Learn about real estate, mortgages, and personal finances

Tuesday, March 22, 2005

Estate In Land

An estate is the right, interest, or nature of interest, a person has in real property.

The Bundle of Rights - privileges, benefits, & amenities associated with ownership include the rights to possess, occupy, use, exclude others from, sell, lease, mortgage, give away, or abandon the property

Categories of estates

Estates in land can be divided into four basic categories:

Freehold estates: rights of ownership

  1. fee simple (fee simple absolute)—most rights, least limitations, indefeasible
  2. fee tail—inalienable rights of inheritance conditional, defeasible, or determinable fee—voidable ownership
  3. life estate—ownership for duration of someone's life

Leasehold estates: rights of possession and use but not ownership. The lessor (owner/landlord) gives this right to the lessee (tenant). There are four categories of leasehold estates:

  1. estate for years (tenancy for years)—lease of any length with specific begin and end date
  2. periodic estate (periodic tenancy)—automatically renewing lease (month to month, week to week)
  3. estate at will (tenancy at will)—loose agreement, can be terminated at will
  4. tenancy at sufferance—created when tenant remains after lease expires and becomes a holdover tenant, converts to holdover tenancy upon landlord acceptance; see Forcible Entry and Detainer Statutes

Types of leases:

  • gross lease
  • net lease
  • percentage lease

Statutory estates: created by law

  1. community property
  2. homestead
  3. dower—interest a wife has in the property of her husband
  4. curtesy—interest a husband has in the property of his wife
  5. tenancy by entirety

Equitable Estates: neither ownership nor possession


  • general
  • specific


  • easement in gross
  • easement appurtenant
  • ingress
  • egress

Real Estate Developer

A real estate developer builds on land, thereby increasing its value. The developer may be an individual, but is often a partnership or a corporation.

Developers are extremely concerned with providing useful buildings and structures. Useless buildings have no value, which means they can't be sold or rented. However, the building can only sell if it's in the right location, has utilities (defined as the availability from adjacent public roadways and with a sufficient capacity of water, sanitary sewer, storm sewer, electrical power, natural gas, telephone and cable) construction costs can be managed, and the project completes on time. The standard solution to the construction problems is to retain a registered professional engineer who specializes in supervision of construction, and involve this person before purchasing the land. The standard solution to the salability problems is to retain an architect to design an attractive development. Many developers retain ownership of profitable rental properties.

Monday, March 21, 2005


Real estate appraisal is a service performed by an appraiser that determines valuation (what property is worth) and legal use (highest and best use).

There are three approaches to determining the fair market value of a property, cost approach, sales comparison approach, and income approach. In theory, if all three approaches are utilized to appraise any given parcel, the resultant values will be the same. In practice, however, some properties and some situations lend themselves to the use of one approach over another.

The Cost Approach is sometimes called the summation approach. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. It is the land value, plus the cost to reconstruct any improvements, less the depreciation on those improvements. The value of the improvements is sometimes abbreviated to RCNLD—reproduction cost new less depreciation, or replacement cost new less deprecation. Reproduction refers to reproducing an exact replica. Replacement cost refers to the cost of building a house or other improvement which has the same utility, but using modern design, workmanship and materials.

In most instances, when the cost approach is involved, the overall methodology used is a hybrid of the cost and market data approaches. For instance, while the cost to construct a building can be determined by adding the labor and materials costs together, land values and depreciation must be derived from an analysis of the market data.

The Sales Comparison Approach looks at the price or price per unit area of similar properties being sold in the marketplace. Simply put, the sales of properties similar to the subject are analyzed and the sale prices adjusted to account for differences in the comparables to the subject to determine the fair market value of the subject

The Income Approach capitalizes an income stream into a present value. This can be done using revenue multipliers or single-year capitalization rates of the net operating income. Net operating income (NOI) is gross potential income (GPI) less vacancy (= Effective Gross Income) less operating expenses (excluding debt service or depreciation charges applied by accountants). Alternatively, multiple years of net operating income can be valued by a discount cash flow analysis (DCF) model.

