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:
“A man may be defeated by his own secondary successes.”
—Woodrow Wilson (1856–1924)
“The mortgage is still in our name but, increasingly, the house is theirs. One diaper, one vote.”
—Fred G. Gosman (20th century)
“To market ‘tis our destiny to go.”
—Robert Frost (1874–1963)