A great example for this is the movie with Jimmy Stewart – “It’s a Wonderful Life!”?
scene where he’s headed on his honeymoon only to learn that there’s a run on the Bailey Brothers Building and Loan. Everybody’s screaming to take their savings out of the institution and Jimmy Stewart explains that their money isn’t in the vault. He tells his customers “… your money’s in Joe’s house and in Mary’s mother’s house just down the street from you…”. A market was created to prevent events like this. Lenders are able to offer exceptionally favorable interest rates due to the fact that lenders have the ability to raise money by selling groups of these mortgage loans to investors. The selling of mortgage loans to investors is referred to as the “secondary mortgage market.” These investments are termed Mortgage Backed Securities (MBS). When a person borrows money from a lender, the person must sign a promissory note promising to repay the home loan and a mortgage note (or deed of trust) to serve as collateral for the loan. The bearer of these notes has a legal claim to the pr
