61. A savings bank sold a package of 100 mortgages to the Federal Home Loan Mortgage Corporation. This is considered a
Answer: C
This is considered a secondary market activity.
Selling a package of 100 mortgages to the Federal Home Loan Mortgage Corporation is an example of secondary market activity, where existing mortgages are bought and sold rather than new loans being originated.
A) second mortgage package
This option is incorrect because a second mortgage package refers specifically to loans that are subordinate to first mortgages in terms of repayment priority. The transaction described does not indicate that the mortgages are second liens.
B) primary mortgage transaction
This option is also incorrect as a primary mortgage transaction involves the origination of new loans directly between borrowers and lenders. The sale of an existing package of mortgages to another entity falls outside the definition of a primary transaction.
C) secondary market activity
This is the correct option because it accurately describes the sale of existing mortgages to the Federal Home Loan Mortgage Corporation. In the secondary market, financial institutions trade mortgage loans and their associated securities, allowing for increased liquidity in the mortgage market.
D) tandem plan arrangement
This choice is incorrect as it does not pertain to the sale of mortgage packages. A tandem plan typically refers to a specific type of loan structure or investment strategy rather than a transaction involving the sale of mortgage loans.
Conclusion
The correct answer is C, as it accurately represents the sale of mortgages in the secondary market, a fundamental aspect of mortgage finance. Options A, B, and D fail to describe the nature of the transaction correctly, illustrating the importance of understanding market structures in real estate finance.