Definition:
The secondary mortgage market is the market where banks sell mortgages to other investors. This allows banks to spread their risks over many different investments. For example a bank in California will sell the majority of its mortgages on the secondary mortgage market. In turn banks from all over the United States and other countries or investment firms will purchase a portion of these mortgages. That way if one particular market begins to have problems the losses are spread over a large area instead of in just one bank.
