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The Secondary Mortgage Market and the Sub prime Mortgages Crises
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As at the end of the sixties, the secondary mortgage market has become a significant part of the overall mortgage market especially so in the residential sector. The current US sub prime woes that led to the subsequent collapses of major financial institutions have left many confused and concerned in the areas of mortgage financing. This article provides a simple explanation on the secondary mortgage market.
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The Secondary Mortgage Market Explained.
The secondary mortgage market is a term used to refer to the buying and selling of existing mortgages with the goal to provide primary lenders the means of funding or liquidity. Many secondary mortgage participants are they themselves primary mortgage lenders. Hence, in the secondary mortgage market, the lenders are trading in the loans that they themselves do not originate.
Who are the participants of Secondary Mortgage Market?
They include:
Functions of Secondary Mortgage Market
The secondary mortgage market facilitates the transfers of fund in areas of surplus to areas of shortage. As the world becomes closely knitted in the webs of trades and finances, this would also means across borders between countries. It explains why in US the sub prime woes are affecting many international institutions in Europe and Asia at the same time. At the time before the US sub prime crises, the secondary mortgage market provides a vehicle for institutions to convert mortgages into cash. It helps to ease their liquidity as primary mortgages are long term commitments with funding constraints Finally, the secondary mortgage market is a place where one can obtain and evaluate information about other financial products as compared to mortgage securities and investments
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