ABSTRACT
A major trend in financial markets throughout the world has been the securitization of loans. This means that a tradeable security is created with the payments of principal and interest on the original loans used to service the security. Securitization has advantages for both borrowers and lenders. Lenders have a more liquid instrument while borrowers are able to obtain finer margins over market rates of interest. Generally, securitization has not extended to mortgage markets for a number of reasons, not least the peculiar nature of mortgage loans. However, there is a thriving secondary mortgage market in the United States, and recently signs have emerged of conditions favouring the establishment of at least quasi-secondary market activity in Britain.
