Finance
The secondary mortgage market provides liquidity to lenders by:
ASetting interest rates for new mortgages
BBuying existing mortgages from lenders, freeing up funds for new loans✓ Correct
CGuaranteeing that all mortgages will be repaid
DRegulating lending standards for all banks
Explanation
The secondary mortgage market (including Fannie Mae, Freddie Mac, and Ginnie Mae) purchases mortgages from primary lenders. This replenishes lenders' funds and enables them to make new loans, thereby maintaining liquidity in the home lending market.
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