ABSTRACT
The structure of mortgage markets is key to an understanding of housing industries for two major reasons. First, a large majority of housing sales and construction is financed through debt. Second, from a larger point of view, residential mortgage financing is one of the largest uses of available credit in the economy, generally accounting for about a fifth of all funds raised in US credit markets and a third of funds raised by the Nation’s private, non-financial sectors. Mortgage institutions are structured to provide for five basic functions in raising and distributing capital for housing: origination, servicing, investment, transformation, and insurance. The housing finance system as we know it is generally dated from the 1930s when the Federal Government intervened in financial markets in an attempt to stabilize the economy. The major mortgage lenders at that time were mutually owned building and loan societies and banks, which took deposits from households and relent the funds for mortgages.
