Mortgage
A mortgage is the granting of a lien on real property, such as a home, by a debtor (borrower) to the creditor (lender), such that the property is security for the repayment of a loan. Once the loan is paid, the mortgage should be discharged.
An increase in the mortgage rate makes it more difficult to purchase a home, and can cause a slowdown in the housing market. Mortgage rates can be 3 or so percentage points higher than the Federal funds rate, which is set by the Federal Reserve Bank's Federal Open Market Committee (FOMC).
Hypothecation refers to the right of a creditor to liquidate goods, securities, or other assets if the borrower fails to service a loan.
A sub-prime mortgage is one in which the borrower has a demonstrated inability to abide by the terms of a credit obligation.
See also
- Financial Crisis of 2008
- Recession of 2008
- Glossary of Budget Terms
- Accounting
- Mortgage insurance
- Free Enterprise