is this when the original mortgage is sold off to countrywide and other major lenders?

any examples would be great!

Secondary market would be the MBS investors. Bear Stearns, Lehman Brothers, etc.

Investors in a market, i.e. Wall Street that purchase the loans. The loans are submitted in a stacking order, goes through underwriting, and packaged in a portfolio to be resold. These packages/portfolios are in guidelines with Fannie & Freddie to be serviced to the investors.

when the secondary market purchases loans from a lender they buy them in bulk. They randomly audit svereal files in a stack. This is why lenders occasionaly go back, and may ask for additional conditions before closing a loan. If there is one item missing from a file no matter how small of an item it will affect the price of the bundle. It's kind of like buying fruit or beef as a grocery store. If there is one thing wrong the grade will be lowered, and so will the price.

You will sometimes here loan officers and bank reps talking about how a certain lender is well below the market on rates and fees. Lenders take a huge risk when trying to get new business from new brokers, and sometimes make terrible decisions that ultimatley cost them in the long run. If a lender has a high default rate they will struggle to sell thier bundle, and may end up in big trouble.

what about the bad loans that dont make it in the bundle?

can we call a direct lender and ask to buy non performing assets(notes) for a discount?

The investors typically will take a certain % of 1-off loans.

Let's call the loan bundles boxes...

And let's say the investor wants 80% to conform to guidelines and 20% scratch and dent.

When the scratch and dent box fills up the secondary marketing department tends to buckle down and stop granting exceptions.

Does this make sense? 1 month a lender may turn a deal down then go ahead and do it a few months down the road.

Secondary Market = Investors purchasing loans. Simple explanation...

Whether the investors are on wall street or buy loans then take them to wall street they are part of the secondary market.

The best way to go about this is to go to wall street directly. You will get lower pricing and cut out the middle man.

For example Bear Sterns.. The do a lot of Alt-A paper. Some big direct lenders sell their paper to them then they sell it again.

Make sense Alvin?