Mortgage Arrears Reduce Building Society Profits

UNIT IV

THE MORTGAGE MARKET

After studying this unit, you should be able to:

· examine topics and subtopics and predict content related to the functioning of the mortgage markets and their participants;

· apply reading skills to comprehend, analyze, and interpret texts related to the organization and functions of the mortgage markets, their basic components and main participants, terms and options of mortgage loans (i.e. recognize main ideas in paragraphs, definitions, explanations, examples, classifications, comparisons and contrasts, sequence of events, cause/effect, pros and cons);

· use strategies to reinforce comprehension skills (i.e. use graphic organizers to visualize connections between main ideas and supporting details, cite evidence for main ideas, answer literal and critical comprehension questions);

· identify the main ideas, recall important details of a listening segment pertaining to the financial system and financial markets, take notes from spoken context as well as relate new information to previously acquired concepts;

· give spontaneous and prepared monologs, dialogs, and group interaction using topical vocabulary;

· summarize, annotate, render and translate texts related to the issues covered in the unit.

Exercise 1. Comment on the following quotations. What do the authors mean? Do you agree with them?

1. “There is no class of people in the world, who have such good memories as creditors.” (P.T. Barnum)

2. “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain." (Mark Twain)

3. “Those who understand interest earn it; those who don’t, pay it.” (Henry Ford)

Exercise 2. Read the text.

The Aspects of the Mortgage Markets Industry

The mortgage markets form a subcategory of the capital markets because mortgages involve long - term funds. But the usual borrowers in the capital markets are government entities and businesses, whereas the usual borrowers in the mortgage markets are individuals. Also mortgage loans are made for varying amounts and maturities, depending on the borrowers' needs, features that cause problems for developing a secondary market.

A mortgage is a long-term loan secured by real estate. A developer may obtain a mortgage loan to finance the construction of an office building, or a family may obtain a mortgage loan to finance the purchase of a home. The loan is amortized: the borrower pays it off over time in some combination of principal and interest payments that result in full payment of the debt by maturity.

The mortgage markets can be divided into primary and secondary mortgage markets.

The primary mortgage market is the market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transactions. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market.

The secondary mortgage market is the market where mortgage loans and servicing rights are bought and sold between mortgage originators, mortgage aggregators and investors. The secondary mortgage market is extremely large and liquid.

A large percentage of newly originated mortgages are sold by their originators into the secondary market, where they are packaged into mortgage-backed securities and sold to investors such as pension funds, insurance companies and hedge funds. The secondary mortgage market helps to make credit equally available to all borrowers across geographical locations.

The mortgage market has become very competitive in recent years. Thirty years ago, savings and loan institutions and the mortgage departments of large banks originated most mortgage loans. Currently, there are many loan production offices that compete in real estate financing. Some of these offices are subsidiaries of banks, and others are independently owned. As a result of the competition for mortgage loans, borrowers can choose from a variety of terms and options such as mortgage interest rates, loan terms (influenced by collateral, down payments, private mortgage insurance, borrower qualification) and mortgage loan amortization.

Ø The mortgage interest rate is the percent charged, or paid, for the use of money. It is charged when the money is being borrowed, and paid when it is being loaned. The interest rate that the lender charges is a percent of the total amount loaned. Similarly, the interest rate that an institution, such as a bank, pays to hold your money is a percent of the total amount deposited. Thus the mortgage interest rate borrowers pay is probably the most important factor in their decision of how much and from whom to borrow.

Oslash; A loan term is a period over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term. A loan term must not be confused with loan terms. Loan terms are conditions and requirements included in a loan agreement that specify the loan amount, term, interest rate, and other enforceable conditions agreed to by the borrower and the lender.

Mortgage loan contracts contain many legal and financial terms, most of which protect the lender from financial loss. Options that influence a loan term are the following:

· Collateral is one of the characteristics common to mortgage loans. It is the requirement that collateral, usually the real estate being financed, be pledged as security. The lending institution will place a lien against the property, and this remains in effect until the loan is paid off. A lien is a public record that attaches to the title of the property, advising that the property is security for a loan, and it gives the lender the right to sell the property if the underlying loan defaults.

