MBS/Dennis Lockhart

acts as banker for the US government; maintains treasury dept checking account, supervise and regulate monetary policy for the US

Ben Bernanke

Timothy Geithner

promote stable prices (inflation) and maximize sustainable employment (unemployment)

purchased $1.7 Trillion of MBS product

monthly purchase of $600 Billion of US Treasuries

every 6 weeks in DC

federal open market committee

borrower pledges some asset as collateral for the loan which then becomes a secured debt owed to the creditor who makes the loan. in the event of default, creditor takes possession of the asset and may sell to satisfy the loan.

not connected to any specific asset or piece of property, typically backed by reputation of borrower with a promise to repay

loan to value ration; mathematically expresses the amount of the first mortgage as % of the appraised value of the house

first claim in event of default

determined by qualified and licensed appraiser

institution that works with the borrower to complete a transaction for funding/loan on a house, either mortgage broker or mortgage banker, typically works for a fee

faced with higher mortgage rates and deteriorating housing markers, homeowners are having trouble paying off their mortgages. late payments and/or failure to make payments are termed delinquent.

legal process in which a bank or other secured lender/creditor repossesses a parcel of property after owner has failed to comply with contract/promissory note. Selling of asset is sometimes only exit strategy for bank/lender, referred to as short sale

adjustable rate mortgages; mortgage where interest rate on the note is periodically adjusted based on an index;
most common-Cost of Funds Index (COFI), London Interbank Offered Rate (LIBOR), Prime rate

initial interest rate on ARMS, typically well below the going market, used by lenders to entice borrowers to choose ARM product over traditional/conventional mortgages; low at beginning then spikes up

borrower only pays the interest on the principal balance, typically over a 5 or 10 year period with principal balance unchanged. either a balloon payment at the end of the period or traditional mortgage that amortizes over the remaining life

mortgage which does not fully amortize over the term of the note leaving a balance at maturity

credit extended in making a loan without regard to borrower's ability to repay; unnecessary refinancing of a loan with little financial benefit to borrower; charging high interest rates, inflated origination fees, exorbitant broker fees

one-time lump sum loan in which the borrower uses the equity in their home as collateral; creates a lien against the home and by definition reduces equity in the house

situation in which you owe the bank/creditor more than the house is worth

federal national mortgage (a GSE-government sponsored enterprise)- privately owned corporation authorized to make loans; ensures that money continues to be available to qualified buyers for new home purchases, not backed or guaranteed by US

federal home loan mortgage corp (GSE)- authorized to make loans and ensures that money continues to be available for qualified buyers in the secondary market; not backed or guaranteed by US

evaluated by a FICO score, a credit evaluation based on consumer's ability to repay

Equifax, Transunion, Experian

7

12

bank supervision, payments and processing services, monetary policy, financial system stability

decline in country's gdp for two successive quarters

3% growth with a 1% band

1.5%-2.5%

index that measures the average price of consumer goods and services

stimulative, restrictive, neutral

interest rate at which depository institutions, mostly banks, lend to other member banks, usually overnight; used to regulate the supply of money in the US economy; currently at 0 (between 0-.25%)

rate at which member banks borrow directly from the fed, approx 25-50 basis points higher than fed funds rate; typically only during emergencies