> I also don’t understand how the pricing models used on the securitizations translate to the actual prices agreed by buyers and sellers Who is the buyer? Most

> I also don’t understand how the pricing models used on the securitizations translate to the actual prices agreed by buyers and sellers Who is the buyer? Most paper is created with expected returns months before the potential homeowner has the loan underwritten. If there is no one willing to buy the security, then the originator/servicer can not create the mortgage and the homeowner can not purchase the home. Because the underwriters have to limit access to the paper based on available buyers of the security, when times are plenty, credit and income requirements lower. The lending rates just slow or speed up the market slightly. When there is more liquidity in the system, more people can purchase homes. > My naive guess would be that the government backing of mortgage loans makes the securitization market possible, rather than securitization making the real estate sector viable. If Fannie and Freddy had 2x the amount available in the US then home ownership would not exactly explode because there would be fewer buyers of the underlying security as prices and returns lower. However it's not the government backing in all cases. The same would be true if the Building Societies in the UK would also had more capital available. An over-abundance of securities would lower their demand.