Agency Mortgages
In residential lending in the United States, the market evolved from one where banks extended loans to borrowers, to one where banks extended loans but those loans were securitized and sold off as bonds. The government sponsored enterprises Fannie Mae and Freddie Mac were created to assist banks in doing this, by stamping the bonds with a guarantee of timely payment, even if the homeowner was late on their payment.
However if the commercial mortgage market for apartment buildings of 5 or more units, Fannie Mae and Freddie Mac do even more than this. Essentially they lend their own money and then securtize the bonds themselves, leaving banks to handle the servicing (i.e. billing etc.) of the loan. They have come to dominate the market for apartment lending "Commercial/Multifamily Mortgage Debt Grows in Q3". 2008-07-01. http://originatortimes.com/content/templates/standard.aspx?articleid=2700&zoneid=4. Retrieved 2008-07-01. As of December 17, 2007 GSE's were reported to hold 34% of total debt outstanding for multifamily property. Given the recent liquidity crisis due to the sub prime crash of 2007 & 2008, these numbers are reported to be even higher by the Mortgage Bankers Association.
The financial institutions who work to obtain the loans for Freddie Mac or Fannie Mae are then primarily agents, and for this reason this area of lending is known as Agency Lending.
Read more about this topic: Commercial Mortgage
Famous quotes containing the word agency:
“It is possible that the telephone has been responsible for more business inefficiency than any other agency except laudanum.... In the old days when you wanted to get in touch with a man you wrote a note, sprinkled it with sand, and gave it to a man on horseback. It probably was delivered within half an hour, depending on how big a lunch the horse had had. But in these busy days of rush-rush-rush, it is sometimes a week before you can catch your man on the telephone.”
—Robert Benchley (1889–1945)