Michigan Real Estate Salesperson Licensing – 3 hour PSI Practice Exam

When a primary lender has exhausted its funds for home mortgages, the next step typically involves selling mortgages and notes to the secondary market. This process allows the lender to convert their existing mortgage loans into cash, which replenishes their funds and provides them with the capital necessary to originate more home loans.

The secondary market includes various entities, such as government-sponsored enterprises (like Fannie Mae and Freddie Mac) and institutional investors that purchase loans from primary lenders. By selling these loans, the primary lender effectively transfers the risk associated with those loans while also obtaining liquidity to continue lending activities. This is a common practice in the mortgage industry and helps maintain a continuous flow of financing for home buyers.

Increasing interest rates on new loans might be a tactic to manage demand or control risk but doesn’t directly resolve the issue of funds being exhausted. Offering personal loans could diversify a lender's offerings but doesn't address the immediate need for more funding for home mortgages specifically. Filing for bankruptcy is an extreme measure that would typically occur due to financial mismanagement or lack of solvency, which doesn't represent a routine operational response for a primary lender facing funding limitations.