What is the primary function of the secondary mortgage market?

The primary function of the secondary mortgage market is to facilitate the buying and selling of existing mortgages. This market provides liquidity to lenders by allowing them to sell loans they have originated to investors, including institutions and individual investors. This process enables lenders to free up capital so they can issue more loans, ultimately supporting the overall mortgage market and consumer access to home financing.

By purchasing existing mortgages, investors can earn returns through the interest payments made by borrowers, while lenders can manage their balance sheets more effectively. This transaction between lenders and investors plays a crucial role in stabilizing the mortgage market and influencing the availability of funds for lending.

The other options relate to aspects of mortgage financing but do not accurately describe the primary function of the secondary mortgage market. The creation of new mortgages and negotiating interest rates are typically handled in the primary mortgage market, while the rental of properties involves completely different dynamics related to real estate operations and investment types.