In existing mortgage contracts borrowers pay a series of cash flows. Equivalently, the mortgage interest rate is the sum of a bond interest rate, servicing fee, and guarantee fee. The
mortgage interest rate depends on the credit quality of the applicant, particularly with automated underwriting systems.These computerized systems immediately accept or reject applicants. Lower-quality borrowers face higher interest rates,partly because they must leave markets with either direct or indirect federal government guarantees. The borrower pays for mortgage insurance, tiered by loan-to-value ratio.