Massachusetts Real Estate License Practice Test 2025 - Free Real Estate License Practice Questions and Study Guide

A secondary mortgage refers to the actions of agencies or investors that purchase existing mortgages from lenders or financial institutions. This process allows original lenders to receive immediate capital, enabling them to reinvest that money in new loans. By facilitating this transfer, the secondary market helps to provide liquidity, stability, and increased access to mortgage financing for borrowers.

This function enhances the availability of mortgage credit, potentially lowering interest rates and promoting homeownership. Agencies involved in this market often include government-sponsored enterprises like Fannie Mae or Freddie Mac, which buy mortgages to bundle them into mortgage-backed securities and sell them to investors.

The other options describe different aspects of finance and lending but do not accurately define a secondary mortgage. Direct loans to borrowers represent primary mortgages, while investments by banks and loans for investment properties fall outside the specific definition of secondary mortgages.