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阿德萊德代寫assignment

代寫Theory, History Borrower Qualification


3.0 REF: Overview,
3.1 What is finance?
3.2 What is Real Estate finance?
3.3 Some issues in REF
3.4 A brief history of REF
3.5 Default risk, borrower qualifications and loan underwriting






Announcements
•Where we are….
•Learning Objectives
•LO#3  Explain how basic finance principles can be applied to real estate finance
•Relevant Readings
•Main text: pp 46–56; 63–67; 76–79; 171–185
•Class Activity #1
•How do you think REF may be different from a traditional finance course?
•3.1 What is Finance?
•The study of the process, institutions, markets, and instruments used to transfer money and credit between individuals, businesses, and governments for any purpose
•If the purpose is to develop/acquire real property then it becomes REF
•Real property = rights, powers, privileges associated with use of real estate
•Real estate = land plus all fixed, immovable improvements on it
•3.2 What is Real Estate Finance?
•The study of
–The effect of financing on the value of real property
–The valuation of mortgages (dead deposit)
–The financing of residential and commercial real estate
–The primary and secondary mortgage markets
–The securitization of mortgages
•Institutions create financial instruments to transfer money and credit related to real property transactions
•Financial institutions channel funds from surplus income units to deficit income units
Primary mortgage market
•The market where mortgages are originated
•Originators either hold mortgages in portfolio or sell them into the secondary mortgage market
Secondary mortgage market
•investors purchase mortgages from originators in the primary mortgage market
•mortgage-related securities issued using mortgage pools as collateral
•Class Activity #2
•Can you think of other examples of primary and secondary markets?

 3.3 Some issues in REF
•Financial leverage
–The use of debt in financing
–Borrowing rate is less than the return on the asset
•Class Activity #3
Is financial leverage a good thing? How much?
Options in real estate
–Call Option - Right to prepay at any time before maturity
–Put Option - Putting the property in place of the debt
–Important to note the difference in definition here and that in traditional finance course

3.4 A brief history of REF
Roman law
–Transfer of title and possession until repayment: fiducia
–No transfer of title or possession. Lender could take title and possession under suspicion of default: pigus
–No transfer of title or possession. Lender could take title under actual default: hypotheca
German law
–Gage is a deposit made to fulfill an agreement
–Mort is French for Dead. Real property (not transportable) was a dead gage
–In default the lender could take title but could not look further for relief
•English law
–Concept of usury in that charging interest was sinful
–Equitable Right Of Redemption - Allowing borrower to redeem the property after default
•U.S. law is a mix of Roman, German, And English law
•3.5 Default risk, borrower qualification, and loan underwriting
Default risk
•Ability-to-Pay Theory
–For whatever reason, borrower cannot make the payments
•Equity Theory (Put Option)
–The lower the equity, the greater the likelihood that the borrower will “put” the property in place of the debt

Borrower qualifications
•Type and stability of income
•Other debt and living expenses
•Five Cs
Qualifying ratios
•Loan-to-Value Ratio (LTR)
–The higher the LTR Ratio, the higher the default risk
–Very important concept/tool in making loans
•Class Activity #4
If the LVR is 80%, how long might it take you to purchase a house in Australia valued at $500,000.  Assume, all savings from own earnings.
Mortgage Contracts
•Mortgage - defines the debt and creates alien against the property
•Promissory Note - Outlines the provisions of the loan
–Recourse vs. Non-Recourse
–Interest and Payment Structure
–Pre-Payment
–Default and Acceleration
–Due-on-Sale Clause
–Amount of Loan
–Assignment of Rents and Income
•Learning Objectives
•LO#3  Explain how basic finance principles can be applied to real estate finance
•Next week/lecture…
•Thank you!
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