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Understanding the Total Mortgage Market: Breakdown of Originators, FRMs, and ARMs

This comprehensive analysis explores the total mortgage market, focusing on the breakdown of major mortgage originators and the differences between Fixed Rate Mortgages (FRMs) and Adjustable Rate Mortgages (ARMs). It includes examples of ARM terms, historical variations in base rates, yields, and detailed cash flow calculations. Additionally, we discuss useful mortgage formulas and the impact of federal agencies on the mortgage market, including their role and borrowing costs in capital markets.

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Understanding the Total Mortgage Market: Breakdown of Originators, FRMs, and ARMs

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Presentation Transcript

  1. Mortgages & Agencies Topic 10

  2. Total Mortgage Market & Its Breakdown

  3. Top Mortgage Originators

  4. Breakdown of FRMs and ARMs

  5. Example of an ARM Terms

  6. Historical Variations in ARM base rate

  7. Mortgage Yields and Cash Flow Calculations

  8. Mortgage Yields and Cash Flow Calculations

  9. Computing Mortgage Monthly Cash Flows

  10. Computing Mortgage Monthly Cash Flows

  11. Mortgage Yields and Cash Flow Calculations

  12. Useful Mortgage Formulas -- Cash Flow Calculations Source: Lakhbir Hayre, CITIGROUP G: Monthly coupon (6% annual implies G=0.06/12=0.0050). U: Discount factor: U=1/(1+G)=1/1.005=0.995025 N=Original term of mortgage loan in months (e.g. N=360). n=Age of loan in months. R=N-n=remaining loan term in months.

  13. Useful Mortgage Formulas -- Cash Flow Calculations No prepayments

  14. The role of Federal Agencies in Mortgage Market

  15. The role of Federal Agencies in Mortgage Market

  16. The role of Federal Agencies in Mortgage Market

  17. Agency’s Borrowing Costs in Capital Markets

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