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:
“The prime purpose of being four is to enjoy being four—of secondary importance is to prepare for being five.”
—Jim Trelease (20th century)
“The mortgage is still in our name but, increasingly, the house is theirs. One diaper, one vote.”
—Fred G. Gosman (20th century)
“I refuse to be. In
the madhouse of the inhuman
I refuse to live.
With the wolves of the market place
I refuse to howl ...”
—Marina Tsvetaeva (1892–1941)