Mortgage Markets

Primary morgage market:
The primary mortgage market is made up of primary lenders that originate new mortgage loans for borrow. A primary market is the market where securities or goods are actually created. for example, if a commercial bank lends a homebuyer the money to buy house the use of mortgage loan, that would be a primary market activity. The dominant primary lenders are commercial banks, savings associations(SAs), mutual savings banks, selected credit unions, and mortgage bankers. Together, these lenders originate more than 95 percent of all residential mortgage loans.
Secondary mortgage market:
A secondary market is an investor market that buys and sells already existing securities.Do not confuse the secondary market with second mortgages.) Institutions and agencies in th secondary mortgage market recycle capital by purchasing loans previously made by primary lenders. Suppose, for example, that a CB desires to recover the funds loaned, perhaps with some profit if conditions permit. The bank then might sell the mortgage to Fannie Mae. This transaction would be a secondary market activity because the mortgage was created by a previous transaction. This secondary mortgage market is the principal source of mortgage capital in the United States. The major federal agencies active in secondary market activities are:

  • Fannie Mae.
  • Ginnie Mae.
  • Freddie Mae.