Contents contributed and discussions participated by Daphne Feng
Definitions - 98 views
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Some definitions and terminology I've come across in research:
2/28 ARM -
Indicates that this is a adjustable rate mortgage, fixed for two years, then reset to the market value at that time (plus a margin)
Predatory lending -
"Unscrupulous activities" lenders take part in in order to entice a borrower into taking a loan with high rates, interest, or a loan that ultimately gives the borrower a bad credit rating.
Loan-to-value (LTV) ratio -
Amount of mortgage / Appraised value of the property
This ratio is used by financial institutions to assess a ratio before approving a mortgage. A higher LTV ratio means the mortgage is of higher risk, because that means a high amount of mortgage for a small value of property.
Collateralized Mortgage Obligation (CMO) / Collateralized Bond Obligation (CBO) -
Like a collateralized debt obligation (CDO), just with mortgages/bonds backing the security.
Payment shock -
The risk that a loan's payments will suddenly increase substantially. This happens when an initial "teaser" interest rate expires, when the fixed-rate period of a loan ends, etc.
Credit crunch -
An economic condition during which it is difficult to obtain investment capital, or credit. Banks and investors do not lend as much to businesses, which increases the price of debt for borrowers.
Who Is To Blame For The Subprime Crisis? - 6 views
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