Question 1:

Read the textbook, name the four major classes of mortgage-related securities.  As an issuer, explain the reasons for choosing one type over another. Please elaborate by expressing your thoughts about your findings in at least 5 – 6 sentences.

Student 1:

The four major classes of mortgage related securities are as of the following:

• Mortgage-Backed Security: Just like what is mentioned in the name of the mortgage, it is backed by the collateral of the asset or the property. Mortgage backed security issued mortgage securities that is backed with the property as lien against the borrower.
• Mortgage Pay Through Bonds: A hybrid between the mortgage backed securities and the mortgage pass through securities. It is a hybrid security with issued against a mortgage pool. A mortgage pay through is also considered the debt obligation to the issuer.
• Mortgage Pass-Through Security: It is a purchase of shares of a pool or collections of mortgages. The cash flow from the pass through is to the security holder as monthly payments. More in a secondary market situation.
• Collateralized Mortgage Obligations: It is bundled mortgages sold as an investment by others. Organized and characteristic by risk levels.

I would like to have mortgage backed security if the property is considered highly valuable in term of future market cost. This is riskier if a single property over a diversified pool more like the three others. The pass through entities that have a pool of bundle attached usually have less risks than a single mortgage backed security due to diversification. If an entire zip code appears to be in excellent condition, it might be a good idea to have the pool of less risky and secondary market investor with lower potential returns in exchange.

Sources:

https://realtytimes.com/advicefromtheexpert/item/1004574-mortgage-pay-through-bonds#:~:text=Mortgage%20pay%2Dthrough%20bonds%20are%20usually%20issued%20against%20a%20mortgage%20pool.&text=The%20issuer%20retains%20the%20ownership,the%20pool%20and%20simple%20amortization (Links to an external site.).

https://www.nasdaq.com/glossary/m/mortgage-pass-through-security (Links to an external site.)

https://www.investopedia.com/terms/c/cmo.asp

Question 2:

Please visit the Penny Mac Broker Direct at https://www.pennymacbrokerdirect.com.  Explore the site.  Identify resources that may be of use to real estate professionals and share it with class.

Student 2:

PennyMac is a national wholesale mortgage lender. PennyMac serves as the middleman between the mortgage borrowers and lenders. Its business is consistent, engaged and transparent. PennyMac provides a range of innovative solutions to help the brokers grow the business. The company provides competitive products and prices in several categories, such as VA, FHA and Conventional.

Its website only offers simple information about its business, special features and short introduction of the business. A user or broker needs to register to be contacted by an agent. A company can become a PennyMac partner or a broker. A POM will be working with the broker to grow the business. As a potential broker working with PennyMac, you can register and signon using the Power login. The website lists the paperwork turn around time.

References:

Penny Mac Broker Direct. Retrieved from https://www.pennymacbrokerdirect.com

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