Draw a Diagram on how money flows in the real estate credit market.
Introduction: Banks originally owned and maintained in their portfolios all the real estate loans they created. However, this often caused banks to restrict new loans due to capital restrictions. With the creation of the secondary market, banks were able to sell a large number of their real estate loans, creating additional liquidity for new home purchases.
Apply your understanding of how loans are sold by primary lenders to the secondary market, and how the secondary market creates liquidity for the real estate market by addressing the assignment checklist items after reading the scenario.
Introduction:
Visual presentations to buyers and sellers in real estate is a necessity in order to illustrate complex processes and explain various considerations that can affect seller and buyer decisions. In this assignment, you will apply diagramming to show the flow of funds in a particular scenario.
Read the scenario and respond to the checklist items.
Scenario: Henri and Lila who own the Three Forks Restaurant have decided to possibly purchase a home, and they can put down 20% on a home loan. They have been informed by the bank that their loan might be sold off at some point after closing.
Checklist:
Explain the kind of mortgage market they will apply to and what mortgage interest rate they might obtain based on a 30-year, fixed-rate mortgage at this week’s rate.
Diagram how the mortgage will travel through different channels to end up being sold on Wall Street. (You can use the insert tab in Microsoft® Word®, then select SmartArt®.)
Explain the diagram and discuss each step in the overall process.