Automated Valuation Models (AVMs) are growing in acceptance. These rely on statistical models such as multiple regression analysis and geographic information systems (GIS). There is growing evidence that AVMs are not accurate. This is most evident where there is a renewal or "revitalization" of a particular area or neighborhood. There can exist within a single city block homes that are in poor condition to homes that have been completely rehabilitated and in good to excellent condition. The differential of sales prices can be demonstrated to be from 50% to 125%. This can lead to an inaccurate model. Extreme caution should be exercised when relying on these AVMs.

Friday, March 18, 2005

Real Estate Defined

Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. Real estate is often considered synonymous with real property (also sometimes called realty), in contrast with personal property, chattel, or personalty. However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate. The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property.

In spite of the name, real estate has no connection with the concept of reality (in other words, the law does not consider real property more "real" than personal property). It derives instead from the feudal principle that in a monarchy, all land was considered the property of the king. Thus originally the term real estate was equivalent to "royal estate", real originating from the French royale, as it was the French-speaking Normans who introduced feudalism to England and thus the English language; cognate to Spanish real.

With the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields.

Specialists are often called on to valuate real estate and facilitate transactions. Some kinds of real estate businesses include:

  • Appraisal - Professional valuation services
  • Brokerages - Assisting buyers and sellers in transactions
  • Development - Improving land for use by adding or replacing buildings
  • Property management - Managing a property for its owner(s)
  • Relocation services - Relocating people or business to different country
Within each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate.

Thursday, March 17, 2005


In law, lien is the broadest term for any sort of charge or encumbrance against an item of property that secures the payment of a debt or performance of some other obligation.

Liens can be consensual or non-consensual. Consensual liens are imposed by a contract between the creditor and the debtor. These liens include:

  • mortgages;
  • security interests;
  • chattel mortgages
Non-consensual liens typically arise by statute or by the operation of the common law. These liens give a creditor the right to impose a lien on an item of real property or a chattel by the existence of the relationship of creditor and debtor.

These liens include:

  • tax liens, imposed to secure payment of a tax;
  • attorney's liens, against funds and documents to secure payment of fees;
  • mechanic's liens, which secure payment for work done on property or land;
  • judgment liens, imposed to secure payment of a judgment
  • maritime liens, imposed on ships by admiralty law.

Liens are also "perfected" or "unperfected." Perfected liens are those liens for which a creditor has taken the steps required by law to give third parties notice of his interest in the property in which a lien is claimed. The fact that an item of property is in the hands of the creditor usually constitutes perfection. Where the property remains in the hands of the debtor, some further step must be taken, like recording a notice of the security interest with the appropriate office.

Perfecting a lien is an important part of the task of protecting the secured creditor's interest in the property. A perfected lien is valid, even against a trustee in bankruptcy; an unperfected lien is not.

Monday, March 14, 2005


A deed is a legal instrument used to grant a privilege. The deed is best known as the method of transferring title to real estate from one person to another. However, by the general definition, powers of attorney, commissions, patents, and even diplomas conferring academic degrees are also deeds.

Historically under common law, for an instrument to be a valid deed it needed five things:

  • It must indicate that the instrument itself conveys some privilege or thing to someone. This is indicated by using the word hereby or the phrase by these presents in the sentence indicating the gift.
  • The person receiving the privilege or thing must have the legal capacity to receive it.
  • The grantor must have the legal ability to grant the thing or privilege.
  • A seal must be affixed to it. Most jurisdictions have eliminated this requirement and replaced it with the signature of the grantor. However, for conveyances of real estate, most jurisdictions require that the deed be acknowleged before a Notary Public and some may require a witness or witnesses in addition.
  • It must be delivered to and accepted by the recipient. Conditions attached to the acceptance of a deed are known as covenants.
In the United States of America, a pardon of the President was at one time considered to be a deed and thus needed to be accepted by the recipient. This made it impossible to grant a pardon posthumously. However, in the case of Henry Ossian Flipper, this view was altered when President Bill Clinton pardoned him in 1999.

In some jurisdictions, a deed of trust is used as an equivalent to a mortgage.
In some jurisdictions (especially New Zealand) a deed of endowment is used as an equivalent to a Royal Charter, often used to establish educational or medical institutions. One such example is when the Governor of New Zealand, Sir George Grey, established the Auckland and Wellington Grammar Schools in 1850.

