What is the primary function of the secondary mortgage market?

The primary function of the secondary mortgage market is to purchase and assemble mortgage loans for resale to investors. This market plays a crucial role in the overall real estate financing system by providing liquidity to lenders, allowing them to free up capital by selling off the loans they have originated.

When mortgage loans are pooled together and sold as mortgage-backed securities, it allows investors to buy shares in those loans, which can offer returns based on the mortgage payments made by borrowers. This process helps to stabilize the housing market by ensuring that lenders have access to funds to make new loans, ultimately supporting the flow of credit to consumers seeking to buy homes.

In contrast, selling new mortgage loans directly to consumers is a function of primary mortgage lenders, not the secondary market. Providing loans to private companies does not align with the operation of the secondary mortgage market, which focuses specifically on mortgages for residential properties. Furthermore, regulating interest rates is typically the role of governmental bodies and does not fall under the duties of the secondary mortgage market.