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Which market is created for the purchase of existing mortgages to increase liquidity?

  1. Primary Mortgage Market

  2. Secondary Mortgage Market

  3. Tertiary Mortgage Market

  4. Real Estate Market

The correct answer is: Secondary Mortgage Market

The secondary mortgage market is specifically designed to facilitate the buying and selling of existing mortgages, which helps to increase liquidity in the overall mortgage market. When lenders originate loans in the primary mortgage market, they often sell these loans to investors in the secondary market. This process allows lenders to free up capital, enabling them to issue more loans and continue lending. The secondary market plays a crucial role in the stability and efficiency of the mortgage industry. By allowing the sale of mortgages, it ensures that lenders have the funds needed to lend to more homebuyers. Additionally, it provides an investment opportunity for institutions and investors who seek income through mortgage-backed securities. The primary mortgage market refers to the initial creation of mortgages where borrowers obtain loans directly from lenders. The tertiary mortgage market is not a commonly recognized term in the context of mortgage transactions and does not pertain to the buying and selling of existing mortgages. The real estate market involves the buying and selling of properties rather than the financial instruments tied to those properties, which further clarifies why the secondary mortgage market is the correct context for this question.