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Unformatted text preview: about the secondary mortgage market, they are not referring to second mortgages or deeds of trust. They are talking about a market where existing loans are bought and sold. PRIMARY AND SECONDARY MORTGAGE MARKET
When a lender makes a loan directly to a borrower, that action takes place in the primary mortgage market. Later, that loan may be sold to a bank, pension fund, or some other investor. The sale of that loan takes place in the secondary market. For example, if a savings bank makes a loan directly to a borrower, it is involved in the primary market. If the loan is subsequently sold to the Federal Home loan Mortgage Corporation, that sale takes place in the secondary market. The secondary mortgage market consists of private and Institutional lenders, investors, and government agencies that buy and sell mortgages to each other. In the secondary market, discounts are used constantly. Buyers and sellers of mortgages negotiate on the basis of yield. Discounts are used to adjust yields so agreements can be reached and sales made. Mortgage loan bankers are engaged in the primary mortgage market when making the loan and in the secondary mortgage market in the sale of the loan. 7-10 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 7: LOAN PAYMENTS & SECONDARY MARKETS
In secondary market: The purchasing and selling of existing mortgages and deeds of trust Lenders selling loans to other lenders and investors. PURPOSE OF THE SECONDARY MARKET
The main purpose of the secondary market is to shift money from areas where there is a surplus to areas where there is a shortage. In the early 1970s, depository institutions sold only a small portion of the loans they originated. They were able to rely on their savings inflow to finance the loans they made. During this time, interest rates and the flow of deposits were relatively stable. As the 1970s progressed, the institutions were forced to sell more loans in the secondary m...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10