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What Is a Weighted Average Coupon? The weighted average coupon (WAC) is an essential measure that represents the average gross interest rate for a pool of mortgages packaged and sold to investors as mortgage-backed securities (MBS). The WAC is crucial because it provides insights into the pre-pay characteristics of these
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What is a Voluntary Foreclosure? A voluntary foreclosure, also known as strategic default or friendly foreclosure, occurs when a borrower consciously decides to relinquish ownership of their property to the lender in lieu of continuing mortgage payments. Unlike involuntary foreclosures initiated by lenders, voluntary foreclosures enable borrowers to take control
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Definition of Vacancy Rate The term ‘vacancy rate’ refers to the percentage of all available units within a rental property, such as an apartment complex or office building, that are currently unoccupied or vacant at any given time. This metric is a significant determinant for both property owners and investors
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Introduction to Underwater Mortgages An underwater mortgage is a significant financial hurdle for homeowners when property values plummet and leave them owing more on their mortgages than the worth of their homes. This phenomenon, which was pervasive during the 2008 housing market crash, can restrict homeowners’ abilities to sell or
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Introduction to Shadow Banking The term “shadow banking” refers to financial intermediaries that perform vital credit functions outside the traditional regulated banking sector. Unlike banks, these entities do not take deposits but rather engage in activities like maturity and liquidity transformation, credit risk transfer, and leverage. The shadow banking system
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Introduction to Rent Control Rent control is an increasingly contentious policy aimed at keeping rental costs affordable for lower and moderate-income families, elderly individuals, and communities facing rising housing costs. This section will delve into the intricacies of rent control, its history, and the arguments both for and against this
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Introduction to Short Sales Short sales have become an increasingly common real estate phenomenon as many homeowners find themselves in financial distress, struggling to keep up with their mortgage payments or facing impending foreclosure proceedings. A short sale is a type of pre-foreclosure sale that allows homeowners to sell their
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Introduction and Definition of Price-to-Rent Ratio The Price-to-Rent (P/R) Ratio is a crucial metric for evaluating the affordability and economic viability of owning versus renting real estate. This ratio measures the relationship between median home prices and median yearly rents in specific locations. By comparing these figures, the P/R Ratio
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What is PITI? PITI, an acronym for Principal, Interest, Taxes, and Insurance, refers to the sum components of a monthly mortgage payment. Comprised of principal repayment, interest on borrowed funds, property taxes, and insurance premiums, PITI helps both lenders and borrowers assess mortgage affordability. Principal The primary component of PITI,
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Introduction to the Over-55 Home Sale Exemption The Over-55 Home Sale Exemption, introduced in 1984, was a significant tax benefit that allowed eligible homeowners aged 55 or older to exclude up to $125,000 of capital gains on the sale of their primary residence. This exemption aimed to stimulate the real
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Introduction to Option Adjustable Rate Mortgages (Option ARMs) An option adjustable-rate mortgage (Option ARM) is a flexible alternative to traditional fixed-rate mortgages and adjustable-rate mortgages (ARMs). Introduced in the late 1990s, this innovative mortgage product allowed borrowers to choose their monthly payment based on specific options. Option ARMs gained immense
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