ABSTRACT
A secondary mortgage market has been developed in order to increase the total supply of funds available to mortgage borrowers. In various innovations have made the mortgage loan a more liquid financial instrument, and the innovations that have facilitated the trading of mortgages are closely related to the development of the secondary mortgage market. The federal government has been instrumental in the development of the secondary mortgage market. Without the efforts of federal housing finance agencies secondary market facilities would never have been established. The mortgage securities that are traded on the secondary market can be considered as unconventional examples of a public good. The federal government was paramount in developing the first standardized mortgage instrument. The amortized mortgage loan was an innovation of the Home Owners Loan Corporation, a government agency Congress established in 1933. The Government National Mortgage Association mortgage-backed securities program is the most important element of the secondary mortgage market.
