Secondary Mortgage Market Enhancement Act - SMMEA

AAA

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.

INVESTOPEDIA EXPLAINS '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. Subprime Meltdown

    The sharp increase in high-risk mortgages that went into default ...
  2. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  3. Ratings Service

    A company, such as Moody's or Standard & Poor's, that rates ...
  4. Securitization

    The process through which an issuer creates a financial instrument ...
  5. Subprime Lender

    A type of lender that specializes in lending to borrowers with ...
  6. Policyholder Surplus

    The assets of a mutual insurance company minus its liabilities. ...
Related Articles
  1. These Financial Products Are Too Complex ...
    Options & Futures

    These Financial Products Are Too Complex ...

  2. Conquering The Terms Of Your Mortgage
    Options & Futures

    Conquering The Terms Of Your Mortgage

  3. Rate Freeze To Cool Mortgage Meltdown
    Credit & Loans

    Rate Freeze To Cool Mortgage Meltdown

  4. Fannie Mae, Freddie Mac And The Credit ...
    Insurance

    Fannie Mae, Freddie Mac And The Credit ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center