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CHAPTER 11
Paragraph 2: The shift from traditional local lenders to global securitization reshaped home mortgage lending.
Paragraph 3: This paragraph previews how changes in lending sources affected borrower-lender relationships and underwriting standards.
Paragraph 4: Mortgage lendings instability from 01-06 reveals how excess capital inflows and relaxed credit inflates housing markets.
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Paragraph 1: The exhibit shows hor mortgage bankers link lenders and capital markets.
Paragraph 2: The dominance of megabanks and secondary markets in mortgage finance today reflects a major departure form the localized thrift model.
Paragraph 3: The rise of megabanks came from three forces: global economic integration, cpaital markets development, and bank transformation.
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Paragraph 1: In the 70s U.S. economic globalization and foreign competition undermined the closed, thrift based lending system.
Paragraph 2: As interest rates rose in the late 70s, disintermediation led dpeositors to abandon thrifts in favor of wall street investments.
Paragraph 3: Disintermediation ulimtately sparked a collapse in traditional thrift institutions
Paragraph 1: The demise of thrifts was accelerated when their deposit costs outpaced the earnings on fixed rate mortgages during inflation.
Paragraph 2: Congress responded in 1989 with FIRREA, which imposed capital standards and paved the way for commercial banks to fill in the lending gap.
Paragraph 3: The decline of thrigts shows how outdated structures could not adapt to technical and regulatory changes.
Paragraph 1: The deregulation of bank powers in the 80s helped them survive while thrifts failed due to more flexible funding sources and better asset/liability management.
Paragraph 2: The regulatory framework was historicallycomplicated, with overlapping roles for the DIC, Federal Reserve, and state/federal agencies. This created inefficienceies that were later removed.
Paragraph 3: Megabanks expanded into mortgage banking by acquiring or creating subsidiaries that specialized in it, quickly becoming dominant players in the market.
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Paragraph 1: Mortgage banking refers to the process of originating, funding, and selling mortgage loans, not just a type of firm, but a sequence of actions.
Paragraph 2 Unlike mortgage bankers, brokers do not fund loans—they simply connect borrowers with lenders and are paid for facilitating the transaction.
Paragraph 3 (Exhibit 11-4) This visual shows how a loan is originated, closed, serviced, and sold or retained, and it emphasizes the “pipeline risk” period where timing of interest rate locking is crucial.
Paragraph 1 Pipeline risk is the exposure mortgage bankers face between the time they commit to make a loan and when it’s closed or sold, especially if interest rates change.
Paragraph 2 Selling loans to investors (like Fannie Mae) removes the loan from the banker’s books, but the servicing may be retained for steady income.
Career Focus box The industry is increasingly complex, but many accessible resources exist to help students or new professionals learn about mortgage banking.
Paragraph 1 Mortgage-backed securities (MBS) revolutionized mortgage finance by allowing mortgage pools to be sold to investors as tradable securities.
Paragraph 2 Through pass-through MBS, investors receive a share of mortgage payments, while the issuer retains servicing duties—helping spread risk and capital.
Paragraph 3 This innovation allowed small and large investors to participate in mortgage lending and improved liquidity across the financial system.
The GSEs played a central role in building the secondary mortgage market by pooling and scuritizing home loans, especially after 2000.
Paragraph 2: Ginnie Mae does not buy or sell loans but guarantees securities backed by FHA/VA loans, which enables private lenders to access capital markets with lesser risk.
Concept CHeck: The key role of GInnie MAe and the GSEs is to provide investor assurance by guaranteeing timely payments in MBS securities.
Paragraph 1: → Fannie Mae transitioned from a government agency to a private company, evolving into a major buyer of residential mortgages for MBS creation.
Paragraph 3: As of 2021, Fannie Mae had $3.9 trillion in loans, mostly packaged into MBS where investors bear risk only if Fannie defaults.
Paragraph 4 (Concept Check 11.12): Fannie Mae buys loans and ensures investors are repaid, even though they don’t directly own the mortgages.
Paragraph 1: Freddie Mac functions similarly to Fannie Mae but focuses on purchasing conventional loans and creating MBS.
Paragraph 2: Freddie Mac, like Fannie Mae, was placed into conservatorship in 2008 and is now operationally very similar to Fannie.
Paragraph 3 (Concept Check 11.13): In 2021, Fannie and Freddie together backed about 52% of all home mortgage loans through ownership or securitization.
