The Role of the Primary Mortgage Market in the Development of a Successful Secondary Mortgage Market
By Michael J. Lea (01/00, IFM-121, En) See also Infrastructure and Financial Markets
This paper is one of a series of best practices papers that have been produced based on a Regional Conference held at Inter-American Development Bank on the Development of Mortgage Securitization. Key prerequisites for a secondary mortgage market include: an organized primary market, the appropriate legal/regulatory framework, a receptive capital market, and private-public sector support for the institution.
This paper focuses on the elements of the primary mortgage market that are relevant to establish a secondary mortgage market. The paper also presents the specific example of Mexico. A successful secondary mortgage market requires an active primary market and appropriate standardization. The lack of standardization of mortgage procedures, contracts, and documentation, increases transaction and processing cost and encumbers the development of a dynamic secondary mortgage market. Standardization is required for loan application, mortgage credit policy, property evaluation, loan underwriting, and loan product characteristics. If a regional approach to mortgage intermediation is adopted, primary market standardization becomes paramount, and additional challenges may include managing currency risk and integrating monetary policy.
Contents | |
| Introduction | |
| Market Structure | |
| Characteristics of the Instrument | |
| Mortgage Origination | |
| Secondary Marketing | |
| Servicing | |
| Primary Market Prerequisites in a Developing Country: the Case of Mexico | |
| Conclusion | |
| References | |
Author | |
| Michael J. Lea is President of Cardiff Consulting Services, a firm specializing in analysis of and research on domestic and international financial markets and institutions. | |
To order a hard copy | |
| Order your copy by sending an e-mail to: sds/ifm@iadb.org Please specify publication code, title, quantity, language and complete shipping address. Publication code: IFM-121 | |
Last updated: 05/08/07
