What does the secondary mortgage market primarily involve?

The secondary mortgage market primarily involves the transferability of mortgages among mortgagees. This market plays a crucial role in the overall stability and liquidity of the mortgage lending system. In this context, mortgagees are typically financial institutions or investors who buy and sell mortgages, which allows for increased liquidity and the ability for lenders to offer more loans to homebuyers.

In the secondary mortgage market, investors purchase existing mortgages or mortgage-backed securities, which are collections of mortgages bundled together. This process enables primary lenders to free up capital, allowing them to issue more loans. The transferability of mortgages enhances the availability of credit, promotes standardization in lending practices, and helps to lower mortgage rates for consumers by providing a larger pool of capital.

In contrast, placing junior liens specifically relates to types of subordinate financing on a property, which does not encompass the broader function of the secondary mortgage market. Similarly, the transferability of mortgages among mortgagors does not reflect the role of the secondary market, as mortgagors are the borrowers in these transactions, not the entities involved in selling or trading the mortgages. Thus, the correct answer highlights the essential function of the secondary mortgage market in facilitating the exchange of mortgages among mortgage lenders and investors.