Real Estate Finance
- 1.5 credits
- Prerequisite: F520
Numerous innovative and complex financial instruments have been created with real estate mortgages as the underlying collateral. This module will analyze the risk and return characteristics of several of these financial instruments such as residential mortgage-backed securities, participating mortgages, and commercial mortgage backed securities (CMBS) and other derivatives such as IOs and POs. The role of mortgages and mortgage-backed securities will be examined from both the borrower and lender’s perspective. The course will integrate theory and practice, facilitated through the use of spreadsheets and simulation using @Risk to capture the value of options that are implicit in mortgages and mortgage backed securities such as prepayment and default.
- The structure if various types of mortgage instruments including fixed rate, adjustable rate, participating, convertible, and others
- Analysis of financing decisions such as loan assumptions, refinancing, prepayment
- The role of secondary mortgage markets and federal agencies such as FNMA, GNMA and FHLMC
- Financial instruments such as residential and commercial mortgage backed securities
- Sources of mortgage capital and underwriting criteria
- Risk and return analysis of mortgage backed securities.
Typical Reading and Text: Real Estate Finance and Investments by Brueggeman and Fisher, McGraw Hill and selected readings.
Grading will be based upon homework assignments, case studies, class participation and exams.
Kelley finance MBA students manage a live $400,000 portfolio through the Investment Management Academy.