No one can buy the property and obtain clear title to it without paying off this lien. For example, if you purchased a piece of property with a loan secured by a lien, the lender would file notice of this lien at the public recorder’s office. The lien gives notice to the world that if there is a default on the loan, the lender has the right to seize the property. If you try to sell the property without paying off the loan, the lien would remain attached to the title or deed to the property. Since the lender can take the property away from whoever owns it, no one would buy it unless you paid off the loan. The existence of liens against real estate explains why a title search is an important part of any mortgage loan transaction. During the title search, a lawyer or title company searches the public record for any liens. Title insurance is then sold that guarantees the buyer that the property is free of encumbrance.

· A down payment on the property is also required by the lender from the borrower to obtain a mortgage loan, it means that the borrower is to pay a portion of the purchase price. The balance of the purchase price is paid by the loan proceeds. Down payments (like liens) are intended to make the borrower less likely to default on the loan. A borrower who does not make a down payment could walk away from the house and the loan and lose nothing. Furthermore, if real estate prices drop even a small amount, the balance due on the loan will exceed the value of the collateral. The down payment reduces moral hazard for the borrower. The amount of the down payment depends on the type of mortgage loan.

· Purchasing private mortgage insurance (PMI) is another way that lenders protect themselves against default of borrowers. PMI is an insurance policy that guarantees to make up any discrepancy between the value of the property and the loan amount, should a default occur.

· Borrower qualification is a preliminary assessment by a lender of the amount it will lend to a potential homebuyer. Before granting a mortgage loan, the lender will determine whether the borrower qualifies for it. Qualifying a borrower is rather complex and constantly changing procedure. Factors that influence it are loan payment, taxes, insurance other debt obligations and gross monthly income.

Ø Mortgage loan amortization is the schedule for how each monthly mortgage payment is allocated to interest on the loan and principal payment. Mortgage loan borrowers agree to pay a monthly amount of principal and interest that will fully amortize the loan by its maturity. “Fully amortize” means that the payments will pay off the outstanding indebtedness by the time the loan matures. During the early years of the loan, the lender applies most of the payment to the interest on the loan and a small amount to the outstanding principal balance. Many borrowers are surprised to find that after years of making payments, their loan balance has not dropped appreciably.

Word List

mortgage loan – іпотечний кредит

real estate – нерухомість

developer – забудовник

to amortize a loan – погашати позику

servicing rights – права на обслуговування кредиту

be packaged into – бути у складі; package of mortgages – іпотечний портфель

hedge funds – хеджувальні фонди (установи, що займаються зменшенням ризику шляхом укладання протилежної угоди)

mortgage department – відділ іпотечного кредитування

loan production offices – установи іпотечного кредитування

subsidiary – дочірня компанія

variety of terms and options – різні умови кредитування

collateral – застава

down payment – перший платіж по іпотечному кредиту

borrower qualification – вимоги до позичальника

loan term – строк кредиту

lending institution – кредитна установа

to place a lien against the property/ to attach a lien to the title of the property – надавати майну статус закладного

to advise – надавати інформацію

underlying loan – даний кредит

clear title – «чисті» майнові права

loan secured by a lien – позика забезпечена закладною

to file notice of the lien – реєструвати закладну

public recorder’s office – органи державної реєстрації прав

to seize the property – вилучати (конфісковувати) майно

title – право власності на

deed – документ, що підтверджує право власності

title search – перевірка майнових прав

title company – установа, що перевіряє майновий статус

title insurance – страхування майнових прав

encumbrance – закладна, борг, зобов’язання

loan proceeds – позикові кошти

balance due on the loan – залишок до сплати по кредиту

moral hazard – моральна шкода

make up a discrepancy – усувати різницю

grant a loan – надавати кредит

qualify for – відповідати вимогам

gross monthly income – сукупний щомісячний дохід

mortgage loan amortization – погашення іпотечного кредиту

outstanding indebtedness – існуюча заборгованість

outstanding principal balance – залишок по кредиту

Exercise 3. Complete the following scheme.

