The Risk-Free Period on Mortgage Business
||Trello, Jesus; Serret Alfredo
||The Risk-Free Period on Mortgage Business
||10th European Real Estate Society Conference (10-13 June 2003) Helsinki, Finland
||Let us define method as ěthe process which is follow by science to discover the truth and to demonstrate itî2. We believe that in the mortgage business, methods should be used that permit the calculation of the true real risk which is borne in the financing of housing with mortgage guarantees. The objective of this paper is to search for and to measure the risk in mortgage activity in order to answer the key question: when is the point in time in the life of the mortgage after which the maximum receivable debt for a mortgage loan (ML) is always less than the current value (CV) of the mortgage guarantee if the loan is foreclosed? The aim of this paper is to introduce the concept of ěRisk-Free Periodî into the methodology for analysing housing mortgage loans, which can be extended to any type of property guarantee. The objective is to demonstrate that after a specific moment in time in the life of all mortgage loans, the possibility of losses through default is zero, because the outstanding receivable debt (the outstanding capital plus the accrued interest receivable and foreclosure fees) is covered by the sum awarded after foreclosure though public auction of the property which was put up originally as a guarantee of the mortgage loan.
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||Session 3, Housing Economics 1
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