In which market do lenders commonly buy and sell mortgages to optimize their portfolios?

In the context of mortgage transactions, lenders typically engage in buying and selling mortgages in the secondary market. This market is essential for enhancing liquidity and risk management for lenders. When lenders originate loans, they can sell those loans in the secondary market, thereby recouping funds and enabling them to continue lending to new borrowers.

The secondary market includes various participants, such as government-sponsored enterprises like Fannie Mae and Freddie Mac, as well as private investors. By selling mortgages in this market, lenders can optimize their portfolios by managing interest rate risk, diversifying their investments, and increasing their capital for additional lending.

The primary market, in contrast, involves the initial phase where loans are created and originated directly to borrowers. The consumer market generally refers to the market conditions impacting borrowers and the overall economic factors influencing consumer behavior. While the mortgage market is a broader term that encompasses both primary and secondary markets, the correct focus for the buying and selling of mortgages specifically pertains to the secondary market, making it the right answer in this scenario.