Secondary Mortgage Market

Introduction One of the major topics of interest all around the world is the subject of securitisation and secondary mortgage market. The success of such market in the United States has propelled both private and public officials in many countries to recommend its creation and development in their own economic and financial sector to boost the flow of capitals to housing (Lea, 2000). However, the success of the securitisation and the secondary mortgage market depends on the stability and sufficiency of the primary mortgage market, and unless and until the primary market is well-maintained and healthy, a true and sustainable secondary market cannot be attained (Lea, 2000).

Market Structure One important aspect in the development of the secondary

According to Michael J. Lea, a primary mortgage market is the traditional model of portfolio lending where all the undertakings necessary for mortgage such as origination, funding, servicing and portfolio risk management are handled by one institution only (2000). The bank or institution may use third-party vendors to handle other tasks such a mortgage insurer, appraisers and credit insurers, but the primary task of the mortgage is accomplished one institution only. The lenders can be banks, contract-saving institutions or mortgage banks (Lea, 2000). On the other hand, a secondary market is a modern unbundled mortgage delivery system whereby the tasks of origination, servicing, funding and risk management are unbundled and performed by several different entities specializing in each task (Lea, 2000). As an example of the above-mentioned entities: originators may be traditional depositaries, mortgage companies/brokers - the firm that originates the loan may not be the one that services it; and in this model of mortgage, there are a wide diversity of investors ranging from depositaries and mutual funds, while the global secondary market may have both domestic and foreign investors (Lea,

Conclusion Securitisation, as is the secondary mortgage market, in this time and century, is an established and successful part of Australia’s financial system. This is important to note, because according to Chris Dalton in his paper “The Future of Securitisation,” “securitisation provides an alternative source of funding for financial institutions, introduces an element of competition in certain lending markets, and provides fixed income securities with varying risks and yield attributes to investors” (Dalton, 2016). Securitisation and the secondary mortgage market is here to stay, and it can be utilized even more success to help Australia’s financial system grow even more prosperous not only for the benefit of the country, but most especially for those entities and individuals relying on the mortgage market as their source of