What is the primary function of the secondary mortgage market?
Correct Answer
B) To purchase existing mortgages from primary lenders, replenishing their capital to fund new loans
The secondary mortgage market consists of entities such as Fannie Mae (FNMA) and Freddie Mac (FHLMC) that purchase mortgage loans from primary lenders (banks, credit unions, mortgage companies). By buying these loans, they replenish the lenders' capital, enabling them to issue new loans to additional borrowers. This process increases the availability and affordability of mortgage credit nationwide.
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Related Topics & Key Terms
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Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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