The secondary market for mortgages has all but disappeared in recent weeks as investors have worried about the value of loans and rising delinquencies and defaults.
Mortgage lenders rely on the secondary markets to borrow money to make more loans. The problems started as subprime mortgages -- loans given to customers with poor credit history -- started going delinquent and defaulting at faster rates.
The problems have spread to the broader mortgage market, making investors nervous about nearly all types of loans that cannot be purchased by Fannie Mae or Freddie Mac. These include subprime and jumbo loans but not Conforming loans.
Conforming loans are considered safer because Fannie Mae and Freddie Mac are government-sponsored entities.(Refer to post jumbo/conforming 8/15/07).
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