Three dialogue questions / finance
The secondary mortgage market is a monetary market the place mortgage lenders should buy and promote present mortgages. It is a crucial supply of liquidity for lenders, as they’ll repackage and resell their portfolios to traders and generate new capital to finance extra loans. Three the reason why the secondary mortgage market is necessary are:
1. It helps enhance the provision of credit score: By offering a platform for lenders to commerce their present mortgages, lenders have extra capital obtainable for issuing new loans which can assist develop entry to credit score amongst debtors who could not in any other case qualify for a mortgage.
2. It helps promote aggressive pricing: By having extra consumers within the secondary mortgage market, lenders have higher incentives to supply aggressive charges on dwelling loans and different mortgages since there’s all the time somebody able to buy these belongings at engaging costs.
3. It supplies stability within the housing market: The secondary mortgage market helps present liquidity in occasions of financial uncertainty by permitting traders to purchase up distressed mortgages and preserve them off banks’ stability sheets till markets enhance, thus avoiding losses attributable to defaults or foreclosures.