Posted To: Mortgage Rate Watch

The most important ingredient in the mortgage market is the presence of homeowners–prospective or otherwise–with the means and desire to make monthly payments. That fact invites investors to earn solid, predictable returns with almost no risk. After all, most of the mortgage market is comprised of loans that guarantee that an investor will get their principal and interest back. The only real risk is a temporary interruption in cash flow or a premature sale/refi that results in the investor being unable to collect interest for as long as they’d hoped. The industry term for such a premature sale/refi (or anything else that terminates the loan, like a foreclosure or short sale) is ” prepayment .” Because of the guarantees from the agencies (Fannie/Freddie/Ginnie), prepayments account for most…(read more)

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Source: Mortgage News Daily