What is the normal securitization channel for jumbo conventional loans?

The normal securitization channel for jumbo conventional loans is through private conduits. Jumbo loans are those that exceed the conforming loan limits set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, and because they are not backed by these entities, they rely on private sector financing.

Private conduits are investment vehicles set up by private financial institutions to pool these jumbo loans and then issue mortgage-backed securities (MBS) to investors. This process allows lenders to obtain liquidity and manage risk by selling the loans they originate, while investors seek attractive returns from the cash flows generated by the underlying mortgages.

In contrast, government agencies and the Federal Reserve are primarily involved with conforming loans or government-backed securities. Public investments are less relevant in this context, as they usually refer to broader equity or bond market investments, rather than the specific securitization of individual mortgage loans. Therefore, private conduits serve as the primary channel for securitizing jumbo conventional loans due to their role in the private mortgage market.