Who Really Funds Home Loan?

By: Real Estate Pros

There are two major sources of mortgage financing.

(1)Primary Mortgage Markets- where mortgage loans are originated. It is made up of

(A) Institutional lender- which are Insurance companies, Savings and Loans (Savings bank) and Commercial Banks. They receive most of their deposits from "Household Savings" (Savings of individual depositors)

(i) Insurance Companies-They prefer long terms loans on existing commercial property such as shopping center loans. Mortgage bankers (Loan Correcpondents) usallu negotiate and service their loans.

(ii) Savings and Loan Association(Savings Banks)-- Savings and Loanhave the greatest percentage of their asset in real estate loans. This is main source of 1-4 family unit home loans.

(iii) Commercial Bank-Commercial banks prefer short term loans and they are the primary source of construction financing.

(B) Non-Institutional lenders.-Which basically represents Private lender and Mortgage Companies such as Mortgage Bankers and Mortgage Loan correspondents.

(i) Private Lenders-This is major source of Junior loans. Junior loans are second, third and fourth loans.

(ii) Mortgage Companies such as Mortgage Bankers and Mortgage Loan correspondents-They are licensed by Department of Real Estate or by Departmentr of Corporations as Residential Mortgage lenders or California Finance Lenders. They originate conventional loans.

(2)Secondary Mortgage Market- This is resale market place for loans, where existing loans are bought and sold. The participant in the secondary mortgage market have increased the amount of housing credit available to the economy. The major participants in the secondary mortgage market are

(A)Federal National Mortgage Association ( Fannie Mae) - Originally a government agency, it is now a corporation with shares traded on New York Stock Exchange. It was created for the purpose of increasing the amount of housing credit available to the economy. It is concerned primarily with the development of the secondary mortgage market for conventional , FHA, and VA loans originated in the primary mortgage market.

(B)Government National Mortgage Association (Ginnie Mae)-A federal agency within the Deparment of Housing and Urban Development (HUD)

(C)Federal Home Loan Mortgage Corporation ( Freddie Mac) - Works with Fannie Mae and Ginnie Mae to Increase the availability of mortgage money and maintain the secondary market for residential mortgages.

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