Florida Real Estate Broker ExaminationReal Estate Finance and InvestmentMedium
A Florida real estate broker is explaining the secondary mortgage market to a new licensee. The broker emphasizes the role of certain entities in purchasing existing mortgages from primary lenders. Which of the following is a key participant in the secondary mortgage market?
- ACommercial banks
- BFannie Mae
- CCredit unions
- DMortgage brokers
Show answer & explanationAnswer & explanation
Correct answer: B. Fannie Mae
Fannie Mae (Federal National Mortgage Association) is a government-sponsored enterprise (GSE) that buys mortgages from primary lenders, thereby providing liquidity to the mortgage market.
Why the other options are wrong
- A. Commercial banks are primary lenders, originating mortgages, but they also sell them into the secondary market.
- C. Credit unions are primary lenders, similar to commercial banks, originating loans for their members.
- D. Mortgage brokers originate loans by connecting borrowers with lenders, but they do not purchase existing mortgages.
Secondary Mortgage Market
A market where existing mortgage loans are bought and sold by investors, providing liquidity to primary lenders.
- Does not directly involve the borrower.
- Key players include Fannie Mae, Freddie Mac, and Ginnie Mae.
- Allows primary lenders to replenish funds for new loans.
Memory trick: Primary lends, Secondary bends (buys).