They invest shareholders' funds in a diversified portfolio of securities issued by GNMA
, FNMA, the Federal Home Loan Mortgage Corporation, and private issuers such as the Bank of America.
Pan, 1995, "An Arbitrage-Free Estimate of Prepayment Option Prices in Fixed-Rate GNMA
Mortgage-Backed Securities", Real Estate Economics, 23:1-20
where [c.r.sub.0] is the 30-year GNMA
current-coupon bond-equivalent yield, [[pi].sub.0] is the TIPS spread measure of inflation expectations, [r.sub.0] is the constant-maturity ten-year T-note yield, [[rho].sub.0] is the yield of the on-the-run ten-year TIPS, and [k.sub.0] is the equity risk premium as defined above.
Mortgage; Valuation; Interest rates; Option pricing; Prepayment; Price-process model; GNMA
Between ending GNMA
and signing with Unisys, however, the paper had more than its CSI system; Pensiero brought in the Quark Publishing System for the then-new "Weekend Journal" section.
Global stock funds and GNMA
bond funds had the most volatile net flows, while income stock funds had the most stable flows.
Initially, the GNMA
CDR contract enjoyed considerable success, with volume climbing steadily from its introduction in 1975 to 1980, when volume leveled off at over 2 million contracts per year.
Most FHA buyers make a down payment of five percent or less.(5) Below the ceiling, nearly all low down payment loans are insured by FHA and securitized by GNMA
However, the adviser must determine the after-tax yield of the GNMA
bonds in order to compare the two investments.
When a GNMA
or FNMA security bought at a premium is prepaid at par value, most of the difference shows up on the books as a capital loss.
Here's how ARMs work: Banks make adjustable rate mortgage loans and typically sell them to government agencies such as the Government National Mortgage Association (GNMA
or Ginnie Mae), the Federal National Mortgage Association (FNMA or Fannie Mae), or the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac).
The resulting positive differential between the cash flow from the assets collateralizing the CMO bonds (the GNMA
, FNMA, or FHLMC mortgage certificates) and the principal and interest payments on the collateralized bonds became known as a CMO residual or CMO excess cash flow.