Finance
In Michigan, the 'secondary mortgage market' refers to:
AA second mortgage taken after the primary mortgage
BWhere mortgage loans are bought and sold by investors (e.g., Fannie Mae, Freddie Mac, Wall Street), providing lenders with capital to make new loans✓ Correct
CThe second-largest mortgage lender in Michigan
DMortgages on secondary residences such as vacation homes
Explanation
The secondary mortgage market is where existing mortgage loans are bought and sold. Entities like Fannie Mae and Freddie Mac purchase Michigan loans from originators, package them into mortgage-backed securities, and sell them to investors—creating liquidity for new lending.
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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.
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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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