Massachusetts Real Estate License Practice Test

What role do primary mortgage lenders play?

1. They originate funds directly to borrowers

2. They serve as secondary market investors

3. They only buy existing mortgages from other lenders

4. They ensure legal compliance in real estate transactions

The correct answer is: They originate funds directly to borrowers

Primary mortgage lenders are crucial in the real estate financing process as they originate loans directly to borrowers. These lenders assess the borrower's creditworthiness, determine the loan amount, and provide the funds necessary for purchasing real estate or refinancing an existing mortgage. They often include banks, credit unions, and mortgage companies that actively engage with consumers to meet their mortgage needs. The other roles described in the options pertain to different aspects of the mortgage industry. Secondary market investors do not originate loans; rather, they purchase loans that have already been created by primary lenders. The option regarding buying existing mortgages highlights the function of secondary market players, such as Fannie Mae and Freddie Mac, which involves acquiring already originated loans to provide more liquidity in the market. The choice related to legal compliance pertains to different professionals, such as real estate attorneys or title companies, who ensure that transactions adhere to local laws and regulations. Therefore, the primary role of lenders originates directly ties to option A.