Existing mortgages are bought and sold in the secondary mortgage market. These loans are grouped together and sold as bulk loan packages to Fannie Mae or other investors. Loans are bought and sold in the secondary mortgage market without the knowledge or consent of the borrower. Borrowers typically find out that their loans were sold when they are notified of a new address to mail their mortgage payment. Most banks do not service the loans they originate. In order to have available funds to make new mortgage loans, banks and other lenders sell their loans shortly after they close. The secondary mortgage market gives small community banks the liquidity they need to continue to loan money to home buyers. Investors minimize their risk by purchasing a large amount of loans at one time.
