How the Mortgage Machine Works
A lot has to happen to make 30-year mortgage rates possible. If you want to understand what each player in the process does, and what risks they take than the Wall Street Journal has got you covered (Wall Street Journal)
One major reason is the U.S. housing market’s unique system of taxpayer support, via the government-sponsored enterprises. Fannie Mae and Freddie Mac buy loans from originators, guarantee them and resell them to investors as agency mortgage securities. So in turn, many originators’ economics are ultimately driven by the volume of loans they produce and sell via Fannie or Freddie. This business model also avoids lending risk and requires less capital, making it appealing to investors.