In the transfer of real estate, a grant deed conveys ownership from the old owner to the new owner, and includes a warranty that the old owner's claim to the property was valid. With a quitclaim deed the old owner forsakes his or her claim of ownership in favor of the new owner, but it does not contain any warranty that the old owner's claim was actually valid. While a grant deed is normally used for all real estate sales and transfers, quitclaim deeds are sometimes used for transfers between family members, gifts, and other special or unusual circumstances

Hard Money Loan

Hard money loans are loans collateralized by real estate. In 'hard money', higher interest rates and lower LTVs (loan-to-value ratios) are common because the lender is not backed by a government institution (unlike mortgages given by banks).

A loan that is backed by real-estate is unique because the lender assumes a lien position on the property that has been collateralized for the loan. If the borrower cannot repay the hard money loan, the lender may take the property and sell it to re-pay the loan.

Bridge Loan

A bridge loan is a type of short-term loan in the financial industry. Bridge loans are typically taken out for a period of 2 weeks to 3 years in order to finance other projects. Uses for bridge loans include real estate purchases, retrieving real estate from foreclosure and business loans for operating capital.

Reverse Mortgage

A reverse mortgage (known as equity withdrawal in the United Kingdom) is a type of loan used by older consumers as a way of converting their home equity into a cash payment while retaining ownership of their property. To qualify for a reverse mortgage in the United States, you must be at least 62 and have paid off all or most of your home mortgage.

Reverse mortgages allow the home owner to continue living in the home without being required to repay the loan. In exchange, the lender receives a substantial fraction of the home's equity. In the United States, the proceeds of the loan are tax-free, there are no minimum income requirements, and for most reverse mortgages, the money can be used for any purpose. However, reverse mortgages also tend to be costlier than other types of loans, and are sometimes abused by shady lenders.

Income is generally not considered by lenders when granting reverse mortgages, and no medical tests or medical histories are required. The amount you can borrow depends on your age, the equity in your home, the value of your home, and the interest rate. Reverse mortgages administered by the government may have other requirements as well.

In the United States, you can be paid in a lump sum, in monthly advances, through a line of credit, or a combination of all three. The loan advances, which are not taxable, generally do not affect Social Security or Medicare benefits. However, you should keep in mind that reverse mortgages tend to be more costly than traditional loans. They also use up all or some of the equity in a home. For these reasons, it's very important to compare reverse mortgage lenders and be aware of their requirements and risks before applying for this type of loan.

Blanket Loan

Also known as a blanket mortgage. A blanket loan is a mortgage lient securing several parcels of property, frequently used by developers who have purchased a single tract of land intending to subdivide into individual parcels. The developer normal requires a "partial release" clause so that individual parcels can be released from the blanket mortgage as they are sold.

Equity Loan

An equity loan is a mortgage placed on real estate in exchange for cash to the borrower. For example, if a person owns a home worth $100,000, but does not currently have a lien on it, they may take an equity loan at 80% loan to value (LVR) or $80,000 in cash in exchange for a lien on title placed by the lender of the equity loan.

Many lending institutions require the borrower to repay only an interest component of the loan each month (calculated daily, and compounded to the loan once each month). The borrower can apply any surplus funds to the outstanding loan principal at any time, reducing the amount of interest calculated from that day forward. Some loan products also allow the possibility to redraw cash up to the original LVR, potentially perpetuating the life of the loan beyond the original loan term.

The rate of interest applied to equity loans is much lower than that applied to unsecured loans, such as credit card debt.

Interest-Only Loan

An interest-only loan is a loan in which for a set term the borrower pays only the interest on the capital; the capital remains owing. At the end of the term the borrower may renew the interest-only mortgage, repay the capital, or (with some lenders) convert the loan to a principal and interest payment loan at his option. It should be noted that some interest-only mortgages in Canada allow the borrower to pay interest-only, principal and interest, or even principal and interest plus 20% extra.

