What is the primary function of the secondary mortgage market?
Correct Answer
B) To purchase existing mortgages from primary lenders, replenishing their capital to make new loans
The secondary mortgage market is where existing mortgage loans are bought and sold among investors. Key participants include Fannie Mae (FNMA), Freddie Mac (FHLMC), and Ginnie Mae (GNMA). By purchasing loans from primary lenders (such as banks and mortgage companies), the secondary market replenishes those lenders' capital, enabling them to originate new loans. This process increases the availability of mortgage credit and helps stabilize interest rates.
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