What is the primary function of the secondary mortgage market?

The primary function of the secondary mortgage market is to provide capital for primary mortgage lenders. In this market, existing mortgages are bought and sold, allowing lenders to obtain funds that they can then use to issue new mortgage loans to consumers. This process increases the liquidity of mortgage capital, enabling lenders to manage their risk and enhance their lending capacity.

By selling mortgages to investors, primary lenders are able to free up their balance sheets, which allows them to lend more money to homebuyers. The secondary market creates a more efficient system by giving investors a way to invest in mortgages, while providing lenders with the funds needed to issue additional loans. This mechanism is essential for maintaining a stable and accessible housing finance system, as it helps ensure that lenders can continuously provide loans to consumers.

Other options, while related to the broader mortgage process, do not accurately describe the primary function of the secondary mortgage market. For example, facilitating consumer loans refers more to the activities of primary mortgage lenders directly dealing with borrowers rather than the function of the secondary market. Issuing new mortgages directly to consumers is also the responsibility of primary lenders, and managing property title transfers falls under the domain of legal and real estate transaction processes, not the secondary mortgage market.