Secondary Mortgage Market

Definition - What does Secondary Mortgage Market mean?

The secondary mortgage market is a market for trading mortgages that is different than the primary mortgage market which is mainly made up banks or other lenders and people buying homes. The secondary mortgage market is where lenders trade mortgages that have already been sold and servicing rights with investors, or other entities looking to own and profit from the mortgages.

Justipedia explains Secondary Mortgage Market

In a normal mortgage, a bank provides a home loan to a borrower who is looking for funding for a new house. If the bank doesn't wish to sell this mortgage, then it can simply wait and collect payments with interest over time. However, if it would like to sell this mortgage in order to get its money back before the loan matures, then it can do so on the secondary market. So, for example, a bank could sell ownership of a $300,000.00 mortgage to an investor who would then receive payments from the original borrower.

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