We have seen how the United States housing finance system and the secondary mortgage market works. The secondary mortgage market links the primary mortgage market and the capital market by attracting those investors who traditionally have not invested in mortgages. The secondary market increases the availability of funds for mortgage lending by increasing the liquidity of mortgage investment and by allowing lenders to originate mortgages for sale and not just to keep for their own portfolio. The increase in the supply of funds for mortgage lending may help drive interest rates down and thus benefit homebuyers. Investors and guarantors in the secondary market assume and manage mortgage-related credit and interest risks, and help to standardize loan origination guidelines. The government sponsored enterprises in the secondary market help to serve the underserved in housing and mortgage finance.…
