Also known as: primary mortgage markets · primary market
Written by attorneys · grounded in primary & secondary sources — see below
The national market in which lenders originate mortgage loans directly to borrowers. This market supplies the initial demand for new mortgage financing before any subsequent transfers of existing loans.
Pacific Bank approves a loan application from Peter Park and disburses funds secured by a mortgage on Park's new residence. The bank records the mortgage and holds both the promissory note and the security instrument from the outset. This direct origination places the transaction squarely in the primary mortgage market.
Preston Pratt obtains financing from Pinnacle Holdings to acquire a commercial building. Pinnacle Holdings underwrites the loan, executes the note and mortgage in its own name, and funds the closing directly. The transaction constitutes origination in the primary mortgage market.
Penelope Price secures a construction loan from Precision Tools to develop a residential subdivision. Precision Tools evaluates the project, advances funds in stages, and takes a mortgage on the undeveloped parcels at the first disbursement. The loan creation occurs in the primary mortgage market.
Select any source to read its text and confirm it supports the definition.
The primary mortgage market is the setting in which lenders originate new mortgage loans directly to borrowers. The secondary mortgage market is the setting in which existing mortgages are bought and sold after origination. Transfers in the secondary market are governed by rules that keep the mortgage and the underlying obligation together unless the parties expressly agree otherwise.
Supporting sources
Separation of the mortgage from the right to enforce the obligation renders the note unsecured as a practical matter. That result is economically wasteful and gives an unwarranted windfall to the mortgagor. The Restatement therefore supplies a presumption that the mortgage travels with the obligation unless the parties clearly agree otherwise.
Supporting sources
No. The primary mortgage market concerns only the initial origination of the loan by a lender to a borrower. Later syndication or sale of participation interests occurs in the secondary market and does not change the character of the original transaction.
Supporting sources
…assistant managers aided the shareholders in disposing of stock which the managers knew was traded in two separate markets—a primary market of Indians selling to non-Indians through the bank and a resale market consisting entirely of non-Indians. Indian sellers charged that the assistant managers had violated § 10 (b) and Rule…