This paper models the development of the secondary market as a way of trading off its lower cost of securitization with adverse selection due to asymmetric information and high monitoring costs. We use a simple adverse selection model in the tradition of Akerlof (1970) with successive modifications, including licensing contracts similar to those of Leland (1979) and Chan and Leland (1982), to explain the evolution of the secondary market and discuss implications for the future, particularly as information improves.