Secondary mortgage market

Part of a series on

Financial markets

* Public market
* Exchange · Securities

Bond market

* Bond valuation
* Corporate bond
* Fixed income
* Government bond
* High-yield debt
* Municipal bond

Securitization

Stock market

* Common stock
* Growth stock
* Preferred stock
* Registered share
* Stock
* Stockbroker
* Stock certificate
* Stock exchange
* Watered stock

Other markets

Derivatives

* (Credit derivative
* Futures exchange
* Hybrid security)

Foreign exchange

* (Currency
* Exchange rate)

* Commodity
* ETF
* Money
* Mutual fund
* Option
* Real estate
* Reinsurance
* Structured product
* Swap (finance)

Over-the-counter (off-exchange)

* Forwards
* Options

* Spot market
* Swaps

Trading

* Participants
* Regulation
* Clearing

Related areas

* Alternative investment
* Angel investor
* Asset (economics)
* Asset pricing
* Banks and banking
* Bull
* Climate finance
* Diversification (finance)
* Eco-investing
* Environmental finance
* ESG
* Financial
* analysis
* analyst
* asset
* betting
* corporate
* crime
* forecast
* personal
* public
* services
* Fintech
* Greenwashing
* Growth investing
* Impact investing
* Investment management
* Market risk
* Market trend
* Speculative attack
* Sustainable development goals
* Sustainable finance

* v
* t
* e

The secondary mortgage market is the market for the sale of securities or bonds collateralized by the value of mortgage loans. A mortgage lender, commercial bank, or specialized firm will group together many loans (from the "primary mortgage market"[1]) and sell grouped loans known as collateralized mortgage obligations (CMOs) or mortgage-backed securities (MBS) to investors such as pension funds, insurance companies and hedge funds.[2] Mortgage-backed securities were often combined into collateralized debt obligations (CDOs), which may include other types of debt obligations such as corporate loans.

The secondary mortgage market was intended to provide a new source of capital for the market when the traditional source in one market—such as a Savings and loan association (S&L) or "thrift" in the United States—was unable to. It also was hoped to be more efficient than the old localized market for funds which might have a shortage or surplus depending on the location.[3] In theory, the risk of default on individual loans was greatly reduced by this aggregation process, such that even high-risk individual loans could be treated as part of an AAA-risk (safest possible) investment.

On the other hand, mortgage securitization undid "the connection between borrowers and lenders", such that mortgage originators no longer had a direct incentive to make sure the borrower could pay the loan. While historically in the US, fewer than 2% of people lost their homes to foreclosure; rates were far higher during the Subprime mortgage crisis.[4] Delinquencies, defaults, and decreased real estate values could make CDOs difficult to evaluate. This happened to BNP Paribas in August, 2007, causing the central banks to intervene with liquidity.

## See also

[edit]

* Real estate investment trust
* Asset-backed security
* Commercial bank

## References

[edit]

1. ^ Definition of 'Primary Mortgage Market' "The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction ..."
2. ^ Investopedia 'Primary Mortgage Market'
3. ^ All the Devils Are Here, MacLean and Nocera,p.5
4. ^ All the Devils Are Here, MacLean and Nocera, p.19

## External links

[edit]

* Current Mortgage-Backed Security (MBS) Prices

* v
* t
* e

Real estate

* Property
* Tertiary sector of the economy

By location|

* Bangladesh
* Canada
* China
* Indonesia
* Italy
* Turkey
* Kenya
* Pakistan
* Panama
* Puerto Rico
* Russia
* Saudi Arabia
* United Arab Emirates
* United Kingdom

Types|

* Commercial property
* Commercial building
* Corporate Real Estate
* Extraterrestrial real estate
* International real estate
* Lease administration
* Niche real estate
* Garden real estate
* Healthcare real estate
* Vacation property
* Arable land
* Golf property
* Luxury real estate
* Off-plan property
* Private equity real estate
* Real estate owned
* Residential property

Sectors|

* Property management
* Real estate development
* Real estate investing
* Real estate flipping
* Relocation

Law and regulation|

* Adverse possession
* Chain of title
* Closing
* Concurrent estate
* Conditional sale
* Conveyancing
* Deed
* Eminent domain
* Encumbrance
* Foreclosure
* Land law
* Land registration
* Leasehold estate
* Lease
* Property abstract
* Real estate transaction
* Real estate contract
* Real property
* Rent regulation
* Severance
* Torrens title
* Zoning

Economics, financing
and valuation|

* Asset-based lending
* Capitalization rate
* Effective gross income
* Gross rent multiplier
* Hard money loan
* Highest and best use
* Home equity loan
* Investment rating for real estate
* Mortgage insurance
* Mortgage loan
* Real estate derivative
* Real estate economics
* Real estate bubble
* Real estate valuation
* Remortgage
* Rental value

Parties|

* Appraiser
* Buyer agent
* Buyer broker
* Chartered Surveyor
* Exclusive buyer agent
* Land banking
* Landlord
* Moving company
* Property manager
* Real estate broker
* Real estate investment club
* Real estate investment trust
* Real property administrator
* Tenant

Other|

* Companies
* Eviction
* Filtering
* Gentrification
* Graduate real estate education
* Green belt
* Indices
* Industry trade groups
* Investment firms
* Land banking
* People
* Property cycle
* Real estate trends
* Undergraduate real estate programs
* Urban decay
* Urban planning
* List of housing markets by real estate prices

* Category
* Commons
* List of topics

This economics-related article is a stub. You can help Wikipedia by expanding it.

|

* v
* t
* e

*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template