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In Introduction to Mortgages & Mortgage Backed Securities, author Richard Green combines current practices in real estate capital markets with financial theory so readers can make intelligent business decisions. After a behavioral economics chapter on the nature of real estate decisions, he explores mortgage products, processes, derivatives, and international practices. By focusing on debt, his book presents a different view of the mortgage market than is commonly available, and his primer on fixed-income tools and concepts ensures that readers understand the rich content he covers. Including commercial and residential real estate, this book explains how the markets work, why they collapsed in 2008, and what countries are doing to protect themselves from future bubbles. Green's expertise illuminates both the fundamentals of mortgage analysis and the international paradigms of products, models, and regulatory environments.
- Written for buyers of real estate, not mortgage lenders
- Balances theory with increasingly complex practices of commercial and residential mortgage lending
- Emphasizes international practices, changes caused by the 2008-11 financial crisis, and the behavioral aspects of mortgage decision making
Upper-division undergraduates and graduate students studying real estate finance and capital markets. Common course titles include "Mortgages and Mortgage-Backed Securities and Markets," "Real Estate Analysis," and "Investment Property Analysis."
Contributors and Acknowledgments
Chapter 1. A Brief History of Mortgages
The Great Depression, the New Deal, and the Transformation of the American Mortgage Market
The Post World War II Era
Chapter 2. Mortgage Originations and the Mortgage Chain
The Securitization Process
A Summary: The Mortgage Chain
Chapter 3. The Work-Horse American Mortgage: The 30-Year Fixed-Rate Mortgage
The Popularity of the 30-Year Fixed-Rate Mortgage
Chapter 4. Other Types of Mortgages
Pay Option ARMS, PLAMS, and Other Negative Amortization Mortgages
Second Lien Mortgages
Chapter 5. Underwriting Mortgages and Mortgage Default
Automated Valuation Methods
Putting it Together
Chapter 6. Mortgage-Backed Securities and Derivatives
Types of Tranches
Chapter 7. Multifamily Mortgages
Property-Based Underwriting Standards
Underwriting the Borrower
Commercial Loan Covenants
Sources of Multifamily Finance
The 5–50 Problem
Section 42 Low Income Housing Tax Credit Program
Modeling the Cost of Default for a Multifamily Property
Chapter 8. International Comparisons of Mortgages
Tax Treatment of Mortgages
Sources of Funding
Differences in Government Intervention in Mortgages
How Consumer-Friendly Is the US Mortgage?
Size of Mortgage Markets
Mortgages and Macro-Prudential Supervision
Chapter 9. The Subprime Crisis
Those Who Saw it Coming
Those Who Said House Prices Would Rise Forever
Ex Post Views on Causes of the Financial Crisis
Chapter 10. Consumers in Mortgage Markets
Economic Models of Mortgage Loan Choice
Prepayment and Default Decisions
Consumer Knowledge and Mortgage Decisions
Behavioral Decision-Making Perspectives and Mortgage Borrowers
External Influences on Mortgage Decisions
The Home Purchase Decision
Consumer Protection in Mortgage Markets
Conclusion: What’s the Optimal Mortgage for a Borrower?
Chapter 11. The Yield Curve, Monte Carlo Methods, and the Option-Adjusted Spread
Interest Rate Models
Monte Carlo Methods
Chapter 12. A Brief Discussion of Duration and Convexity
Problems Created by Duration-Convexity
Methods for Managing Mortgage Interest Rate Risk
Option Adjusted Spread
How Investors Think They Can Make Money Using Convexity
Chapter 13. The Rise and Fall of Fannie Mae and Freddie Mac: Lessons Learned and Options for Reform
How Fannie Mae and Freddie Mac Support the Mortgage Market
A Brief History of Fannie Mae and Freddie Mac
The Benefits of the GSE Model
Inherent Weaknesses and Criticisms of the GSE Approach
Principles for Reform
- No. of pages:
- © Academic Press 2013
- 1st November 2013
- Academic Press
- Hardcover ISBN:
- eBook ISBN:
Richard Green is Director of the Lusk Center for Real Estate at the University of Southern California. Prior to joining the USC faculty, he was Oliver T. Carr Jr. Chair of Real Estate Finance at The George Washington University School of Business. He was previously Wangard Faculty Scholar and Chair of Real Estate and Urban Land Economics at the University of Wisconsin, Madison.
Director of the Lusk Center for Real Estate, University of Southern California, Los Angeles, USA
"After reviewing the history of mortgages in the United States, this finance textbook explains the loan origination and securitization process, mortgage underwriting criteria, automated valuation methods, the splitting of mortgage pools, and commercial loan covenants."--ProtoView.com, April 2014
"Richard Green has done a masterful job of addressing the key elements of the mortgage market. The book will be an ideal text for advanced undergraduate or graduate students studying real estate finance. The book should be suitable for students from a variety of disciplines including business administration, economics, and urban planning."--Michael Lacour-Little, California State University – Fullerton
"Many books have been written recently about mortgages and the financial crisis. This is the only book I've seen that takes the reader through a wide range of mortgage products from origination through securitization so clearly and concisely; then connects these designs and the policy decisions that accompanied them to the recent crisis. The accompanying Excel models are a great help to readers who like to see how financial products work in practice with actual numbers. A terrific choice for any university housing or finance course, and for anyone in the business who needs to really understand how these products work."--Stephen Malpezzi, University of Wisconsin
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