Primary Mortgage Market
What is the primary mortgage market?
The primary mortgage market is the market in which lenders originate loans and make funds available directly to borrowers, bear the risk of long-term financing, and usually service the loan until the debt is discharged. A mortgage can only be originated, or issued, once. This is done in the primary market.
Who makes up the primary mortgage market?
The primary mortgage market is made up of institutional lenders, such as savings and loan associations and banks, and mortgage bankers and brokers. It is important to note that although mortgage brokers work in the primary market, they do not make loans; instead, they act as an intermediary between borrowers and lenders.
Even a seller of a house could participate in the primary mortgage market if they provide loan funding to the buyer of their home.
Once a loan is funded in the primary market, can it be sold?
Yes, it can. Loans can be assigned to someone else. In other words, the primary market lender can sell the loan to someone else and assign it to them. Once loans have been originated in the primary market, they can be bought and sold in the secondary market.
You can simplify this concept by thinking about how cars are bought and sold. A car is only sold as a new car once, which you can think of as the primary market. However, once someone buys a car, they can sell it to whomever they like. When the owner sells the car, it takes place in the secondary market. A car is only sold brand new one time.
A mortgage is only originated once, and that occurs in the primary mortgage market.
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