MORTGAGE MARKETS AND THEIR PARTICIPANTS:

v ______________________________________:

Ø ____________________________;

Ø ____________________________;

Ø ____________________________;

Ø ___banks____________________.

v ______________________________________:

Ø ___ _________________________;

Ø ____________________________;

Ø ___investors_________________:

· ___________________________;

· ___________________________;

· ___________________________.

TERMS AND OPTIONS OF MORTGAGES:

v ________________________;

v ________________________:

Ø ________________________;

Ø ________________________;

Ø ________________________;

Ø ________________________.

v ________________________.

Exercise 4. Translate and memorize the prepositions in the following phrases.

To place a lien against something, to attach a lien to the property, a lien against something, a title to the property, a deed to the property.

Exercise 5. Give Ukrainian equivalents to the following words and word-combinations.

To form a subcategory, to pay sth off, to effectuate mortgage transaction, primary mortgage market, mortgage servicing rights, savings and loan institutions, loan production offices, to be pledged as security, to purchase a piece of property with a loan secured by a lien, to seize the property, a title search, a balance due on the loan, the public recorder’s office, to amortize the loan by its maturity.

Exercise 6. Find in the text English equivalents to the following words and word-combinations. Make up your own sentences using them.

На іпотечних ринках, конкурувати у фінансуванні нерухомості, отримувати іпотечний кредит, основна сума та відсоткові платежі, узгоджувати умови, іпотечні брокери, відсоткова ставка по закладній, кредитна установа, ставати конкурентоспроможнім, дочірні банки, сукупний щомісячний дохід, вільний від обтяжень, перевищувати вартість застави, приватне іпотечне страхування, залишок основного боргу, зробити кредит однаково доступним для всіх позичальників.

Exercise 7. Here are some word-combinations from the text. Match and translate them into Ukrainian.

1.	to compete in	a)	a variety of terms and options
2.	to give the lender the right	b)	full payment of the debt
3.	to choose from	c)	the outstanding indebtedness
4.	to protect the lender from	d)	the value of the collateral
5.	to pay off	e)	to sell the property
6.	to result in	f)	any discrepancy
7.	to exceed	g)	real estate financing
8.	to make up	h)	financial loss

Exercise 8. Economists believe that the interest rate borrowers pay on their mortgages is probably the most important factor in their decision of how much and from whom to borrow. The interest rate on the loan is determined by three factors. Learn more about them. Fill in the gaps with the phrases from the box.

interest rates	discount points
maturity	the lender
long-term funds	the borrower
mortgage rate	the mortgage
the proceeds	interest payments

The interest rate on the loan is determined by three factors: current long-term market rates, the life (term) of______________, and the number of ____________paid.

Market rates. Long-term market rates are determined by the supply of and demand for________________, which are in turn influenced by a number of global, national, and regional factors.

Term. Longer-term mortgages have higher __________________than shorter-term mortgages. The usual mortgage lifetime is either 15 or 30 years. Lenders also offer 20-year loans, though they are not as popular. Because interest-rate risk falls as the term to _______________decreases, the interest rate on the 15-year loan will be substantially less than on the 30-year loan. For exam­ple, in August, 2004, the average 30-year _________________was 6.06%, and the 15-year rate was 5.47%.

Discount points (or simply points) are ________________made at the beginning of a loan. A loan with one discount point means that ________________pays 1% of the loan amount at closing, the moment when the borrower signs the loan paper and receives _____________of the loan. In exchange for the points, ______________reduces the interest rate on the loan.

Exercise 9. A. Match the terms with their definitions.

1.	insurance premiums	a.	a group of mortgages with similar class, interest rate, and maturity characteristics
2.	reserve accounts	b.	the process of taking many individual assets and combining them into a group,or pool,so that investors may buy interests in the pool rather than in the individual assets
3.	mortgage pool	c.	the risk that a borrower will repay a loan before its maturity, depriving the lender of future interest payments
4.	trustee	d.	funds taken out of earnings to provide for anticipated future payments
5.	securitization	e.	an appointed person or institution that manages assets for the benefit of someone else
6.	prepayment risk	f.	payment for insurance

B. Fill in the gaps with the phrases from the box then listen to Jack Peterson, Professor of Economics, talking with his student about the mortgage-backed securities and check your answers.

mortgages	interest rates
lender	mortgage pool
times to maturity	denominations

1. Many institutional investors do not want to deal in such small _______.

2. The second problem with selling _____ in the secondary market was that they were not standardized.

3. They have different ______, interest rates, and contract terms.

4. The ______ must collect monthly payments, often pay property taxes and insurance premiums, and service reserve accounts.

