Mortgage, loan and property. What is a mortgage?

A mortgage is putting a property as a guarantee to a lender as a security for a mortgage loan.

While a mortgage in itself is not a liability or a dept, it is evidence of a debt. It is a transfer of an interest in property, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the property when the terms of the mortgage have been satisfied or concluded.

In other words, the mortgage is a guarantee for the loan that the lender makes to the borrower. In all but a very few states, a mortgage creates a lien on the title to the mortgaged property.

Friday, February 8, 2008

Credit market: As if there was no Real Estate

Even if the commercial real estate market has held up pretty well so far, even if businesses are not walking away from their leases, even if the U.S. office vacancy rate at the end of 2007 was 12.4%, slightly below the level of 2006, and even if the rate for industrial properties was flat at around 8%...

The credit markets are performing as if the Judgment Day has arrived for offices, warehouses and retail. The credit depression that originated in the housing market has invaded the world of commercial real estate.

Despite the small volume of defaults, the dipping market value of CMBS has forced a lot of write downs. Wachovia took $1.1 billion in write downs over the last two quarters and ended the year with approximately $7.5 billion in its trading account. It transferred most of those securities into a long-term investment portfolio where accounting rules don't require the bank to mark its holdings to market. Do you deduce it's worried about something?

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