Enjoying Equity with Second Mortgage Loans

Article Abstract:

Consumer credit has been made more promising through second mortgages, which are now a big business. Second mortgages are the fastest growing area of consumer credit, which may well lead to private mortgage insurance coverage secondary market openings, and the possibility of revolving adjustable rate second mortgages. The Federal Home Loan Mortgage Corporation (Freddie Mac) sees a huge growth potential in second mortgages. Second mortgages are defined by that organization as any loan wrought by a junior lien on a residence under four families, including condominiums. Some market entities regard them as home equity finance. Three kinds are popular: home improvement, purchase money/refinance, and personal loans. Unfortunately, there is little data on second mortgages because of the financial institutions' habit of combining them on balance sheets. Since consumer finance firms are not subject to federal regulations, they do not report statistics. Benchmark surveys where performed by the Federal Reserve in this field in 1975 and 1980, and monthly summaries will be instituted in 1984. The most thorough data collected on this market segment comes from the United States Bureau of the Census, as a segment of the residential finance survey. Market tables are featured.

Mortgages

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The Valuation of Partial Interests in Real Estate

Article Abstract:

There has been widespread confusion as to actual fair market value of undivided minority interests in real estate parcels when conveyed to a non-related buyer. Courts have often held that the fair market value of such a minority interest is identical to the part of the value of the property's entire interest. Other opinions hold that it would be at a meaningful discount. Several rationales pertain to the latter viewpoint, particularly arguments of the relationships of co-owners and their property rights. The difficulty of co-tenant sales revolves around the reduction of rights and amenities which are normally attendant to fee simple ownership. Some sales of undivided minority interests are examined, including those of rural property in Alabama, Texas, Indiana, and Pennsylvania. Tax Court and Federal Court decisions regarding minority interest sales are featured. Court cases seem to revolve around the relationship of the party in minority interest with that of the parties having the remaining interest. Statistical data on the discounting of interests is included.

Laws, regulations and rules, Real property, Real estate appraisal, Property

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Earnings and Assets: The Complete Business Valuation

Article Abstract:

Investors are concerned with both earnings and assets when purchasing or selling businesses. Opinions on value should be made only after price/earnings (P/E) multiples and the firm's tangible and intangible assets are examined. Value curves can correlate the link of earnings, equity, and assets. The curve can furnish explicit definitions for appraisal terms. Many investment parameters affect the choice of a P/E ratio, including asset protection. A graph of the Clausen curve is featured. Three types of businesses are considered in light of their asset values: one with intangible assets, one with no intangible assets, and one where liquidation may overtake the going concern. There is strong support for the theory of P/E being greatest when asset protection is greatest. Asset protection is a substantial point in the evaluation of preferred stocks and other instruments having preference to assets in liquidation. A glossary of appraisal terms is included.

Business, Capital

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