When a loan is immediately sold onto the secondary market, who is responsible for funding?

When a loan is immediately sold onto the secondary market, the primary lender is responsible for funding the loan. This means that the initial financial institution, which originates the loan, provides the funds necessary for the mortgage at the outset. Once the loan is established and the borrower has received the funds, the primary lender can sell that loan to investors in the secondary market.

This process allows the primary lender to recover the funds they initially disbursed, enabling them to continue lending to other borrowers. The secondary lender, or the entity purchasing the loan from the primary lender, does not take on the responsibility for funding at the outset; instead, they buy the rights to the loan after it has been originated.

Understanding this process is critical, as it highlights the flow of funds in mortgage transactions and the roles of different parties involved at various stages.