Flashcards in Chapter 3 Deck (18):
where lenders make loans to home buyers
where lenders sell loans to investors
Loan origination process
1) Processing application
2) Approval decision
3) Funding the loan
when depository institutions lose funds to higher-yielding investments
Secondary market activities
1) Buying and selling loans
2) Issuing mortgage-backed securities
Keeping payment records
(The entity that services a loan isn't necessarily the lender that originated it.)
investment instruments with pools of mortgage loans as collateral. May be purchased directly from secondary market agencies or on Wall St.
Secondary market functions
Promotes home ownership and investment
Stabilizes primary market
Federal National Mortgage Association. Buys conventional, FHA, and VA loans from all types of lenders. Issues MBSs based on pools of conventional, FHA, or VA loans.
GSE / Government-sponsored enterprise
Created and supervised by the federal govt. but owned by private stockholders. Ex. Fannie Mae and Freddie Mac.
Government National Mortgage Association. Wholly owned govt. corporation. Agency within HUD. Guarantees MBSs based primarily on FHA and VA loans (not conventional loans).
Federal Home Loan Mortgage Corporation. Buys conventional, FHA, and VA loans from all types of lenders. Issues MBSs based on pools of conventional, FHA, or VA loans.
loans made to less creditworthy buyers
FHFA / Federal Housing Finance Agency
regulates Fannie Mae and Freddie Mac
Secondary market agency
one of the 3 govt.-created entities that buy loans and issue MBSs (or guarantees them): Fannie, Freddie, and Ginnie
When a secondary market agency creates MBSs by buying a large number of mortgage loans, "pooling" them together, and pledging the pool as collateral for the securities.
A mortgage loan that the lender keeps in its own investment portfolio until the loan is repaid (instead of selling the loan on the secondary market).