In the United States, a five or ten year interest-only period is typical. After this time, the principal balance is amortized for the remaining term. In other words, if a borrower had a thirty year mortgage and the first ten years were interest only, at the end of the first ten years, the principal balance would be amortized for the remaining period or twenty years. The practical result is that the early repayments (in the interest-only period) are substantially lower than the later repayments. This enables a borrower who expects to increase their salary substantially over the course of the loan to borrow more than they would have otherwise been able to afford. Interest only loans were popular in the 1920s. Due to the depression and lack of work for the average person, there were many foreclosures during the depression.

Interest-only loans are popular ways of borrowing money to buy an asset that is unlikely to depreciate much and which can be sold at the end of the loan to repay the capital. For example, second homes, or properties bought for letting to others. In the United Kingdom in the 1980s and 1990s a popular way to buy a house was to combine an interest-only loan with an investment in the stock market, the combination being known as an endowment mortgage. The stock market crash of the late 1990s showed this to be a gamble. An interest-only mortgage in Canada can be combined with Corporate Bonds in a Registered Retirement Savings Plan (RRSP)where the plan holder receives a tax deduction, tax deferral and compound interest.

Friday, March 11, 2005

Mortgage Loan Types

There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM).

In a FRM, the interest rate, and hence monthly payment, remains fixed for the life (or term) of the loan. In the US, the term is usually for 10, 15, 20, or 30 years. In the UK the fixed term can be as short as five years, after which the loan reverts to a variable rate (which makes the loan an ARM).

In an ARM, the interest rate is fixed for a period of time, after which it will periodically (annually or monthly) adjust up or down to some market index. Common indices in the US include the Prime Rate, the LIBOR, and the Treasury Index ("T-Bill"). Other indexes like COFI, COSI, and MTA, are also available but are less popular.

Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain. Since the risk is transferred, lenders will usually make the initial interest rate of the ARM's note anywhere from 0.5% to 2% lower than the average 30-year fixed rate.

In most scenarios, the savings from an ARM outweigh its risks, making them an attractive option for people who are planning to keep a mortgage for ten years or less.

A partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding principal balance is due at some point short of that term. A balloon loan can be either a Fixed or Adjustable in terms of the Interest Rate. Many Second Trust mortgages use this feature. The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.
Other loan types:

  • term loan or interest-only loan
  • equity loan
  • blanket loan
  • package loan
  • wraparound mortgage
  • seasoned mortgage
  • reverse mortgage
  • budget loan
  • deed of trust
  • bridge loan
  • hard money loan

Costs Involved in a Mortgage

Lenders may charge various fees when giving a mortgage to a mortgagee. These include entry fees, exit fees, administration fees and lenders mortgage insurance.

Fixed Rate Mortgage Calculations

First the nomenclature.
I - The stated interest rate, for example, 5%/year. This is not the APR (annualized percentage rate).
m - The number of periods in the time frame of I. I is usually based on a year but it could be based on any amount of time.
i - The interest rate for the compounding period which is needed for the calculation. For example, a real property mortgage is usually based on a monthly period. In this case i=I*1/12 where I is based on the normal yearly period. In general i=I/m. Also I needs to be a decimal not a percent thus it also needs to be divided by 100.
n - The total number of periods or payments. Things like mortgages usually cover multiple years.
B - The balance, for example, the balance remaining on the mortgage at any point in time.

Mortgage Calculations:
Let B0 be the original mortgage.
Let B1, B2, B3 etc. be the balance after the first, second, third period respectively.
Obviously, one can think of B0 as the balance after the zeroth period namely the beginning balance.
P - The mortgage payment.
Now lets write down the balances. First the initial balance, the amount of the mortgage.
Now calculate the balance after one period or payment.
During the first period the initial balance has grown by the period interest and has been decreased by the first payment. Similarly
After n periods or payments we have
Bn is set equal to zero. When the mortgage is paid off the balance is zero. Now one can solve for P the payment. Rearranging gives:
The righthand side is a geometric series where each term is equal to the preceding term multiplied by (1 + i) which is known as the common ratio. See geometric sequence for additional details.

