Briefs, Notes & White Papers

Mortgage Market Note 08-3: A Primer on the Secondary Mortgage Market

A secondary mortgage market consists of financial institutions and individuals that buy and sell residential mortgages and mortgage-backed securities (MBS), which are financial assets whose cash flows are derived from groups of mortgages. The secondary market in the U.S. is highly developed. Today, three-quarters of the dollar volume of single-family loans are funded through the sale of MBS, up from three-fifths in 2001, and most sales of whole loans occur as part of the creation of pools of mortgages that collateralize MBS. This primer on the U.S. secondary mortgage market discusses the three national submarkets for MBS, focusing primarily on single-family mortgages. The primer reviews the types of securities traded, the roles of various types of market participants, the forward or "To-Be-Announced" (TBA) market, and recent market trends.