Paragraph 1: Fannie and Freddie created uniform underwriting and appraisal standards, improving efficiency and comparability across lenders.
Paragraph 3: Despite past failures, the GSEs remain deeply embedded in the mortgage system and are hard to replace, which fuels debate over their future.
Paragraph 4 (Concept Check 11.14): A major legacy of Fannie and Freddie is bringing uniform standards to the mortgage market.
securities.
Paragraph 3: Understanding the relative dominance of each channel at different times shows how regulation, risk appetite, and borrower profiles shape mortgage market flows.
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Paragraph 1: This section explains that banks have largely ceded the role of loan origination to brokers, shifting power to intermediaries who guide borrowers to lenders.
Paragraph 2: Despite borrowers initiating the process, competition between loan sources—banks, brokers, and conduits—makes the search for a home loan more complex and potentially costly.
Exhibit 11-11: The chart visually captures how the dominance of GSEs rose, fell, and rose again depending on market conditions, especially around the 2008 crisis.
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Paragraph 1: The underwriting process centers on the "three C's"—collateral, creditworthiness, and capacity—which have long defined mortgage risk evaluation.
Paragraph 2: Loan-to-value ratios provide a measurable threshold for how much risk lenders are willing to tolerate based on the borrower's equity.
Paragraph 3: The shift from manual to automated models was prompted by the need to streamline and depersonalize risk assessments, improving efficiency but raising concerns about fairness.
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Paragraph 1: The housing expense ratio (PITI ÷ GMI) measures how much of a borrower’s income goes toward the mortgage payment and is a key affordability indicator.
Paragraph 2: The debt-to-income ratio expands this by adding long-term obligations (LTO), giving lenders a broader view of a borrower’s total debt burden.
Paragraph 3: Gross monthly income (GMI) is central to both ratios, but defining and verifying it fairly is complex and heavily regulated under ECOA.
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Paragraph 1: Automated underwriting uses credit data and algorithms to determine default risk quickly, transforming how mortgages are approved and priced.
Paragraph 2: This tech-driven process replaced many subjective manual evaluations, improving access to credit but raising questions about transparency and error margins.
Paragraph 3: The “ability-to-repay” standard, introduced after the crisis, requires lenders to evaluate eight core factors, reinforcing borrower protection through comprehensive analysis.
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Paragraph 1: The traditional cash down payment requirement has served as a commitment signal, but affordability concerns led to programs reducing or removing this requirement.
Paragraph 2: Recent underwriting failures highlighted the dangers of relaxed lending standards, particularly in the subprime market, which contributed to the financial crisis.
Paragraph 3: Marginal borrowers—such as minorities and low-income households—have historically struggled with access to mortgage credit, prompting the creation of targeted loan programs.
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Paragraph 1: GSEs enabled affordable housing loans by relaxing one underwriting criterion, such as lowering the down payment, while maintaining the other two.
Annotation 1 – by paragraph 1 Found objects in building design can preserve heritage while minimizing environmental waste—connecting place memory to sustainable reuse.
Annotation 2 – by box titled “Goal 6 — Sustainable Communities” Sustainable communities blend historic preservation, job creation, and improved quality of life through inclusive development.
Annotation 3 – by paragraph 2 Clean air, water, food, and shelter are essential rights under the ‘planet’ pillar—not luxuries.
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Annotation 1 – by subtitle “2.3 THE TRIPLE BOTTOM LINE AND HISTORIC PRESERVATION” Historic preservation intersects with all three TBL pillars: it protects culture, reuses resources, and generates jobs.
Annotation 2 – by paragraph 2 The demolition of historic neighborhoods in the name of “urban renewal” often ignored social costs and displaced communities.
Annotation 3 – by paragraph 3 The 1966 National Historic Preservation Act reframed preservation as dynamic and forward-looking, not stuck in the past.
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Annotation 1 – by paragraph 1 Historic preservation is about identity and memory, grounding communities in place and time—even amid globalization.
Annotation 2 – by boxed list “Principles of Place” These ten principles show how place-based design can promote social connection, reduce emissions, and inspire civic pride.
Annotation 3 – by paragraph 2 Preservation is evolving to include stories of marginalized groups—broadening whose history gets protected.
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Annotation 1 – by paragraph 1 Reusing buildings reduces carbon, conserves infrastructure, and often aligns with smarter land use and urban form.
