers with the object of getting the future
homebuyer to get a mortgage loan.
Irrespective of whom the sales force works for, the sales staff
are often known by the title of Mortgage Originators, Loan
Officers, or Mortgage Brokers. Often the bank mortgage sales staffs
are preferably called by Mortgage Originators or Loan Officers
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more often than they are called by Mortgage Brokers; however, the
mortgage sales staffs of the Mortgage Banking Company are
interchangeably called by all three titles. In any event, the
Mortgage
Broker is simply versed on the several mortgage types that the
company has to sell. Often though even when a commercial bank has
its own staff of Loan Officers, the sales support of Mortgage
Bankers is still enlisted, primarily because such external sales
representative gives the mortgage product of the commercial bank the
chance to be compared against the product of the competitors.
Mortgage Products
There are several types of
mortgage products and with different characteristics. Each mortgage
product effectively constitutes a mortgage class. Effectively, a
bank may offer a mortgage product of a particular class but with an
entirely different characteristics from one of the same class
offered by another bank. In any event, the most common classes of
mortgages include Fixed Rate Mortgage, Adjustable Rate Mortgage, and
Balloon Mortgage, Graduated Payment Mortgage, etc. The Fixed Rate
Mortgage is defined with a fixed rate through the life of the
mortgage, and such rate are usually set at Prime rate + percent.
Mortgage Products
Contents
However, a better appreciation of
mortgages products and their differing characteristics is gained when the
mortgages are repackaged as
mortgage product-offered to
separate the core products from the expected products which are set
by the guidelines of Fannie Mae and Freddie Mac, from product
augmentation which are set by the offering bank.
Sales of Mortgages
Liquidity is a necessary
requirement of the mortgage business. Hence every entity that
engages on mortgage business sooner or later focuses on the issues
of capital recirculation. Accordingly, sometime after a
loan service has been performed by the original lender and it is
determined that the loan is a serviceable loan, the original lender
often sells off the loan to investment bankers who securitized the
loan and sells it to the public
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through stocks and debt notes.
However, in most cases the approach is to perform an evaluation of
the expected return on investment at the time of maturity and to
then calculate the present value of the investment, and then price
the securities accordingly. Brokerage houses also often get
into the act of selling the mortgage backed securities and note for
commission
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