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)
“We are playing with fire when we skip the years of three, four, and five to hurry children into being age six.... Every child has a right to his fifth year of life, his fourth year, his third year. He has a right to live each year with joy and self-fulfillment. No one should ever claim the power to make a child mortgage his today for the sake of tomorrow.”
—James L. Hymes, Jr. (20th century)
“The market came with the dawn of civilization and it is not an invention of capitalism.... If it leads to improving the well-being of the people there is no contradiction with socialism.”
—Mikhail Gorbachev (b. 1931)