Secondary Mortgage Market Enhancement Act - SMMEA

DEFINITION of 'Secondary Mortgage Market Enhancement Act - SMMEA'

An act passed in the United States in 1984 to meet growing demand for mortgage credit that could not be wholly met by existing federal agencies. The SMMEA allowed federally-chartered and regulated financial institutions to invest in mortgage-backed securities, and also overrode state investment laws to enable state-chartered and regulated institutions to invest in these securities. The act made a major contribution to the exceptional growth of the residential mortgage market in subsequent decades.

BREAKING DOWN 'Secondary Mortgage Market Enhancement Act - SMMEA'

As a consequence of SMMEA, the secondary mortgage market expanded tremendously. But this exponential growth also contributed to the collapse in the U.S. housing market starting in 2007. This collapse was precipitated by a confluence of factors including securitized products (such as mortgage-backed securities) receiving higher credit ratings from rating agencies than was warranted by their holdings, lax lending standards and a surge in subprime borrowing.

RELATED TERMS
  1. Alternative Mortgage Transaction ...

    An act from 1982 that over-rode many state laws that prevented ...
  2. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  3. Residential Mortgage-Backed Security ...

    A type of security whose cash flows come from residential debt ...
  4. Secondary Mortgage Market

    The market where mortgage loans and servicing rights are bought ...
  5. Aggregator

    A party involved within the secondary mortgage market that purchases ...
  6. Primary Mortgage Market

    The market where borrowers and mortgage originators come together ...
Related Articles
  1. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  2. Credit & Loans

    How To Become a Mortgage-Backed Securities Analyst

    Specializing in structured or derivative credit products like mortgage-backed securities requires education and prior experience in the mortgage field.
  3. Insurance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  4. Investing Basics

    What is Securitization?

    Securitization is the process of converting an asset, or group of assets, into a marketable security. Often times, the securitized assets are divided into different layers, or tranches, tailored ...
  5. Home & Auto

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  6. Home & Auto

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  7. Economics

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.
  8. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  9. Wealth Management

    The Most Important Factors that Affect Mortgage Rates

    Discover what the most important factors are that affect mortgage interest rates. Factors range from inflation and economic growth to Federal Reserve activity, .
  10. Credit & Loans

    Don't Get Overcharged for Your Mortgage

    Don't pay more for a mortgage than necessary. Here’s a quick look at the different categories and how to be sure you're getting the best deal.
RELATED FAQS
  1. What are the best ways to invest in mortgage-backed securities (MBS)?

    Find out how you can start investing in real estate through mortgage-backed securities. Read Answer >>
  2. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Answer >>
  3. What role did securitization play in the U.S. subprime mortgage crisis?

    Learn how the securitization of sub-prime mortgages into asset-backed securities fueled the real estate market crash in 2 ... Read Answer >>
  4. What are key government regulations that affect investing in the banking sector?

    Discover how the global financial crisis of 2008 changed the face of banking in the United States and around the world by ... Read Answer >>
  5. What financial regulation exist to control the secondary market?

    Examine a brief characterization of financial regulation in the secondary market, including self-regulatory organizations ... Read Answer >>
  6. What are some of the major regulatory agencies responsible for overseeing financial ...

    Discover the specific responsibilities of some of the major regulatory agencies that oversee financial institutions in the ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center