Question

What is the secondary mortgage market? List three reasons and why it is important.

Answer 1

A secondary mortgage market is one in which the home loans of individual customers are traded in between investors and lenders. That is, these home loans which are underwritten are now sold off to investors.

The three reasons are:

1. It allows mortgage companies to sell active mortgages and thereby restock funds with which new mortgages can be originated.

2. It makes possible the geographic stream of funds.

3.  It boosts the investing options accessible to individual investors and financial institutions