What is the financial market called where mortgages are bought and securitized by private investors and government-sponsored enterprises?

What is the financial market called where mortgages are bought and securitized by private investors and government-sponsored enterprises?

• A. Primary Mortgage Market
• B. Equity Market
• C. Secondary Mortgage Market
• D. Bond Market

Answer: (C)

The financial market where mortgages are bought and securitized by private investors and government-sponsored enterprises is known as the Secondary Mortgage Market. In this market, existing home loans are purchased from lenders—such as banks and credit unions—allowing those institutions to recoup their capital to originate more loans. In the Secondary Mortgage Market, the bundled mortgages can be sold as mortgage-backed securities (MBS), which are then traded among investors. This process enhances the liquidity of mortgage loans and allows for broader access to capital for lenders. Entities like Fannie Mae and Freddie Mac play significant roles here, as they facilitate the buying and securitization of mortgages, which helps to stabilize the overall housing market by providing a continuous flow of funds to lenders. The other financial markets mentioned serve different functions: the Primary Mortgage Market involves the initial creation of mortgage loans; the Equity Market pertains to the buying and selling of stock; and the Bond Market relates to the issuance and trading of debt securities. Each of these markets operates distinctly, making the Secondary Mortgage Market essential for ensuring the efficiency and stability of mortgage financing.

The financial market where mortgages are bought and securitized by private investors and government-sponsored enterprises is known as the Secondary Mortgage Market. In this market, existing home loans are purchased from lenders—such as banks and credit unions—allowing those institutions to recoup their capital to originate more loans.

In the Secondary Mortgage Market, the bundled mortgages can be sold as mortgage-backed securities (MBS), which are then traded among investors. This process enhances the liquidity of mortgage loans and allows for broader access to capital for lenders. Entities like Fannie Mae and Freddie Mac play significant roles here, as they facilitate the buying and securitization of mortgages, which helps to stabilize the overall housing market by providing a continuous flow of funds to lenders.

The other financial markets mentioned serve different functions: the Primary Mortgage Market involves the initial creation of mortgage loans; the Equity Market pertains to the buying and selling of stock; and the Bond Market relates to the issuance and trading of debt securities. Each of these markets operates distinctly, making the Secondary Mortgage Market essential for ensuring the efficiency and stability of mortgage financing.