Secondary Mortgage Market

Category: Finance.

Before the fast paced mortgage process of today came along it wasn t uncommon for a mortgage home loan lender to loan money for a mortgage and wait the full fifteen to thirty years it would take to have the money paid back by the borrower.

If you had a piece of paper sitting under mattress that said someone owed you money, that piece of paper would be of little use to your immediate money needs now wouldn t it? A mortgage lender would just sit the note aside knowing that it would fully mature in that time. Well this is how the mortgage lenders felt when they held the paper on mortgages they had made. Secondary Mortgage Market. The paper wasn t creating big returns in a short time like they would have wanted so they looked for a better way to create those type of numbers, and do it for as long as they could. Dollar signs appeared in the eyes of mortgage lenders as they saw a new financial advantage on the horizon. The portfolio mortgages would work harder if they were recycled through the system to take advantage of rising mortgage interest rates and new loan origination fees.

Interest rates were fluctuating and a way to monetize the mortgages they had in portfolio quickly became apparent. A new way of doing things appeared in the latter part of the 1930 s. And this secondary loan market provided a relief for the primary mortgage market that would change the whole mortgage industry. At that time the secondary mortgage market was born. Secondary mortgage market players provided an alternative for holding notes in portfolio and offered cash to primary lenders that they could use immediately. I m sure you ve heard the names Ginnie Mae, and Fannie Mae, Freddie Mac but are you in the know on who they are? Two Maes And A Mac.

Well the most important thing to know is not who they are but what they are and what they have provided for Americans in terms of making owning a piece of this wonderful land more affordable for more of us. Known collectively as members of the same family, these branches on this family tree have developed a reputation for making possible what necessarily wasn t so years ago. Probably the most recognized nick- names in the mortgage industry, these three are movers and shakers in the secondary mortgage market. Ginnie Mae, Freddie Mac make, Fannie Mae sure that the notes held by primary mortgage lenders are reused and returned to people like us in the form of new mortgages. In return for giving primary mortgage lenders a way to get immediate cash fast, secondary mortgage players receive a discount when they purchase portfolio notes and this allows them to bundle several notes as investments for investors. Secondary mortgage market players don t just do this out of the goodness of their hearts. It s amazing how the primary and secondary mortgage market compliment each other and it shows that holding on to paper may be the best for some but not the best for other people or organizations.

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