The most popular securitization is the "bundling" of mortgage loans, many of which are homogenous. This webinar will focus on the types of mortgages and their features that are "bundled" by mortgage loan originators, turned into securities, sold to third parties - the process known as securitization.
The re-emerging securitization business is an inexpensive way for lenders to raise "cheap" funds. It also allows lenders to avoid excessive credit risk concentrations by spreading out the credit risk to multiple "players" in the mortgage market which reduces systemic risk problems.
Objectives of the Presentation
Why Should you Attend
- Understand mortgages and mortgage loan fundamentals
- Distinguish between various types of mortgage loans
- Analyze various GSEs
- Contrast fixed vs. variable rate loans
- Distinguish between current market index and lagging market index
- Analyze unique characteristics of ARMs
- Review accounting for transfers of loans (securitizations)
- Summarize the meaning of "securitizations"
- Contrast primary and secondary mortgage markets
Attendees will learn the mechanics of the securitization business. Also, attendees will learn the fundamental characteristics and the securitization eligibility standards of the mortgage loans that are "bundled" to create the pass-through securities that are issued by the government sponsored entities (GSEs) such as FNMA (Fannie Mae), GNMA (Ginnie Mae) and FHLMC (Freddie Mac).
Attendees will learn about types of mortgages, mortgage terms, liens, escrow balances, various insurance requirements, loan-to-value ratios, payment to income ratios etc.
Attendees will also learn about the risk associated with securitizations, such as the possibility of granting mortgage loans without minimum prudent lending credit controls. The desire to create "product" for securitizations often leads to less than prudent mortgage lending.
Who will Benefit
- Review basic lending concerns of mortgage originators
- Discuss primary mortgage market and secondary mortgage market issues
- Review the purpose of the Federal Home Loan Banks (FHLBs)
- Review the purpose of the Federal Housing Administration (FHA), including FHA insurance against mortgage default
- Review the purpose of Federal National Mortgage Association (FNMA)
- Review the purpose of Government National Mortgage Association (GNMA)
- Review the purpose of Federal Home Loan Mortgage Corp. (FHLMC)
- Review GSE Guarantees
- Contrast fundamentals between Fixed-Rate Mortgage, Adjustable Rate Mortgage (ARM), Graduated-Payment Mortgage, Balloon Mortgage
- Analyze and distinguish between CMT Index and COFI Index
- Examine and contrast payment-to-Income Ratio and Loan to Value Ratio
- Review securitization accounting by the transferor
- Analyze examples of accounting journal entries that record:
- Transfers with proceeds of cash, derivatives and other liabilities
- Transfers of partial interests
- Sale of receivables (loans) with servicing retained
- Loan originators (lenders)
- Loan operating personnel
- Loan underwriters
- The government sponsored entities
- Bank lending and securitization personnel
- External independent auditors
- Loan investors
- Internal auditors
- External auditors