As I have written before, many homeowners are surprised to learn that the local bank they borrowed money from to buy their home often no longer owns their loan. The reason for this is the secondary loan market: lenders routinely sell mortgage loans not long after the promissory note is executed. The reason for this is that the lender gets a better return on their investment by selling the loan early, which provides them with more money to lend for new mortgage loans.
I recently came across a blog post from Freddie Mac’s website explaining the secondary mortgage market. The blog post is obviously pro-Freddie Mac, but does provide a good overview of this process. I recommend it for anyone interested in learning more about mortgage lending.