Arbitrage in real estate involves buying and selling properties, or financial instruments linked to real estate, in different markets to profit from price differences. This strategy can also include leveraging financial instruments like REITs or mortgage-backed securities to exploit discrepancies in pricing.
Barclay's Mortgage Backed Securities Index is a comprehensive benchmark published by Barclay's Capital that tracks the performance of mortgage-backed securities issued by GNMA, Fannie Mae, and Freddie Mac, and is a component of the broader U.S. Aggregate Bond Index.
CMO, or Collateralized Mortgage Obligation, is a type of mortgage-backed security that pools together a large number of mortgages and issues several classes or tranches with varying degrees of risk and returns.
Commonly known as Fannie Mae, FNMA is a government-sponsored enterprise that expands the secondary mortgage market by securitizing mortgage loans, thus providing lenders with liquidity and facilitating homeownership in the United States.
Ginnie Mae, or the Government National Mortgage Association, provides guarantees for mortgage-backed securities, ensuring a steady flow of capital into the housing market.
Ginnie Mae, officially the Government National Mortgage Association, is a government agency within the U.S. Department of Housing and Urban Development (HUD) that guarantees the timely payment of principal and interest on securities backed by residential mortgages.
The Government National Mortgage Association (Ginnie Mae or GNMA) is a U.S. government corporation within the Department of Housing and Urban Development (HUD) that guarantees timely payments of principal and interest on mortgage-backed securities (MBS) to investors.
Interest rate risk refers to the potential variability in investment returns due to changes in interest rates. This risk can profoundly impact the market value of real estate investments and mortgage-backed securities.
A Mortgage Real Estate Investment Trust (mREIT) is a company that specializes in investing in mortgage obligations, typically providing financing for income-producing real estate by purchasing or originating mortgage loans and mortgage-backed securities.
Prepayment risk is the probability that a fixed-income security will be retired before its term ends, typically caused by a borrower's provision to prepay the loan balance at any time without penalty, impacting the expected returns for investors.
A Qualified Thrift Lender (QTL) is a financial institution that specializes in home mortgage finance and is required to hold a significant portion of its portfolio in residential mortgage loans or mortgage-backed securities, as per the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).
A Real Estate Mortgage Investment Conduit (REMIC) is an entity created for the purpose of holding a fixed pool of mortgages and issuing mortgage-backed securities to investors in a tax-efficient manner.
A Real Estate Mortgage Investment Conduit (REMIC) is an entity used to pool mortgage loans and issue mortgage-backed securities, offering benefits such as tax advantages and liquidity to the mortgage market.
Securitization is the process of pooling various types of debt—including mortgages, car loans, or credit card debt—into packaged securities that can be sold to investors.
A tranche refers to a piece, portion, or slice of a deal or structured financing. Each tranche offers a different risk-reward ratio to suit different investor appetites.
