Finance (alternative)
In Maryland, the 'secondary mortgage market' functions primarily to:
AProvide home equity lines of credit
BPurchase loans from primary lenders, replenishing their funds to make new loans and providing market liquidity✓ Correct
CRegulate mortgage interest rates
DProvide mortgage insurance
Explanation
The secondary market (Fannie Mae, Freddie Mac, Ginnie Mae) buys mortgages from primary lenders, freeing up capital for more lending and providing liquidity to the mortgage market.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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