Annotation 2 – by paragraph 3 Embodied energy compounds over a building’s life span—meaning older structures often carry less environmental cost over time.
Annotation 3 – by paragraph 5 (starting with “According to the creators of BuildCarbonNeutral…”) New construction releases most carbon upfront, making retrofits a critical part of reducing short-term emissions.
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Annotation 1 – by subtitle “Profit and Historic Preservation” Preservation has measurable financial return: tax credits, job creation, and revitalized local economies.
Annotation 2 – by paragraph 4 (starting with “The perspective on stewardship…”) Policy should presume reuse over demolition—putting the burden of proof on those advocating for teardown.
Annotation 3 – by paragraph 6 (starting with “Across America…” near the bottom) Rehab jobs are more labor-intensive than new construction, keeping more money circulating locally.
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Annotation 1 – by paragraph 1 (Richard Moe quote) Historic preservation is reframed as environmental common sense, similar to recycling everyday materials like cans or glass.
Annotation 2 – by subtitle “SUSTAINABLE STEWARDSHIP OF OUR BUILDINGS AND COMMUNITIES” The reuse of buildings is central to sustainability—reducing landfill waste, conserving energy, and cutting material demand.
Annotation 3 – by Figure 2.5 caption Transit-accessible reuse projects, like The Center for Neighborhood Technology, show how preservation can support urban livability.
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Annotation 1 – by subtitle “2.5 INTERWOVEN HISTORY OF SUSTAINABILITY AND HISTORIC PRESERVATION” Preservation and sustainability evolved together—both balancing private rights with the public good.
Annotation 2 – by paragraph starting “In 1872, President Ulysses S. Grant…” U.S. preservation began with protecting natural lands, later expanding to historic buildings as public resources.
Annotation 3 – by Timeline box The timeline shows preservation’s long history alongside environmental movements—both reinforcing one another.
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Annotation 1 – by boxed quote “Learning from the Past” Older buildings used passive systems like natural ventilation—offering low-tech lessons for energy-efficient design today.
Annotation 2 – by paragraph starting “Protection of resources…” U.S. preservation policy developed with a dual aim: protecting both natural landscapes and cultural heritage.
Annotation 3 – by paragraph starting “Policies and standards…” Preserving historic places is a national responsibility—seen as essential for education, identity, and future generations.
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Annotation 1 – by paragraph beginning “The era after World War II…” Postwar urban renewal often prioritized demolition over preservation—sparking a backlash led by figures like Jane Jacobs.
Annotation 2 – by paragraph beginning “Both laws reflect the link…” Environmental and historic protection became legally connected through laws like NEPA and the National Historic Preservation Act.
Annotation 3 – by paragraph ending with “national heritage…” Preservation law recognizes historic sites as irreplaceable assets—valued for their cultural, educational, and economic roles.
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Annotation 1 – by paragraph 1 Historic preservation is gaining recognition as a major force in shaping sustainable design and influencing the built environment.
Annotation 2 – by paragraph 2 By connecting place, memory, and sustainability, preservation invites broader participation in climate and cultural discourse.
Annotation 3 – by paragraph 3 Regenerative design leverages both environmental and cultural resources to renew communities as well as buildings.
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Annotation 1 – by the CCI Center fact box The CCI Center is a fully renovated office building that exemplifies sustainability through reuse and environmental design.
Annotation 2 – by paragraph below fact box This project blends historic preservation with community revitalization and environmental stewardship.
Annotation 3 – by sentence “honors the building’s place…” Reusing existing buildings retains embodied energy and strengthens community identity.
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Annotation 1 – by “PROJECT DESCRIPTION” subtitle This office renovation unites multiple sustainability-focused tenants and prioritizes green building systems.
Annotation 2 – by sentence “When the building is occupied…” Daytime cooling is achieved using stored ice, a strategy that avoids unnecessary energy spikes.
Annotation 3 – by Figure 2.17 caption Grouping shared functions and direct ventilation for toxic equipment reduces energy loads and health risks.
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Annotation 1 – by paragraph 1 Energy performance is optimized through real-time monitoring of daylight, temperature, and indoor air quality.
Annotation 2 – by table “GREEN DESIGN ELEMENTS” CNT’s design checklist integrates transit access, energy storage, VOC-free finishes, and water-efficient features.
Annotation 3 – by “PROJECT TEAM” section Multidisciplinary collaboration was key—blending architects, engineers, and sustainability consultants to achieve LEED goals.
