The secondary mortgage market primarily functions to:
Correct Answer
B) Purchase mortgages from primary lenders, replenishing their funds to make new loans
The secondary mortgage market — dominated by government-sponsored enterprises such as Fannie Mae (FNMA), Freddie Mac (FHLMC), and Ginnie Mae (GNMA) — buys existing mortgages from primary lenders such as banks and mortgage companies. This replenishes the primary lenders' capital so they can continue originating new loans. The secondary market improves liquidity and the availability of mortgage credit nationwide.
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Related Concepts
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
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