Legal Definitions - secondary lender

A secondary lender is a type of wholesale mortgage buyer that purchases first mortgages from banks and savings-and-loan associations. This allows these institutions to replenish their money supply and lend more money to borrowers.

For example, let's say a bank has lent out a significant amount of money to borrowers and needs to replenish its funds. The bank can sell some of its first mortgages to a secondary lender, who will then provide the bank with the cash it needs to continue lending.

Another example is a savings-and-loan association that wants to expand its lending operations but doesn't have enough funds to do so. By selling some of its first mortgages to a secondary lender, the association can increase its lending capacity and offer more loans to borrowers.

In summary, a secondary lender plays an important role in the mortgage industry by providing banks and savings-and-loan associations with the funds they need to continue lending to borrowers.