5. A trustee, such as a bank or a government agency, holds the ________, which serves as collateral for the new security; this process is called securitization.

6. If ______ fall and borrowers refinance at lower rates, the securities will pay off early.

C. Listen again and answer the questions.

1. What problems inspired the creation of mortgaged-backed securities?

2. What makes it difficult to bundle a large number of mortgages together?

3. Why are mortgage loans costly to service?

4. What is called a mortgage pool?

5. What is securitization?

6. What is the mortgage pass-through?

7. What happens if borrowers prepay their mortgages?

8. Why have mortgage pools become so popular?

Exercise 10. Check your knowledge of the mortgage markets. Answer these questions.

1. How do the mortgage markets differ from the capital markets?

2. What is a mortgage?

3. What do people take mortgages for?

4. How is the mortgage loan amortized?

5. What is the primary mortgage market?

6. What are the participants of the primary mortgage market?

7. How do the mortgages usually end up?

8. What is the secondary mortgage market?

9. What is the main function of the secondary mortgage market?

10. What are the investors of the secondary mortgage market?

11. Why has the mortgage market become very competitive in recent years?

12. What influences the mortgage loan?

13. What is the mortgage interest rate?

14. What is a collateral?

15. What is a loan term?

16. How is the interest rate on the loan determined by?

17. What is the usual mortgage lifetime?

18. What does a loan with one discount point mean?

Exercise 11. Choose the correct alternative.

For the majority of homeowners / houseowners, the purchase of their property is financed by a mortgage. The bank or building society which lends the money to buy a property is called a mortgage lender / giver or mortgagee. The person who borrows money in the form of a mortgage is called a mortgage borrower/ taker or mortgagor.

There are several different types of mortgage in / on the market.

Probably the most common is a mortgage, in which the capital sum / capital price and the interest are paid in installments / pieces over a long period (for example 25 years).

An alternative is a mortgage, in which the interest is paid, and the capital sum is repaid / paid in another way, for example with an endowment assurance policy. With another type of mortgage, the mortgage borrower's daily / current account is combined with her/his mortgage. Provided the current account is usually in / with credit, this can reduce the interest repayments on / for the mortgage.

Exercise 12. Choose the correct alternative.

1. Houses, bungalows, apartments, offices, shops and any other type of building you can own are called __________. a. housing b. property c. buildings

2. The __________ are a document which proves who owns a property.

a. owner's deeds b. owner's papers c. title deeds

3. In some countries you can get a mortgage for __________ your annual salary.

a. times five b. five times c. five of

4. If a mortgage borrower ___________ the installments… a. doesn't pay b. defaults on c. fails on

5. …the mortgage lender will eventually __________ the property. a. retake b. take back c. repossess

6. Before a property can be repossessed, the lender must apply to a court for a __________.

a. repossession order b. repossession paper c. repossession document

7. When the lender has a repossession order, the occupants of the property can be __________.

a. evicted b. put out c. ejected

8. Generally, mortgage lenders only repossess as ____________.

a. a desperate action b. a last resort c. the final option

9. A mortgage lender can also be called a mortgagee or a __________.

a. mortgage provider b. mortgage maker c. mortgage producer

10. A mortgage borrower can also be known as a mortgagor or a __________.

a. mortgage owner b. mortgage possessor c. mortgage holder

11. To change your mortgage agreement is to __________ your property.

a. mortgage again b. remortgage c. unmortage

12. A mortgage paid over 25 years is called a __________ mortgage.

a. 25 b. 25 year c. 25 years

13. When somebody's mortgage is the most they can possible afford, you can say they are "mortgaged up to the __________".

a. hilt b. top c. head

14. If property prices go down, and your house is mortgaged for more than its current value, you have __________.

a. negative money b. negative value c. negative equity

15. After you have paid your last mortgage installment, you can say that you have __________ your mortgage.

a. paid out b. paid up c. paid off

Exercise 13. Match the phrases on the left with the alternatives on the right.

