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How are the primary and secondary mortgage markets different?

The primary market is where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. In other words the primary market is where the loan is actually created. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market. After being originated in the primary mortgage market, most mortgages are sold into the secondary mortgage market thus enabling the originating lender to recycle/reuse the funds to make a new loan to a new borrower.

The secondary market is essentially any transaction involving the sale or pledging of a mortgage loan asset other than the primary market transaction that created the mortgage loan asset. The secondary market is where mortgage loans and servicing rights are bought and sold between mortgage originators, mortgage aggregators and investors such as FannieMae, FreddieMac and GinnieMae. A large percentage of newly originated mortgages are sold by their originators into the secondary market thus enabling the cycling of capital relating to mortgage lending. The secondary mortgage market helps to make credit equally available to borrowers across geographical locations.