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I’m taking a real estate class right now and the professor asked this question to us. It may or may not be on the exam, but I can’t seem to knock down a solution. I have theories, but I’m not sure how close I am to being correct. Thanks for the help!

3 Thoughts on Why is their unlimited amounts of Mortgage money available in the United States?
  1. Reply
    Califrich
    December 19, 2012 at 6:46 pm

    The premise is false. There are not “unlimited” amounts of mortgage money available. If that were true, mortgage interest rates would near zero percent. As it is now, these interest rates are rising, indicating that there is more demand for mortgage money than there is supply.

  2. Reply
    mister_galager
    December 19, 2012 at 7:06 pm

    There will be unlimited amounts as long as there are people willing to borrow it.
    The more people there are that want to borrow for a mortgage, the more people there are that are willing to loan it so they can make a profit on the interest charges.

    And with rates being as low as they are (compared to the 70’s and 80’s) there are even more people that can afford to borrow.

  3. Reply
    Ron B
    December 19, 2012 at 7:35 pm

    There are unlimited funds, because there is a secondary market for the loans. It allows them to sell the loans to investors and then use proceeds to lend again.
    EX. with no secondary maket.
    A lender finds someone to loan 100K to. They charge interest on the money and thus get more money than they lended out. This is their profit. Over the next 30 years, they get 200K profit back on the 100k they loaned, But thier money is all tied up in this single loan.
    Ex. with a secondary market
    Lender loans 100K out and charges interest based on risk. They then go to an investor and sell the future incoming interest at a discount. They then take the money and lend it again. The investor gets 180k over the next thirty years for paying 120K now. and the lender gets back the 100k they loaned plus 20k profit.
    Of course this is over simplified, but it leads to investors having safe investments, and lenders having profits and money to lend to the next person

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