1.	apply for a loan	a.	arrange a loan
2.	set up a loan	b.	decide the borrower will never repay the loan
3.	take out a loan	c.	get a loan
4.	pay back a loan	d.	repay the loan in installments
5.	pay off a loan	e.	repay all the loan at once
6.	write off a loan	f.	ask for a loan

Exercise 14. Work in pairs. Discuss advantages and disadvantages of obtaining a mortgage loan. Make up dialogues using words and word-combinations given below.

the purchase of the property	to pay off a loan	to write off a loan
to reduce the interest repayments	annual salary	to apply for a loan
the homeowner	the capital sum	to own a property
to lend the money	a mortgage lender	mortgage agreement

Exercise 15. A. The dialogue below is concerned with the application for credit. Read the dialogue.

Banker: Our discount committee is still discussing your application for credit. I wonder if you’d mind giving us some more information about certain items shown on your balance sheet.

Customer: Not at all.

Banker: Is the mortgage on your fixed assets being amortized?

Customer: Yes. We’re making semi-annual payments on this obligation.

Banker: Your balance sheet shows some indebtedness. Are any of your assets pledged as security?

Customer: No. That’s just an open note.

Banker: Would your company be willing to pledge part of its current assets as collateral security to our loan?

Customer: We wouldn’t object to that. Part of this money will be used to retire present debts and part to expand our operations. Then we can immediately begin to liquidate this new liability.

Banker: I think we’d better prefer that arrangement.

Words You May Need

fixed assets – основні засоби, фонди

pledge – закладати

open note – незабезпечений вексель

collateral security – майнове забезпечення, забезпечення цінними паперами

B. Explain the underlined word-combinations.

C. Answer these questions.

1. What is the customer applying for?

2. Has the banker decided whether to grant the credit yet or not?

3. What sort of information is the banker interested in?

4. How does the banker want to secure the banker’s credit?

5. How is the company going to use its current assets?

Exercise 16. Role-play the situation.

One person is a mortgagor another is a loan officer.

The aim of a mortgagor is to obtain a loan needful for his\ her purposes (state your requirements). A mortgagor should consider the things he/ she is interested in concerning the loan and the questions he/ she wants to be answered.

The aim of a loan officer is to provide the necessary information and give advice to a mortgagor. A loan officer should find out:

- whether a mortgagor has sufficient funds to make a down payment;

- whether a mortgagor will be able to repay loan and interest;

- whether to offer all or part of what is being asked;

- whether any further evidence of the creditworthiness of the borrower is needed;

- what sort of security to accept; what kind of term to offer.

Use the following phrases: income below a given level, to pay off the mortgage loan, current assets, to obtain private mortgage insurance, down pay­ment, to make regular payments on the principal, deed, collateral, installment, real estate, property, to change over time, to amortize, to appraise, the lifetime of the mortgage, title, financial hardship, to remain the same until maturity, prepayment penalty, to keep loan volume high, the purchase price of the property, to meet living expenses.

Exercise 17. Complete the table with the information studied in this unit.

Types of mortgage markets
Mortgage market participants
Options that influence a mortgage loan
Options that influence a loan term
The interest rate on the loan is determined by three factors

Exercise 18. Translate into English.

Українська іпотека в 5 разів дорожча за американську [1]

Згідно з результатами досліджень іпотечного агентства Freddie Mac, ставки по іпотечному кредитуванню в Україні в п’ять разів більші, ніж у США. Варто зазначити, що цього року в США ставки з іпотечного кредитування різко зросли до максимального за два роки рівня, але все одно виявилися нижчими, ніж в Україні.

У США середня ставка за житловими кредитами з терміном погашення в 30 років зросла до позначки 4,58%. Іпотечна ставка терміном на 15 років в Америці становить близько 3,6%.

