Article: Secondary market. (Mortgage Bankers Association of America's position on transactions with Fannie Mae and Freddie Mac)

SECONDARY MARKET

Over the years mortgage companies have been able to structure transactions with Fannie Mae and (to a lesser extent) Freddie Mac whereby a lender agrees to accept the risk of foreclosure loss in exchange for a lower agency guaranty expense. Companies who manage this risk wisely are able to profit from lower fees paid to the agency and by keeping servicing losses at a minimum. These types of structured transactions seemed to work very well for the agencies, mortgage companies and the consumers who benefit from more flexible underwriting.

Recent bank/thrift regulatory initiatives appear to threaten this way of doing business. Of primary ...

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