Final answer:
Tom is the mortgagor, and Joe is the mortgagee. When mortgage interest rates are lower than inflation, it's better for borrowers; when rates are higher than inflation, it's better for lenders. The role of cosigners and the impact of mortgage-backed securities are also important considerations in the mortgage market.
Step-by-step explanation:
In the context of a mortgage loan, the party borrowing the money is known as the mortgagor, which in the given scenario would be Tom. On the other hand, the lender, Joe, is termed the mortgagee. These roles are crucial to understand when evaluating the benefits of mortgage rates in various years in relation to the rate of inflation. Analyzing a table that lists mortgage interest rates and the rate of inflation for different years can help to determine when it would have been more advantageous to be the borrower or the lender. Generally, during years when the mortgage interest rates are lower than the rate of inflation, it is better for borrowers because the real interest rate (adjusted for inflation) is lower. Conversely, when mortgage interest rates are higher than the rate of inflation, it is generally better for lenders, as they receive more in interest payments relative to inflation.
Understanding the role of a cosigner is also pivotal in financial capital markets as they pledge to repay the loan if the original borrower fails to do so. Furthermore, the complexities of mortgage-backed securities and the role of credit agencies in assessing the risks associated with these financial products play a significant role in understanding the mortgage market. Misjudgment by the credit agencies and inadequate intervention by regulators can lead to financial crises, as seen in past housing market bubbles.