Solving for P gives:
The payment can be readily calculated to the penny with a spread sheet or scientific calculator.
Note: B0 is just a simple multiplier. Therefore one can do the calculation for a unit of currency such as a dollar and then multiply the result by the amount of the loan. In essence B0 is just a scale factor. For example think of the loan amount as my dollar where my dollar is just a currency whose exchange rate is just the loan amount difference.
Now lets do some calculations. Mortgages are usually for 10, 15, 20 or 30 years. Interest rates used to be around 9%/year and today around 6%/year. For all calculations B0 = 1
years, n, (1 + i)^n, P, nP for i = .09/12 = .0075

Thursday, March 10, 2005

Government National Mortgage Association

The Government National Mortgage Association (GNMA, also known as Ginnie Mae) was created by the United States Federal Government through a 1968 partition of the Federal National Mortgage Association. The GNMA is a wholly owned corporation within the United States' Department of Housing and Urban Development (HUD). Its main purpose is to provide financial assistance to low- to moderate-income homebuyers, by promoting mortgage credit.

The GNMA, along with the other so-called Government Sponsored Enterprises (GSEs), sell mortgages in their secondary market. This lets investors put money in the mortgage securities market, which increases the price of the mortgage bonds and lowers their rates, which in turn lowers the rates on mortgages in the primary market so that more people are able to buy and mortgage a home. The GNMA does this by guaranteeing the timely payment of the principal and interest payments on mortgage backed securities.

There are several types of GNMA securities that are active in the institutional fixed income markets:
GNMA I securities. A GNMA I (the "I" is a roman numeral one) represents a pool of mortgages all issued by one issuer, all with the same interest rate, and all issued at around the same time (within a few months). GNMA II securities. A GNMA II is similar to a GNMA I, except that the mortgages can have a range of interest rates, and can include mortgages issued by more than one issuer. In this case, the service fees (see below) vary, so that the new interest rate being paid to the investor from each mortgage is the same. GNMA "REMIC" securites. A REMIC (Real Estate Mortgage Investment Conduit) is an additional level of securitization. The collateral pool for a remic consists not of mortgages, but of mortgage backed securities (such as GNMA I, GNMA II, or previously issued REMICs). Pools are created by lenders. For example, a mortgage lender may sign up 100 home mortgages in which each buyer agreed to pay a fixed interest rate of 6% for a 30-year term. The lender (who must be an approved issuers of GNMA certificates) obtains a guarantee from the GNMA and then sells the entire pool of mortgages to a bond dealer in the form of a "GNMA certificate". The bond dealer then sells GNMA mortgage backed securities, paying 5.5% in this case, and backed by these mortgages, to investors. The original lender continues to collect payments from the home buyers, and forwards the money to a paying agent who pays the holders of the bonds. As these payments come in, the paying agent pays the principal which the home owners pay (or the amount that they are scheduled to pay, if some home owners fail to make the scheduled payment), and the 5.5% bond coupon payments to the investors. The difference between the 6% interest rate paid by the home owner and the 5.5% interest rate received by the investors consists of two components. Part of it is a guarantee fee (which GNMA gets) and part is a "servicing" fee, meaning a fee for collecting the monthly payments and dealing with the homeowner. If a home buyer defaults on payments, GNMA pays the bond coupon, as well as the scheduled principal payment each month, until the property is foreclosed. If (as is often the case) there is a shortfall (meaning a loss) after a foreclosure, GNMA still makes a full payment to the investor. If a home buyer prematurely pays off all or part of his loan, that portion of the bond is retired, or "called", the investor is paid accordingly, and no longer earns interest on that proportion of his bond.

The arrangement seemingly benefits everyone involved:

  • The mortgage lender has offloaded all risk to the GNMA, and has very quickly received a reimbursement of the money lent to home buyers from the bond dealer, and can immediately use this money to offer another pool of loans to the public.
  • The home-buying public benefits from lower mortgage rates caused by the large amount of lender competition, in turn caused by a large supply of lenders, which is enabled by this quick reimbursement of money.
  • The lower-income home-buying public benefits from a greater willingness by lenders to risk making loans to that group.
  • The investors, whose money makes all of this work in the first place, benefit from the "full faith and credit" of the United States government; GNMA bonds are backed by the pool of mortgages, and even if massive defaults were to occur, the U.S. government would make good on all payments. GNMA bonds also feature higher returns than other U.S. government issued bonds.

