California Real Estate Practice Exam

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The secondary mortgage market differs from the primary mortgage market in that it?

Offers mortgages to borrowers
Services mortgages
Buys mortgages from primary lenders
Regulates mortgage rates

The correct answer is: Buys mortgages from primary lenders

The secondary mortgage market refers to the buying and selling of existing mortgages, whereas the primary mortgage market deals with the initial creation and lending of mortgages. This means that the secondary market does not offer mortgages directly to borrowers (A), as that is the role of primary lenders in the primary market. Additionally, the secondary market does not service mortgages (B) - that is the responsibility of loan servicers, who may or may not be involved in the secondary market. The secondary market also does not regulate mortgage rates (D), as that is typically done by government entities. The secondary market (C) buys mortgages from primary lenders, providing additional liquidity and resources for the primary lenders to lend more mortgages.