Finance
The secondary mortgage market allows lenders to:
AIssue loans directly to borrowers at higher rates
BSell mortgage loans to investors to replenish lending capital✓ Correct
CSet national interest rates for all mortgages
DApprove loan applications for other lenders
Explanation
The secondary mortgage market allows lenders to sell existing mortgage loans to investors, replenishing their capital so they can make new loans. Fannie Mae and Freddie Mac are major participants.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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