The secondary mortgage market is the market for the sale of securities or bonds collateralized by the value of mortgage loans. The mortgage lender, commercial banks, or specialized firm will group together many loans and sell grouped loans as securities called collateralized mortgage obligations (CMOs). The risk of the individual loans is reduced by that aggregation process.
These securities are collateralized debt obligations (CDOs), also known as mortgage-backed securities (MBS). The CMOs are sometimes further grouped in other CDOs. Mortgage delinquencies, defaults, and decreased real estate values can make these CDOs difficult to evaluate. This happened to BNP Paribas in August, 2007, causing the central banks to intervene with liquidity.
Famous quotes containing the words secondary, mortgage and/or market:
“Cloud-clown, blue painter, sun as horn,
Hill-scholar, man that never is,
The bad-bespoken lacker,
Ancestor of Narcissus, prince
Of the secondary men. There are no rocks
And stones, only this imager.”
—Wallace Stevens (1879–1955)
“The mortgage is still in our name but, increasingly, the house is theirs. One diaper, one vote.”
—Fred G. Gosman (20th century)
“But the nomads were the terror of all those whom the soil or the advantages of the market had induced to build towns. Agriculture therefore was a religious injunction, because of the perils of the state from nomadism.”
—Ralph Waldo Emerson (1803–1882)