Capital Markets Examiner School, Providence, RI

Warehouse Risks/Mitigates

Mortgage Loans

Mortgage Warehouse

Mortgage Bonds

Velocity is the most important hedge against changes in value.

Secondary Market

 Banks participate in the secondary market in order to manage interest rate risk on the balance sheet and expand opportunities to earn fee income.  Typical purchasers of mortgage loans are FNMA, FHLMC, GNMA and private originators and banks.  The secondary market stage may include loan servicing, loan securitization, or

management of a loan portfolio.  Loan may be sold and resold.

 Some of the participants that are included in the secondary market stage are: the lender, the servicer, the investment banker, rating agencies, insurance firms and others.