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What is an Aggregator and How Does it Work?

by | Jun 2, 2023 | FinTech Articles | 0 comments

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Important Keywords: aggregator, mortgage, securitization, mortgage-backed securities, secondary mortgage market, liquidity, financial institutions, investors.

Introduction:

Aggregators play an important role in the secondary mortgage market. They help financial institutions by buying mortgages and then securitising them into mortgage-backed securities. But what exactly is an aggregator and how does it work?

What is an Aggregator?

An aggregate is a financial organization that purchases mortgages from different lenders and originators, and then packages them together to create mortgage-backed securities (MBS). They can be banks, traders, dealers, or correspondents. Aggregators earn profits by buying mortgages at a discount and then selling the MBS at a higher price.

How Does an Aggregate Work?

Aggregators act as intermediaries between mortgage originators and investors. They buy a portfolio of mortgages from different originators and then pool them together to create MBS. These securities are then sold to investors in tranches, with each tranche having different levels of risk and return.

The Role of Aggregates in the Secondary Mortgage Market:

Aggregators play an important role in the secondary mortgage market by providing liquidity to financial institutions. By purchasing mortgages from different originators, they help lenders to free up capital and reduce their risks. They also help to create more diverse and tailored MBS that cannot be obtained from a single originator.

Advantages:

There are several advantages to using an aggregator, including:

  • Reduced risks for mortgage originators
  • Increased liquidity for financial institutions
  • Diverse and tailored MBS offerings
  • Easier access to capital for borrowers

Conclusion:

Aggregators play a crucial role in the secondary mortgage market by helping financial institutions to manage risks, increase liquidity, and provide diverse mortgage-backed securities to investors. They act as intermediaries between mortgage originators and investors, providing a valuable service that benefits all parties involved.

Read More: Notification No. 53/2018 – Central Tax: Seeks to make amendments (Eleventh Amendment, 2018) to the Central Goods and Services Tax Rules, 2017. This notification restores rule 96(10) to the position that existed before the amendment carried out in the said rule by notification No. 39/2018- Central Tax dated 04.09.2018.

Web Stories: Notification No. 53/2018 – Central Tax: Seeks to make amendments (Eleventh Amendment, 2018) to the Central Goods and Services Tax Rules, 2017. This notification restores rule 96(10) to the position that existed before the amendment carried out in the said rule by notification No. 39/2018- Central Tax dated 04.09.2018.

Download Pdf: https://taxinformation.cbic.gov.in/

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