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Lending Cycle in USA. With details on Freddie Mac and Fannie Mae




KEY TERMS


Mortgage 

A mortgage loan is a loan used to raise funds to buy real estate, or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property; this means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property ("foreclosure" or "repossession") to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms.

Fungible

Fungibility implies that two things are identical in specification, where individual units can be mutually substituted. Commodities, common shares, options, and dollar bills are examples of fungible goods.

Security

Refers to a fungible financial instrument.  A security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or a corporation represented by owning that entity's bond; or rights to ownership as represented by an option.

Bond

 is a type of security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as interest (called the coupon) over a specified amount of time).

MBS (Mortgage Based Security) 

Is a type of bond, secured by a mortgage OR collection of Mortgages.





US MORTGAGE MARKET


Source https://www.ft.com/content/e3e1d654-5288-11dd-9ba7-000077b07658


MBS Details


MBS Categories








Difference Chart



Source: Freddie Mac vs Fannie Mae (wallstreetmojo.com)

https://beaconlending.com/blog/fannie-mae-home-ready-vs-freddie-mac-home-possible/



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