GNMA bonds themselves are considered risk-free from the standpoint of total default, but they are subject to risks that all other bonds have, including interest rate risk. They also have the undesirable attribute of being callable every month, meaning that, unlike other bonds, all or part of a GNMA bond might suddenly "mature" next month, if all the homeowners decided to pay off or refinance their mortgages. This does not involve a risk of loss to the investor, but rather a premature payment of the principal, and now the investor has to go look for another investment for his money. This is called prepayment risk. As a practical matter, many institutional investors find it very inconvenient to own bonds which get small principal payments every month.

The GNMA said in its 2003 annual report that over its history, it had guaranteed securities on the mortgages for over 30 million homes totalling over $2 trillion. It guaranteed $215.8 billion in these securities for the purchase or refinance of 2.4 million homes in 2003.

The "big 3" GSEs (government sponsored enterprises) of Fannie Mae, Ginnie Mae and Freddie Mac own or securitize upwards of 70% of the residential mortages in the United States. Only GNMA has the explicit backing of the full faith and credit of the United States government, although there is a perception (and a political reality) that all three are "too large to fail", and therefore will be bailed out by the government should they get into financial trouble.

These GSEs have driven many other mortage companies out of business due to GSEs being able to issue bonds at very low interest rates. A GSE bond is perceived to have the same risk as a government bond, which is essentially near zero risk.

Companies competing with these GSEs generally only securitize mortgages which the GSEs will not securitize. GNMA does not issue gurantees which increase the risk to the government, therefore they only securitize mortgages which are already guaranteed by the government. As a practical matter, these are either mortgages issued to veterans and guranteed by the Department of Veterans Affairs, or mortgages guaranteed by the Federal Housing Administration (FHA). Because their bonds have a higher risk than the GSEs, their bonds (and therefore their mortgages) have a higher interest rate.

The debate about limiting the growth and enforcing additional regulations on the GSEs has been ongoing and increasing. There have also been news reports of various financial irregularities at these GSEs in 2003 and 2004. If the GSEs either mismanage their funds, or there is a large rise in interest rates that the GSEs have not hedged, the government guarantee means the taxpayers would have to pay off their debts. Since they are corporations, some view the existence and growth of the GSEs as a government takeover of a large private industry with all the risks typically associated with doing so.

The GSEs are also known for having made large investments in the lobbying of Congress to keep them regulated in a "friendly" manner. This lobbying has mostly worked because the benefits (listed above) seem to outweigh the risks. This debate will probably continue unless and until there is a large taxpayer bailout to force the US Congress to reconsider its stand on the issue.

Government Sponsored Enterprise

The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to reduce interest rates for specific borrowing sectors of the economy, students, farmers, and homeowners. The mortgage borrowing segment is by far the largest of the borrowing segments that the GSEs operate in.

The GSEs have created a secondary market in these loans through securitization so that the primary market debt issues can be bought and—most importantly—traded by investors. Demand for debt securities drives up their trading price, which lowers their interest rates. Proponents say that this secondary market in consumer loans gives household borrowers cheap fixed rate loans (low fixed rates on long term loans), removes credit risk from banks' balance sheets and provides standardized instruments (securitized securities) for investors.

None of the GSEs are owned by the Federal government; some of them are publicly owned, some are owned by the corporations that use their services. Their lenders grant them extraordinary low rates, and the buyers of their securities grant them extraordinary high prices, as the implicit involvement of the Federal government gives them a sense of financial security. (The influence of Fannie Mae and Freddie Mac, in particular, in the U.S. economy is such that many analysts say the government "could not let them fail".)

List of Organizations

  • Federal Home Loan Banks - The Federal Home Loan Banks are an essential source of stable, low-cost funds to financial institutions for home mortgage, small business, rural and agricultural loans. With their members, the FHLBanks represent the largest source of home mortgage and community credit. The 12 banks of the FHLBank System are owned by over 8,000 community financial institutions. Rather than being publicly traded, equity in the FHLBank System is held by these owner/members.
  • The Federal Home Loan Mortgage Corporation ("Freddie Mac") - See previous post for details.
  • Federal National Mortgage Association (FNMA) - See previous post for details.
  • The Government National Mortgage Association - See furture post for deatils.