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Understanding Specialized Mortgages

Introduction

While underwriter’s may not deal across the spectrum of specialized mortgages, they should have a basic understanding of the various financing alternatives available for borrowers and types of property in order to ensure an appropriate financing solution based on the borrower’s unique needs is provided. At times, this may involve a recognition that the mortgage submission should be referred to a colleague who specializes in certain types of product (e.g. commercial mortgage). Specialized mortgages range from various repayment plans, private mortgages, leasehold, construction, and commercial financing.

An expert understanding of these mortgages will help mortgage professionals to serve a broader range of clients, or to specialize in specific sectors.

Course Outline

Section 1: Mortgage Loan Repayment Plans

  • Interest accruing loans
  • Interest only loans
  • Straight line principal reduction loans
  • Constant blended payment repayment plans
  • Payment frequency 
  • Partial amortization and outstanding balances
  • Variable rate mortgages (VRMs)
  • Graduated payment mortgages (GPMs)
  • Sinking fund assisted mortgages
  • Reverse mortgages (Reverse Annuity Mortgages)
  • Participation mortgages
  • Addressing inflation directly in mortgages
Section 2: Private Mortgages
  • What is a private mortgage?
  • Private lenders
  • Who needs a private mortgage?
  • Underwriting the private mortgage
  • Funding the private mortgage
Section 3: Leasehold Finance  
  • Types of leases
  • Identification of leasehold interests
  • Occupation and ground (or building) leases
  • Analysis of ground leases
  • Ground leases on First Nations lands
  • Ground leaseholds and mortgage lenders
  • Subordination agreements
  • Sale-leaseback
  • Methods for appraisal of leasehold interests
Section 4: Development and Construction Financing
  • Overview of the land development process
  • Development financing
  • Construction financing
  • Structuring the construction loan
  • Alternative development financing arrangements
Section 5: Commercial Mortgage Underwriting
  • Application for commercial loans
  • Cash flow analysis (income, allowance, and expenses)
  • Lending constraints
  • Nature of covenants