Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
12 Cards in this Set
- Front
- Back
|
Mortgage
|
A particular type of loan used to buy a house. The house normally serves as the collateral for the mortgage.
|
|
|
Bubble
|
An increase in the price of an asset or assets that goes far beyond what can be justified by improving fundamentals, such as dividends and earnings for shares of stock or incomes and interest rates for houses.
|
|
|
Interest Rate Spread
|
The difference between an interest rate on a risky asset and the corresponding interest rate on a risk-free Treasury security.
|
|
|
Subprime
|
A classification of a mortgage if the borrower fails to meet the traditional credit standards of "prime" borrowers.
|
|
|
Leverage
|
The buyer uses borrowed money to supplement his or her own funds. Leverage is typically measured by the ratio of assets to equity.
Ex. If the buyer commits $100,000 of his or her own funds and borrows $900,000 to purchase a $1 million asset, we say that leverage is 10-to-1 (1 million divided by 100,000) |
|
|
Insolvent
|
A company when the value of its liabilities exceeds the value of its assets, that is, when its net worth is negative.
|
|
|
Collateral
|
The asset or assets that a borrower pledges in order to guarantee repayment of a loan. If the borrower fails to pay, the collateral becomes the property of the lender.
|
|
|
Foreclosure
|
The legal process through which a mortgage lender obtains control of the property after the mortgage goes into default
|
|
|
Securitized
|
When loans are transformed into marketable securities when they are packaged together into a bond-like instrument that can be sold to investors, potentially all over the world
|
|
|
Mortgage-backed Security (MBS)
|
A type of bond whose interest payments and principal repayments derive from the monthly mortgage payments of many households
|
|
|
Troubled Asset Relief Program
(TARP) |
Enabled the US Treasury to purchase assets and equity from banks and other financial institutions as a means of strengthening the financial sector.
|
|
|
Recapitalized
|
A bank is this when some investor, private or government, provide new equity capital in return for partial ownership.
|
