creating the secondary mortgage market players and history
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Creating the Secondary Mortgage Market: Players and History. Erica Liu. Secondary Mortgage Market. The market for the sale of securities or bonds collateralized by the value of mortgage loans Ensure liquidity in the market Redistribute funds across the nation. National Housing Act of 1934.

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secondary mortgage market
Secondary Mortgage Market
  • The market for the sale of securities or bonds collateralized by the value of mortgage loans
  • Ensure liquidity in the market
  • Redistribute funds across the nation
national housing act of 1934
National Housing Act of 1934
  • Franklin Roosevelt’s New Deal
    • Relief, Recovery, and Reform after Great Depression
  • Make housing and home mortgages more affordable
  • Protect lenders from the risk of default
federal housing administration
Federal Housing Administration
  • Assist in the construction, acquisition, and/or rehabilitation of residential properties
  • Regulate rate of interest and terms of mortgages
  • Insure mortgages
    • Increase the number of people who can afford down payment and monthly mortgage payments
    • Increase the size of market for single family homes
federal national mortgage association
Federal National Mortgage Association
  • 1938 – Founded as a government agency
  • Establish a secondary mortgage market
  • Bought FHA insured loans from private lenders
    • Lenders more inclined to extend mortgage credit
  • Equalize supply and demand of funds in capital rich and capital poor areas
world war ii
World War II
  • 1944 - Servicemen\'s Readjustment Act

(GI "Bill of Rights”)

  • 1949 – Fannie Mae authorized to purchase mortgages insured by the Veteran’s Administration
va home loan program
VA Home Loan Program
  • End of WW II, troops returned home from overseas
    • Increased demand for housing and financing
  • Designed to help members of the U.S. armed forces readjust to civilian life after war
  • Federally guaranteed home loans to help veterans buy houses and reestablish good credit
housing and urban development act of 1968
Housing and Urban Development Act of 1968
  • Fannie Mae becomes a government sponsored enterprise (GSE)
    • sold to private shareholders
  • Fannie Mae split into two organizations
government national mortgage association
Government National Mortgage Association
  • Government-owned corporation within the Department of Housing and Urban Development
  • Securitize loans insured by the FHA and VA
  • Government maintains control over secondary market for federally insured mortgages
mortgage backed securities
Mortgage Backed Securities
  • Agency pass through securities
    • Issued by approved lenders
    • Agency guarantees timely payment
      • Ginnie Mae - only MBS to carry the “full faith and credit guaranty” of the United States government
federal home loan mortgage corporation
Federal Home Loan Mortgage Corporation
  • 1970 - Emergency Home Finance Act
  • Publicly owned GSE
  • Expand secondary mortgage market and eliminate perceived monopoly of Fannie Mae
role of gse s
Role of GSE’s
  • 1972 – Fannie Mae and Freddie Mac began purchasing “conventional” mortgages
    • Mortgages not guaranteed by FHA or VA
    • Loans required insurance from new Private Mortgage Insurance companies
  • Can buy or sell any type of residential mortgage
    • Mortgages packaged into securities are restricted to government loans and those that satisfy underwriting guidelines (conforming conventional loans)
what s the difference
What’s The Difference?
  • GSE’s purchase mortgages
    • Freddie Mac - purchase loans from savings and loan associations
    • Fannie Mae -focused on banks and other mortgage finance companies
  • Ginnie Mae only issues guarantee
sources
Sources
  • http://www.ginniemae.gov/about/history.asp?Section=About
  • http://www.fundinguniverse.com/company-histories/Fannie-Mae-Company-History.html
  • http://www.cbo.gov/ftpdocs/120xx/doc12032/12-23-FannieFreddie.pdf
  • http://www.encyclopedia.com/topic/Federal_National_Mortgage_Association.aspx
  • http://www.referenceforbusiness.com/history2/27/Freddie-Mac.html
  • http://www.themonticellogroup.com/American_Mortgage_Market.pdf
  • http://www.va-home-loans.com/history_VA_loan.htm
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