The Capital Markets
The Capital Markets consist of two different types of lenders, the Portfolio Lender and the Securitizer. The markets are usually divided into large "conduit" loans and "small cap" properties (usually under $3MM). Lenders within these markets have various underwriting requirements and price the loans based on the type of property, value of the property, property's income, as well as the credit worthiness of the borrower and tenants.
The Portfolio Lender
A portfolio lender keeps the collateralized mortgage obligation for their own portfolio. Portfolio lenders are usually:
- A Savings Bank
- A Commercial Bank
- Community Bank
- Credit Union
- Insurance Company
- Pension Fund
- Real Estate Investment Trust
A Securitizer
A securitizer borrows money from a warehouse to fund their securitized mortgage obligations. They take their "closed" loans and combine them into a loan package. The securitizer then turns this package into a security instrument called a CMO bond and sells it at a lower price than what it will be worth in the future. Once the package is "sold," the warehouse is repaid and the securitizer keeps the difference.
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