Standards for Mortgage Lending

by : Syd Johnson

The Secondary Mortgage Market is responsible for the setting many of the rules and common practices that determines who gets a home loan. The secondary market includes Fannie Mae (Federal National Mortgage Association or FNMA), Freddie Mac (Federal Home Loan Corporation or FHLMC), Ginnie Mae (Government National Mortgage Association or GNMA) and a variety of other investment oriented institutions.

These institutions set the standards because they are the ones that will often buy and service your home loan after you have purchased your property. Although your lender handles all of your initial paperwork, there are several well established steps to take your Mortgage out of their hands and into the secondary market where additional fees, manpower and time that will be invested in servicing your home loan for a typical period of 15 to 30 years.

They Lend Money to Your Lender

Once your lender sells you home loan on the secondary market, it frees up the money to make another loan to another consumer looking to purchase their own property. It’s an intricate revolving system that was set up after the depression and refined after the massive Savings and Loans scandals in the 1980’s. It prevents your Mortgage Lender from running out of available cash when they approve lots of loans and assures you that each loan application gets a fair review regardless of the type, size and geographic location of your lender.

How does this all affect you?

Since your loan will spend the majority of its lifetime floating in the secondary market, they institutions involved have setup strict guidelines and requirements that determine what type of information is needed from you before they can work with your loan. All of the guidelines are based to some extent on the systems set up by Fannie Mae and Freddie Mac.

As each lender determines the type of risk they can absorb in the marketing they may work strictly within the guidelines of Fannie Mae and Freddie Mac or they may take a more flexible approach to approving their loans. The guidelines of these Mortgage giants are constantly changing, therefore, it is to your advantage to seek out a reputable company and Mortgage Broker that will fully comprehend them and know how they apply to your particular mortgage file.

Even better, get to know the players and rules on your own. Never be at mercy of a banker or Mortgage Broker again. For information visit the home pages of the following organizations:

Fannie Mae –

Freddie Mac –

Ginnie Mae –