What does it mean to "sell the loan on the secondary market"?

To "sell the loan on the secondary market" refers specifically to the process of transferring ownership of an existing mortgage from the lender who originated the loan to another investor or financial institution. This transaction allows the original lender to recoup funds so they can continue to issue new loans.

When a lender sells a loan on the secondary market, it does not involve offering the loan to the general public or refinancing it (which would involve changing the terms of the loan for the borrower). Instead, it's a way for lenders to manage liquidity and risk while enabling investors to earn returns on the mortgage payments made by the borrower. The secondary market plays a vital role in the overall mortgage industry by allowing for the flow of funds and ensuring that capital is available for new mortgage lending activities.