Over the past month there has been more change in the mortgage industry than in the previous 20 years combined! What happened to all those lenders? How did it happen so quickly? Is this an implosion or just an environment of change?
The answer to most of these questions lays in the “Secondary Market” of mortgage lenders. Each lender needs to replenish their coffers with cash to continue to lend money to homebuyers. To achieve this, lenders package loans into large dollar amounts and “sell” them to an investor. This is considered the “secondary market”. Those investors then create funds that are then made available to all of us in our personal investment portfolios, thus completing the cycle of funds. Last month several of the funds failed and now investors have no interest in buying any additional mortgages from lenders. Thus, lenders have no new funds to lend. Without lending, they have no income and suddenly these companies have no value! Mortgage implosion!
Over the past decade hundreds of brokers and small correspondent lending groups have formed and tried to act like the major lenders. We know these as Brokers, Mortgage Lenders and even some very large names are really “Correspondent Lenders”, in other words they buy money from the wholesale divisions of major mortgage lenders, like Wells Fargo and sell them under their own name. Click here to read more about Sarasota Property, Sarasota Real Estate articles
