primary and secondary market Flashcards
(24 cards)
What is the primary mortgage market?
Where borrowers obtain mortgage loans directly from lenders.
Who are primary lenders?
Banks, credit unions, mortgage bankers, savings & loans, mortgage brokers.
What is the secondary mortgage market?
Where lenders sell mortgage loans to investors for liquidity.
What is Fannie Mae (FNMA)?
Government-sponsored enterprise buying conventional, FHA, VA loans.
What is Freddie Mac (FHLMC)?
GSE buying and securitizing conventional loans from small lenders.
What is Ginnie Mae (GNMA)?
GSE guaranteeing FHA, VA, RHS loan securities (no buying/selling).
What is securitization?
Pooling loans and selling them as mortgage-backed securities (MBS).
What is a mortgage-backed security (MBS)?
Security backed by pooled mortgage loans generating investor returns.
What is mortgage servicing?
Handling loan payments, escrow, and collections.
What is loan origination?
Process of creating a new mortgage loan.
What is portfolio lending?
Lender keeps loan rather than selling it.
What is conforming loan?
Loan meeting Fannie Mae/Freddie Mac guidelines.
What is nonconforming loan?
Loan that does not meet secondary market guidelines (e.g., jumbo loan).
What is a jumbo loan?
Loan exceeding conforming loan limits — not eligible for GSE purchase.
What is liquidity in lending?
Lenders’ ability to convert loans into cash by selling them.
What is Federal Housing Finance Agency (FHFA)?
Oversees Fannie Mae and Freddie Mac.
What is warehouse line of credit?
Short-term line of credit lenders use to fund loans before sale on secondary market.
What is loan servicing rights?
The right to collect and manage loan payments — can be sold separately.
What is credit risk?
Risk borrower will default.
What is interest rate risk?
Risk that rising rates will reduce MBS value.
What is prepayment risk?
Risk borrowers repay loans early, reducing MBS returns.
What is mortgage aggregator?
Entity buying loans from originators to sell as MBS.
What is TBA market?
“To Be Announced” market where MBS trades before exact pools finalized.
What is secondary market role?
Provides liquidity, standardization, and stability to mortgage market.
