Aggregator

DEFINITION of 'Aggregator'

A party involved within the secondary mortgage market that purchases mortgages from financial institutions and then securitizes them into mortgage-backed securities (MBS). Aggregators earn profit by purchasing individual mortgages at lower prices and then selling the pooled MBS at a higher premium.

BREAKING DOWN 'Aggregator'

Purchasing an MBS tends to be far less risky compared to purchasing an individual mortgage as the pools of mortgages diversifies the source of the individual mortgage's income stream.

Some mortgage originators also become aggregators as securitizing a pool of mortgages can be seen as a natural extension of their business. Plus, doing so would limit losses incurred to the originator in the event that mortgage rates rise, as typically seen when originators would sell the mortgages into the secondary market.

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RELATED FAQS
  1. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Answer >>
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    Read several different arguments in favor of allowing the trade of mortgage-backed securities, even after the financial crisis ... Read Answer >>
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