1.3.21
The Wall Street Journal writes in their Heard Explainer column that “finding an investor to take on each of the risks of the 30-year mortgage is the job of the Rube Goldberg contraption that is the U.S. housing-finance industry.” The article explains the multi-step process by which a borrower gets a mortgage from an originator, and then goes into detail about how that loans is bought, sold, and traded in order to commoditize a 30-year mortgage. In addition to explaining the role of originators, the article explains how it is possible for 30-year mortgages to be available a low interest rates, discussing the role of private mortgage insurers, servicers, the GSEs, and other private investors, as well as concepts like prepay speeds, the To-Be-Announced Market, and the role of the Federal Reserve.