Final answer:
A mortgage loan transaction is an exchange where a borrower provides a note and mortgage to a lender for loan funds. The comparison of mortgage interest rates to inflation rates determines the advantage for borrowers or lenders across different years. The value of a mortgage loan can be measured by the current market willing buyer's price. The correct option is D) The borrower gives the lender a note and a mortgage in exchange for loan funds.
Step-by-step explanation:
The mechanics of a mortgage loan transaction best describe the process in which the borrower gives the lender a note and a mortgage in exchange for loan funds. This transaction involves the borrower legally pledging the property as security for the loan, which remains in effect until the loan is fully repaid. From an economic standpoint, the attractiveness of taking out a mortgage loan can be assessed by comparing the mortgage interest rates with the rate of inflation in various years.
In years where the mortgage interest rates are lower than the rate of inflation, it would have been better for a person to borrow money from a bank to buy a home. Conversely, in years where the mortgage interest rates exceeded the rate of inflation, banks would have had a more advantageous position lending money out.
The primary loan market is where financial institutions make loans to borrowers. In contrast, the secondary loan market is where financial institutions buy and sell these loans. The value of a mortgage loan can also be measured in the present by what another party in the market is willing to pay for it. The correct option is D) The borrower gives the lender a note and a mortgage in exchange for loan funds.