Secondary Mortgages

There are myriad advantages associated with the Secondary Mortgage Market as well, and there are some public and private investors that play an important role within this particular market.

The Mortgage Secondary Market is a specialized market where companies acting ad mortgage originators, investors, and mortgage aggregators buy and/or sell servicing rights and mortgage loans.  This market is a liquid market and it is a very large market in the industry.  Basically, a borrower seeking any kind of mortgage gets one from one of many various mortgage lenders or banks.  The mortgage is then used for the purposes of financing a dwelling or home of some kind.  This type of mortgage stems from what is identified as the Primary Market.  When getting this type of initial loan, the repayment schedule will vary and can range from five to thirty years.  If the original lender maintains the mortgage contract, the loan remains in the Primary Market.  If however, the initial mortgage lender opts to underwrite the loan and then sell it to another company dealing with mortgages, then the loan becomes part of the Mortgage Secondary market.  Lenders in the latter market will intentionally buy a number of loans, bundle them, and the resell the loans to another lending institution or an investor within the Secondary Mortgage Market.  Investors that participate in the Secondary Mortgage Market includes private investors, public investors, thrift institutions, and banking institutions.  Some of the chief investors within the Secondary Mortgage Market include the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association.

The Advantages of the Mortgage Secondary Market

The Mortgage Secondary Market creates a number of advantages for lenders and borrowers alike.  First, the Mortgage Secondary Market allows for the Primary Market lenders to sell off mortgage loans so that collected funds can serve as a replenishment for fueling new mortgages.  This ensures that the Primary Market lenders can offer new mortgage seekers the financial funding needed to buy homes.

The Mortgage Secondary Market also stirs up quite a bit of competition within the mortgage lending industry.  This means that lenders working in the Primary Mortgage market offer better rates and diversified repayment plans.  Interest rates are also diminished due to the existence of the Mortgage Secondary Market.  Thankfully, the establishment of a Mortgage Secondary Market has ensured that borrowers do not remain at the relentless mercy of a few, high profile portfolio lenders or banking institutions; instead, many mortgage-lending firms can remain in the business because they liquidate existing loans to offer new mortgages to interested and eligible consumers.

The Mortgage Secondary Market is also known for improving the overall efficiency of the Primary Market by forcing companies to either offer quality services or to break up the services offered into smaller, more attentive divisions.  What’s more, the Mortgage Secondary Market causes fixed rate mortgages to prove less of a risk to lenders too since these types of loans undergo an improved distribution over all.  Further, due to the Mortgage Secondary Market the regional rates in terms of interest are more unified and less disparate.  This means that interest rates are relatively similar no matter what region of the nation you reside in at the time you want to buy a property.  Finally, it is because of the Mortgage Secondary Market that all kinds of homebuyers, even those with less than perfect credit and financial backings can invest in a new home on the market.

The National Association of Home Builders® offers free information about the Mortgage Secondary Market and some of the main investors in the market.  You can also use the site to find out more about building a home, methods of financing a home, home floor plans, home tax buyer credit, home maintenance, home design, and land development.  You can find out more about the Mortgage Secondary Market at: http://www.nahb.org/generic.aspx?sectionID=125&genericContentID=308.

Chief Banking Investors in The Mortgage Secondary Market

As mentioned earlier, there are many investors that participate in the Mortgage Secondary Market.  Some companies have been around for many years.  Here are some of the primary companies that participate within the market.

Fannie Mae

Fannie Mae is a company established in the late 1930s; the company was originally established in order to create the Mortgage Secondary Market for any mortgages that are insured by the FHA: Federal Housing Administration.  Fannie Mae is a corporation sponsored by the government; the organization purchases secondary market mortgages, pools the loans collected and later sells them on the open market as mortgage-backed securities.  This allows for the Primary Market to be readily replenished with necessary cash that is later used to offer new mortgages to borrowers.  For more information about Fannie Mae visit: http://www.fanniemae.com.

Freddie Mac

Feddie Mac is another corporation, established in the year 1970, which is government chartered.  This agency deals with mortgage backed securities like Fannie Mae does.  The company holds the position of issuing securities and bonds into the Mortgage Secondary Market, and this helps create a market that is liquid.  This bank acts as an investor that will buy up mortgages from the Primary Market that other investors hold no interest in; this allows for lenders to get the cash needed to offer additional loans.  For more details about Freddie Mac visit: http://www.freddiemac.com

Ginnie Mae

Ginnie Mae is a privately owned corporate enterprise that works within HUD: the Department of Housing and Urban Development.  This company got its early beginnings in the late 1960s.  This company has offered mortgages to those that have a low to a moderately low income so that they can purchase homes as well.  Ginnie Mae ensures that a loan and the interest associated with it gets paid via mortgage-supported securities.  For additional information on Ginnie Mae visit: http://www.ginniemae.gov.