Агентство Freddie Mac зазначає, що зліт іпотечних ставок у США безпосередньо пов’язаний з прибутковістю американських державних облігацій. За останні місяці прибутковість американських облігацій різко зросла, що і спричинило підвищення ставок на ринку іпотеки.

Для порівняння, в Україні реальна ставка по іпотечних позиках становить близько 23%. Ця цифра у п’ять разів перевищує аналогічний показник у США. Варто зазначити, що трохи нижчі ставки пропонують ті банки, які співпрацюють з Державною іпотечною установою. Експерти вважають, що така значна різниця пояснюється загальними ризиками, які притаманні українській економіці. А також тим, що в США іпотечний ринок більш розвинений, а економіка більш стабільна.

Нагадаємо, що 31 липня ставка за кредитами на придбання житла знизилася до 23,96%. У порівнянні з даними за 12 липня (24,04%) зниження склало 0,08%. Експерти відзначали, що нинішній рівень – найнижчий з кінця серпня 2012 року, коли почалося підвищення вартості іпотечних кредитів, викликане подорожчанням ресурсів на фінансовому ринку.

Questions for economic reasoning and discussion

1.What distinguishes the mortgage markets from other capital markets?

2.What features contribute to keeping long-term mortgage interest rates low?

3.During the 2007 – 2009 recession, many people who had taken out mortgages to buy homes found that they were having trouble making the payments on their mortgage. Because housing prices were falling, many found that the amount they owed on their mortgage was greater than the price of their home. Significant number of people defaulted on their mortgages. The following appeared in an article discussing this issue in the Economist magazine: Since foreclosures are costly for lenders as well as painful for borrowers, both sides could be better off by renegotiating a mortgage. The sticking point, according to conventional wisdom, is securitization. When mortgages are sliced into numerous pieces it is far harder to get lenders to agree on changing their terms. Why might both lenders and borrowers be better off as a result of renegotiating a mortgage? How does securitization result in mortgages being “sliced into numerous pieces”? Why would securitization make renegotiating a loan more difficult? How would theses difficulties effect the services that securitization provides to savers and borrowers?

4.What is the purpose of requiring that a borrower make a down payment before receiving a loan?

5.Lenders tend not to be as flexible about the qualifications required of mortgage customers as they can be for other types of bank loans. Why is this so?

SUPPLEMENTARY TASKS

Task 1. A. Scan the text.

Mortgage Arrears Reduce Building Society Profits

1. The growth in building society profits for this financial year is expected to be restrained due to a sharp increase in the number of buy-to-let property owners going into mortgage arrears.

2. However, the recent interest rate cut is likely to cause arrears to level off, and recently introduced government measures aimed at supporting the buy-to-let market are likely to provide a last-minute boost to building society annual profits.

3. James Edwards, chief executive of the market leaders City and Provincial Building Society, said in a trading statement last week that he broadly concurred with analysts’ forecasts of full-year profits for his company to rise by 5% to £240m. However, the fact that soaring growth in the buy-to-let market (where C&P has a 19% share) has cooled significantly coupled with concerns about arrears has knocked 7.25p off the company’s share price, leaving it at 264p.

4. Despite predictions for growth across the sector as a whole averaging around 4.5%, the share prices of the five leading players in the market have declined by an average of just under 3%. Yields may be falling, but the restricted supply of new-build homes and continuing enthusiasm for buy-to-let have kept the housing market buoyant, and only the most pessimistic of analysts are predicting a slump. Nevertheless, cautious corporate investors have been reducing their holdings.

5. Such fears may well prove to be misplaced. Hints by the Bank of England regarding a further interest rate cut could underpin further growth.

6. An additional boost is likely to be provided by changes to pension rules from April 5th next year. Holders of Self Invested Personal Pensions (SIPPs) will be permitted to invest funds from their pensions in residential property.

7. Up to £15bn of pension cash is expected to flood into the market, including tax relief worth as much as £5bn. This is certain to create a boom in buy-to-let investment, shoring up building society yields, and to push up house prices, especially in areas where they have been in decline, creating more attractive investment opportunities.

