ABSTRACT
The previous chapter showed that the deposit-taking system of housing finance operated through just one stage of financial intermediation: individual savings are invested with deposit-taking institutions which in turn make loans for house purchase. The mortgage bank system involves at least two stages of intermediation. The institutions which make mortgage loans do not raise their funds directly from the retail sector, but rather raise money from the professional money and capital markets, which in turn attract much of their funds from the retail sector. Mortgage banks (the term is used in its widest sense here) have to work with the retail sector to obtain and service their mortgage business. However, there are many variations on the mortgage bank system, largely depending on the form of ownership of the institution. There are also many ways in which wholesale funds can be raised.
