secondary mortgage market - a marketplace for financial instruments where loans originated by institutional lenders and mortgage bankers are in turn sold at a discount in order to replace the funds originally advanced so that additional mortgages may be originated. Large investment banking firms, governmental, and quasi-governmental agencies purchase portfolios or pools of these mortgages, often totaling millions of dollars. The primary lending criteria used in the origination of these loans at the consumer level are established by these secondary market purchasers. These criteria include loan-to-value ratios, buyer income-to-debt and housing cost ratios, credit-worthiness thresholds and maximum loan amounts for conventional-type loans. Typically, after the originating lender sells a loan, it continues to service the loan. That is, it collects the monthly payments and passes the payments to the loan purchaser (less a small servicing fee), oversees the performance of the borrower, institutes foreclosure proceedings when necessary, and the like. These purchasers of pools of mortgages in the secondary market, Federal National Mortgage Association (FNMA or ?Fannie Mae?), Federal Home Loan Bank Board (FHLMC or ?Freddie Mac?), Government National Mortgage Association (GNMA or ?Ginnie Mae?), sell bonds or other publicly traded securities that provide the funding for their purchases of mortgage pools. A primary factor influencing consumer mortgage interest rates is the interest rate that must be paid to the purchasers of these bonds and securities. See also Fannie Mae, Freddie Mac, Ginnie Mae, and servicing.

© 2004 Bella Vista Publishing Company, Inc.  ISBN 0-9718225-0-6

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