loans that are serviced by competent and reputable organizations.
There is of course an element of which comes first, the chicken or the egg. Some will argue that creating a secondary market is necessary to provide the proper incentives and guidelines for standardization, processing and management in the primary market. A well-developed secondary market can indeed have these benefits. But there are clearly minimum requirements regarding the economy, instrument and institutions that must be met before a viable secondary market can be created.
6. Secondary Market Participants: Borrowers: Residential (focus) Commercial
Lenders: 1. Government Sponsored Enterprises: Federal National Mortgage Association (FNMA – Fannie Mae) Federal Home Loan Mortgage Association (FHLMC – Freddie Mac) Government National Mortgage Association (GNMA – Ginnie Mae)
2. Other purchasers: Life insurance companies Pension funds REITs Households 7 The U.S. secondary mortgage market The U.S. secondary mortgage market was established in 1938 by a single agency called the Federal National Mortgage Association. Fannie Mae, as the agency is commonly known, held a monopoly on the secondary mortgage market until 1968, when it was changed from a