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Annotation 1 – by paragraph 1 under “Energy” heading This lab building achieved deep energy savings—72% reduction in source energy and major cuts to carbon and utility bills.
Annotation 2 – by paragraph beginning “Innovative mapping…” Designing vestibules and internal “buildings” minimized HVAC strain and contributed over 50% of energy savings.
Annotation 3 – by last sentence (“Occupancy sensors…” line) Task and ambient lighting separation, plus daylight sensors, streamlined energy use without sacrificing comfort.
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Annotation 1 – by “GREEN DESIGN ELEMENTS” box Design priorities included xeriscaping, recycled content, waterless urinals, and low-VOC finishes—low-impact but effective.
Annotation 2 – by “PROJECT TEAM” box This project involved firms with expertise in health, education, and sustainable engineering—ensuring a holistic result.
Annotation 3 – by “Brewers Hill, Natty Boh Building” fact box The adaptive reuse of this 1890s site merged historic designation with a fully modern sustainability retrofit.
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Annotation 1 – by “PROJECT DESCRIPTION” heading The Brewers Hill project combined federal and state tax credits while restoring a brewery with creative daylighting.
Annotation 2 – by “Site and Water” heading The rainwater-harvesting system reused brewery tanks, easing pressure on infrastructure and cutting irrigation demand.
Annotation 3 – by “Energy” heading Natural light, daylight shelves, and translucent dividers cut energy use, while “industrial chic” preserved materials.
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Annotation 1 – by “Green Materials” heading Low- or no-VOC adhesives and absence of PVC help improve indoor air quality and reduce long-term occupant exposure.
Annotation 2 – by sentence starting “The project uses no PVC piping…” Durable materials like stainless steel and glass were chosen for health and sustainability over cheaper, harmful alternatives.
Annotation 3 – by last sentence of Green Materials paragraph Recycled and rapidly renewable products—like cellulose and agriboard—support a closed-loop materials strategy.
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Annotation 1 – by Figure 2.23 caption Denver Dry was a flagship project that helped catalyze zoning reforms and transit-oriented development in the city center.
Annotation 2 – by paragraph starting “The building benefits from its significant masonry mass…” Thermal mass from brick and stone creates a “flywheel effect,” reducing HVAC needs by stabilizing indoor temps.
Annotation 3 – by last paragraph under “Energy” Evaporative cooling, digital controls, and variable-speed systems contributed to both comfort and energy efficiency.
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Annotation 1 – by “GREEN DESIGN ELEMENTS” box Features like steam waste-heat reuse, low-VOC finishes, and demolition recycling show how even large buildings can go green.
Annotation 2 – by entry “Original façade restored” Preservation of the original structure balances historical integrity with modern performance standards.
Annotation 3 – by entry “Green tenant policy” Tenant sustainability expectations were built into operations—reinforcing the building’s long-term green mission.
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Annotation 1 – by Figure 2.25 caption The cross-section drawing reveals the spatial layering of residential, retail, and office uses over six renovated floors.
Annotation 2 – by “PROJECT TEAM” section The Denver Dry project united developers and public agencies in a model for collaborative urban sustainability.
Annotation 3 – by top of page (architectural diagram) Mixed-use programming and vertical integration of functions optimized the site's footprint and enhanced livability.
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Paragraph 2 (starting with “BUILDING CODES…”)
Annotation: Building codes balance objective safety standards with subjective interpretations, especially in historic preservation and zoning.
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Paragraph 2 (starting with “Many organizations and tools…”)
Annotation: Most green planning tools focus on new construction, but The Natural Step and ICLEI stand out for supporting reuse and rehabilitation.
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Heading: “ICLEI—Local Governments for Sustainability”
Annotation: ICLEI empowers local governments with tools to reduce emissions and meet sustainability goals, offering practical support across diverse communities.
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- Paragraph beginning “The most successful design often springs...”
Collaboration across disciplines is essential in sustainable design, helping balance technical, cultural, and environmental priorities.
- Paragraph beginning “More widespread and formalized team integration...”
Integrated project delivery (IPD) replaces linear workflows with cooperative structures that reduce waste and improve results.
- Paragraph beginning “An integrated approach is needed...”
Addressing climate change in buildings requires coordinated decisions across architecture, engineering, and policy spheres.
Page 89 – Paragraph under "Dubuque, Iowa, Vision Statement" Annotation 1:
