How the mortgage industry works

If you’re considering a career as a mortgage broker, it’s important to understand how the mortgage industry works. Primary mortgage market.  A mortgage is a real estate loan. These loans come with certain risks on the part of the lender. If a borrower fails to repay their loan or if market conditions reduce the value of the investment, lenders can lose money.

Because of this, borrowers are carefully vetted by lenders and must put down money and assets as collateral. When new mortgages are created, it occurs on the primary mortgage market.

Secondary mortgage market

The secondary mortgage market is the lesser known half of the mortgage industry. This is where existing mortgages are bought and sold. Banks and other lenders can sell their mortgages to larger mortgage originators, known as aggregators, who pool these mortgages with their own to create mortgage-backed securities (MBS).

MBSs can then be sold to securities dealers, who go on to sell them to investors. Many home buyers have no idea how the mortgage commitment they make is changed, bought and sold after they borrow their money.

The role of mortgage brokers

While a comprehensive understanding of the mortgage industry is important, mortgage brokers need mostly be concerned with the primary mortgage market when working with clients. Brokers exist to assist borrowers with finding a mortgage that suits their needs, providing greater access and more flexible options to borrowers who may not be able to find these loan products themselves.

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