What distinguishes the secondary mortgage market from the primary mortgage market?

The secondary mortgage market is characterized by its function of purchasing existing mortgage loans from primary lenders, such as banks and credit unions. This market provides liquidity to the primary mortgage market, allowing lenders to free up capital to originate more loans. When primary lenders sell mortgages to investors in the secondary market, they can obtain funds to lend to additional homebuyers, thereby supporting the overall housing market.

This distinction is crucial because the primary mortgage market is where homeowners and buyers directly obtain loans, while the secondary market is where those loans are packaged for sale to investors or government entities. The other options do not accurately reflect the role of the secondary market. The secondary market does not issue new mortgages; it only buys existing ones. Additionally, it is not regulated by the FDIC, as the FDIC primarily oversees banks and savings associations and the deposits they hold. Higher interest rates are not a feature of the secondary market but rather depend on various economic conditions and lender practices. Thus, option B uniquely identifies the defining role of the secondary mortgage market in relation to the primary market.