MORTGAGE MARKETS

Mortgage
Primary way that prospective homeowner have of buying a house and land on which to build a property Obtain from bank,credit union and financial institutions Have to repay principal amount and interest The property bought provided as security for the mortgaged amount

Motgage market
Secondary market Sale of securities collateralized by the value of mortgage loans These securities are collateralized debt obligations also known as mortgage backed securities

Pakistan mortgage market

Provides loan by bank and other financial instituons specially Minimum loan is 500000 and upto 7500000 and more subject to the customer eligibility and location of the project Loans are for 20 or more then 20 years Repayment are monthly installment are through floating rate from 11 to 12 percent and fixed are 14.5%

HISTORY
HBFC incorporated in july 2007 Was establised in 1952 as statury federal body with a purpose of providing mortgage loans to the people Withs its establishment concept of institutionalized house financing is first time introduced

 After the establishmrnt of HBFC prople were more tend toward borrow from this corporation as compared to wait for there full life time saving to build a house It was more convinent for the people to borrow frim this corporation They will have to repay monthly with interest plus the principal amount after the mortgage loan sanchaned

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This corporation is at a boom just because people were feeling more convinent from borrowing from this corporation and the market for the mortgage raised rapidly Then sudden the mortgage market busrt just like a burst of a baloon and it declines The puchasing power of people declines that lead to not repayment of borrowing money People are unable to repay the loans amounts

 Secondary markets of mortgage is not present The mortgage securities are traded When some one needed cash so he can sell the security to the second person but this market is not present in pakistan

SECURITIZATION FOOD CHAIN

LOAN PAYMENTS

IN THE OLD SYSTEM

MORTGAGE PAYMENTS

IN THE NEW SYSTEM

COMMERCIAL MORTGAGES CORPORATE BUYOUT DEBTS COLETRALIZED DEBT OBLIGATION HOME MORTGAGES AAA BBB STUDENT LOANS

Global
In the early 2000s, the economy was healthy, interest rates were low and consumers felt a bit flush helped push real-estate values up across the world lenders felt more confident about making mortgages to customers whose poor credit histories had prevented them from buying homes in the past.

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raise home-ownership rates to a record 69 percent in 2004 double-digit growth year over year was common in some areas Loan are provided to the poor creditrating people called sub prime loan Sub prime lending growth is increased by double every year

 These sub prime lending increased the risk factor by more then expected This lending leads people to default Unethical practices by the lenders Refinance in billions below market rates In 2008 this market is crashed globally Loss of around 370 billion according to american corelogic