Secondary Mortgage Market

buying, selling, and trading of existing mortgage loans and mortgage-backed securities. Original lenders are thus able to sell loans in their portfolios in order to build liquidity to support additional lending. Mortgages originated by lenders are purchased by government agencies (such as the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association) and by investment bankers. These agencies and bankers, in turn, create pools of mortgages, which they repackage as mortgage-backed securities, called pass-through securities or participation certificates, which are then sold to investors. The secondary mortgage market thus encompasses all activity beyond the primary market, which is between the homebuyers and the originating mortgage lender.