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How Mortgages Work in the Primary and Secondary Market
By John R. Blakefield
There are many institutions that loan money to home buyers. Commercial banks, private lenders, credit unions, bank companies, insurance companies and pension funds. It can get confusing as things are always changing in the industry.
Policies, interest rates, programs, where the funds come from, and investors are all changing and can affect where, from who, and the type of you will get to purchase the property you have chosen. Certain entities may offer you better rates depending on your credit history, debt, income, and expenses. It is a good idea to shop many different resources so you can get the best deal possible.
The market is comprised of a primary and secondary market. These two markets work together to give money to a borrower and offer returns on investments to investors.
The primary market occurs on the retail end, meaning a lender sells directly to the consumer. You may use the services of a broker or loan officer in order to have this transaction run smoothly. This is the place where mortgages are originated and the money is given directly to the borrower. In the primary market, lenders make there money on processing fees. There are often many fees associated with getting a that the buyer is responsible for.
Because there can be many fees as charged by the lender, it is important to know exactly where your money is being spent. You should ask for an itemized report for every fee. Unfortunately there dishonest lenders and they will make up charges and fees that really don't have any effort or actual action
behind them. This is how some borrowers can get scammed, and often they may not even know it!
The secondary market manages mortgages that have already been originated in the primary market. What occurs here is the lenders package many mortgages together and sell the notes to investors. Mortgage lenders replenish their cash reserves that can be used towards the origination of more mortgages. The investors make money off of the interest that is charged on the mortgages.
There are both private and public investors that buy these notes. Public investors include Fannie Mae, Ginnie Mae and Fannie Mac that are all government supported. Private investors may include banks, thrift institutions and other individual private investors.
The lender really has a circular pattern, originating loans, selling them to investors and then using that money from the sales to issue more loans.
Many times, you do not even know that your is going to be sold into the secondary market. However, the lender should always notify you of this transaction if the is sold to someone else. If you have questions about this process, you can ask your lender as to what his or her process is.
So when you purchase a mortgage, then you are working in the primary market. The secondary market is for mortgages that have already been originated by the lender and they are being bought and sold as investments for either private or public investors. This process keeps money flowing through the industry and makes more money available to the public to continue property.
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: www.scourtheweb.com/mortgage/
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- Americas Watchdog Offers Assistance For Frozen Or Devalued Cash Equivalents, ARS & Suggests Do's & Don'ts For A Wild 2009 Economic Ride
Americas Watchdog's Wall Street Fraud Watchdog is warning that from an economic standpoint, 2009 will make 2008 look like a walk in the park. In the strongest terms possible the Wall Street Fraud Watchdog is encouraging all US, or international investors, who were defrauded with auction rate securities, and or failed or frozen cash equivalents, to not sit on their hands, waiting for the government to come riding into the rescue. According to the group, " in the case of smaller banks or stock brokerage firms, it will not happen." The group is also offering to help and or assist Bernard Madoff victims that may have a possible SIPC claim. "2009 absolutely terrifies us, we are looking right down the barrel of a global economic meltdown, so if you have failed or frozen ARPS, Schwab Yield Plus, TD Ameritrade Reserve Yield Plus, or any other problematic cash equivalent call us, and we will try to help put you on a track to get your money back, before its too late." US or International investors who were duped into buying auction rate securities, failed or frozen cash equivalents can call the Wall Street Fraud Watchdog anytime at 866-714-6466 or visit their web site at Http://WallStreetFraudWatchdog.Com (PRWeb Jan 7, 2009)
Read the full story at http://www.prweb.com/releases/2009/01/prweb1831204.htm ]]>
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