8. In addition, the buy-to-let market is likely to continue to benefit from the fact that many would-be first time buyers remain priced out of the market, ensuring healthy demand for rental properties. Evidence suggests that large numbers of potential first time buyers are also delaying their plans to buy to due uncertainty on house prices, creating a build-up of demand which is likely to be released when house prices stabilize.

9. A spokesperson for the number two mortgage lender Bolton and Rochdale reported last month that new business volumes have grown steadily month on month from a low base, and that the growth of both the residential and buy-to-let mortgage markets remains robust.

10. However, this upbeat stance was offset by Banker and Mortgage Lender magazine, which predicted that house prices are poised to fall by an average of up to 7% across the UK. The South West in particular was viewed as overvalued, with prices in some areas set to see a drop as high as 15%. In contrast, London is now seen as slightly undervalued, following some dramatic falls over the last year and, according to the magazine, house prices there are set to rise by a minimum of 4% a year for the next three years.

B. Choose the definition which is closest to the meaning in the article.

1. buy-to-let property owners (paragraph 1)

a. people who rent their homes b. people who buy homes to rent to others

2. growth has cooled significantly (paragraph 3)

a. it's growing more slowly b. it's declining

3. a boom in buy-to-let investment (paragraph 7)

a. a lot more people buying-to-let b. slightly more people buying-to-let

4. tax relief worth as much as £5bn (paragraph 7)

a. up to £5bn reduction in tax to be paid b. up to £5bn increase in tax to be paid

5. would-be first-time buyers… (paragraph 8)

a. people who are going to buy their first home.

b. people who would like to buy their first home

6. …remain priced out of the market (paragraph 8)

a. find it very expensive b. can't afford it

C. Find words in the article with the same meaning as the following.

1. overdue mortgage payments (paragraph 1) m____________ a_____________

2. profits (paragraph 4) y____________

3. support (paragraph 7) s____________ u____________

4. low starting point (paragraph 9) l____________ b____________

5. worth less than the current price (paragraph 10) o____________-v____________

D. Complete the definitions.

1. Mortgage arrears are starting to level off means that mortgage arrears …

a. have stopped increasing b. are decreasing

c. are increasing more slowly than they were

2. There was soaring growth in the buy-to-let market means that…

a. profits from buy-to-let mortgages increased b. house prices increased

c. buy-to-let mortgages became more expensive

3. The housing market is buoyant means that …

a. house prices are rising b. house prices are static

c. house prices are falling

4. Investors have been reducing their holdings means that investors have been…

a. buying more shares b. selling all their shares

c. selling some of their shares

5. Interest rate cuts could underpin further growth means that interest rate cuts could…

a. cause further growth b. prevent further growth

c. be caused by further growth

6. Pension cash will flood into the market means that pension fund managers will…

a. avoid this market b. invest heavily in this market

c. make a lot of money from this market

7. New business volumes have grown steadily month on month means that…

a. business has increased every month b. profits have increased every month

c. the number of new customers has increased every month

8. Prices are poised to fall by 7% means that…

a. prices are falling b. prices are expected to fall c. prices will fall

E. Single out the main points of the text. Use the following opening phrases.

The text looks at the (the problem of)…;

The text deals with the issue of…;

It is clear from the text that…;

Among other things the text raises the issue of…;

The problem of…is of great importance;

One of the main points to be singled out is…;

In this connection, I’d like to say…;

I find the question of…very important because…;

I think that…should be mentioned here as a very important mechanism of…

Task 2. Translate the text into Ukrainian.

A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.

The word mortgage is a French Law term meaning "death pledge", meaning that the pledge ends (dies) when either the obligation is fulfilled or the property is taken through foreclosure.

A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank or credit union, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.

In many jurisdictions, though not all (Bali, Indonesia being one exception), it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets for mortgages have developed.

Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.

Mortgage loans are generally structured as long-term loans, the periodic payments for which are similar to an annuity and calculated according to the time value of money formulae. The most basic arrangement would require a fixed monthly payment over a period of ten to thirty years, depending on local conditions. Over this period the principal component of the loan (the original loan) would be slowly paid down through amortization. In practice, many variants are possible and common worldwide and within each country.

Task 3. Render the text in English.

Дата добавления: 2015-10-26