Development Of The Secondary Mortgage Market
The development of the secondary market allowed lenders to convert a group of like loans to single security instrument which then could be sold just like stocks and bonds. Secondary market groups would review the loans to assure compliance with established guidelines on quality and documentation. The loans would then be exchanged for a guaranteed security. The lender now would hold a guaranteed security as an asset, instead of a dozen individual home mortgages. This security could be easily sold whenever money was needed resulting in improved interest rates and unlimited funds for home loans.