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[DOCX File]The Rise and Fall of Mortgage Securitization*
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The effect benefited banks by allowing them to sell mortgages and make money by servicing the loans, while demand was created when investors saw the opportunity to get a better rate of return. Risk assessment and Risk-based pricing.
how do banks sell mortgages

[DOC File]MORTGAGE LENDERS AND MORTGAGE LOANS
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Banks made markets in the sale of these products. In order to do so, they needed to originate mortgages, securitize them, and then hold onto inventory that they would ultimately sell. Banks had to operate as market makers in these securities which meant that they sometimes had to buy and sell securities that would then pile up in inventories.
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[DOCX File]COUNTRYWIDE FINANCIAL CORPORATION AND THE …
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Query: Why do banks assume interest rate risk? Do they HAVE to do so? ... (Ie. using T-Bond futures to off-set the interest rate risk to mortgages) ... Call Option to buy or sell a financial contract like t-bills futures, Stock market index futures (etc) Payoffs: Buy a call.
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[DOC File]CHAPTER 15
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e. Why do regulators not allow banks to benefit from positive current exposure values? Regulators fear that allowing banks to gain from a counterparty default would create risk-taking incentives that would not be in the best interests of the bank or the financial services industry. 24.
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[DOCX File]Homework Exercises – 9
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But the issue of stability also arises here—if people hear that the Fed is about to change interest rates, they may rush out to do all kinds of things such as refinance mortgages, open or close savings accounts, withdraw or deposit money into the stock market, and the like. Chaos could result. 5.
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[DOC File]INTRODUCTION
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A solid understanding of the history of the mortgage industry is crucial in contextualizing the financial crisis of 2008. An analysis of the practices and scope of operations of one of the largest players in the mortgage industry, Countrywide Financial, can shed further light on the events leading up to 2008.To help achieve this, Porter’s Five Forces Model will also be used.
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[DOC File]Introduction to Interest Rate Risk
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Instead, you might go out and borrow from other banks, corporations, or the Fed to obtain funds so that you can make the customer’s loan. Alternatively, you might sell negotiable CDs or some of your securities to acquire the necessary funds. Why has the development of overnight loan markets made it more likely that banks will hold fewer reserves?
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[DOC File]Chapter 1
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What are Banks? Why do we need to know what is and what is not a bank? Not technically "banks": ... techniques used for transforming illiquid sources of cash flow into tradable securities – i.e., sell off loans. Illiquid Sources of Cash Flow may include Home Loans (Mortgages), Credit Card Accounts, Car Loans, Consumer Loans, Corporate Bank ...
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Reason Why Banks Sell Mortgage Loans
Sell Some Mortgages. Lemon Market Problem= sense if you want to sell that 1, I don’t want that 1 (b/c seller wants to sell highest risk mortgages) ( buyer won’t pay as much b/c either. High risk b/c seller in better position to know strength of the loan OR. Buyer does …
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[DOC File]Chapter Twenty .edu
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Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area. E. Bankruptcy. A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed ...
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Why do banks sell mortgages