The current upheavals in the home loan market have prompted me to take a closer look at the structure of the wholesale market than I have ever done before. The wholesale market is where mortgage brokers and smaller lenders, who account for perhaps three quarters of all new loans, get their funding. Wholesale lenders are mostly large firms who may hold some of the loans they write, but most are sold. They sell to Fannie Mae and Freddie Mac if the loans are no larger than $417,000 and meet the other requirements of the agencies. Loans that don't meet these requirements are sold to investment banks or others who convert them into securities that are sold to investors. The non-agency part of the wholesale market currently is claimed to be in a state of disarray. Investors have backe...
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