In this paper we will define Primary Mortgage Market. It is a market where all the mortgage loans are originated initially. Primary mortgage market consists of credit unions, mortgage brokers, banks and mortgage bankers etc.
The development of a primary mortgage market depends upon macroeconomic stability. However, primary mortgage market plays and important role behind the development of a successful secondary mortgage market. Primary mortgage market is a place where the mortgage originators and as well as the borrowers come together to set the mortgage deal and negotiate the terms and conditions regarding that deal.
The credit unions, mortgage brokers, banks and mortgage bankers etc all are the part of primary mortgage market. Basically, the primary mortgage market is a portion of the credit market where the mortgage loans are originated.
On the contrary, in the secondary mortgage market, loans and servicing rights are traded between the mortgage securitizers, mortgage originators and investors. All the new mortgages are created in the primary mortgage market first, then they are sold in the secondary market.
In fact, many mortgage borrowers do not wear off the fact that their mortgages normally come to an end as part of a mortgage package which consists of asset backed security or mortgage backed security or collateralized debt obligation.
Primary mortgage market has a big role behind the formation of a successful secondary mortgage market. Until and unless the primary market produces a huge amount of high quality mortgages, the secondary mortgage market cannot be developed. The efficiency of the primary mortgage market in any country depends largely on macroeconomic stability.