At settlement or shortly after you close on your loan, your lender may notify you that your mortgage is being sold to a secondary mortgage market investor. This will have no effect on you, your mortgage, or your monthly mortgage payments.

The secondary mortgage market consists of investors such as Fannie Mae and Freddie Mac that buy mortgages from primary lenders including mortgage bankers, banks and savings and loan associations. Most primary lenders make mortgage loans and sell them to secondary market investors to maintain a steady stream of funds for future loans. 

Primary lenders that generally keep their loans in portfolio, such as commercial banks and thrifts, also use the secondary market to maintain liquidity and restructure portfolios.

Because of the long-term nature of mortgages, the secondary market is an essential factor in maintaining lender liquidity. The secondary market also provides a significant means of redistributing funds nationwide, moving them from areas where there are surpluses to areas where additional funds are needed.