What is the secondary mortgage market?
The secondary mortgage market is a market where mortgage loans and related rights to service are purchased and sold among entities that have been made by these loans and those who would use these debt options to create securities supported by mortgages. Activity in this type of market is robust in many countries around the world, and this activity has often been considered one of the indications of the healthy economy. The level of the secondary mortgage market activity may have an impact on the ability of new debtors to ensure mortgages and on the ability of current mortgage holders to refinance these existing mortgages.
Within the overall function called mortgage pipeline, it is not uncommon for the creditor to sell a significant percentage of the original mortgages on the secondary mortgage market. This is often controlled by the association of these mortgages into securities, which can then be sold to investors in several different ways. These securities supported by a mortgage can be sold as hedge funds, pension funds or jAKO securities associated with the insurance company.
One of the immediate benefits of generated secondary mortgage market is to injection of capital to those who the original creditors. Capital at hand can be used to extend services offered to customers and partially provide resources necessary to approve and issue new mortgages. From this point of view, the existence of a secondary mortgage market for consumers is good because it helps to improve the chances that a qualified applicant will be approved for the mortgage and become the owner of the house.
For those who buy securities through the secondary mortgage market, these assets may be the source of the ongoing current current, provided the economy remains stable and the value of the basic assets associated with these mortgages maintained them. In a strong market, an investor may decide to buy securities supported by a mortgage and hold them for some time, PIt is to sell them for a rate that is significantly higher than the original purchase price. Depending on the performance of securities, the investor may decide to invest for several years or not more than a few months. As with any type of investment activity, there is a certain risk of loss, but if the investor precisely predicts the market movement, these securities can be sold before falling below this original purchase price and avoiding loss.