What is the role of Fannie Mae in the mortgage market?

What is the role of Fannie Mae in the mortgage market?

• A. Underwrite loans for borrowers
• B. Provide insurance on mortgage loans
• C. Buy mortgages from lenders
• D. Issue mortgages directly to consumers

Answer: (C)

Fannie Mae plays a crucial role in the mortgage market by buying mortgages from lenders. This process helps to provide liquidity to the mortgage market, allowing lenders to free up capital so they can offer more loans to consumers. By purchasing these mortgages, Fannie Mae enables lenders to manage their risks and maintain their capacity to issue additional loans. When Fannie Mae acquires these loans, they often bundle them into mortgage-backed securities, which can then be sold to investors. This not only creates an investment vehicle but also helps stabilize the housing market by ensuring there is a consistent flow of funds for mortgages. As a government-sponsored enterprise, Fannie Mae aims to support the availability and affordability of housing by ensuring that a stable supply of mortgage credit is available. The other options do not accurately reflect Fannie Mae's role: it does not underwrite loans directly, provide insurance on mortgage loans, or issue mortgages directly to consumers. Instead, it acts as a secondary market facilitator, enhancing the overall functioning of the mortgage lending process.

Fannie Mae plays a crucial role in the mortgage market by buying mortgages from lenders. This process helps to provide liquidity to the mortgage market, allowing lenders to free up capital so they can offer more loans to consumers. By purchasing these mortgages, Fannie Mae enables lenders to manage their risks and maintain their capacity to issue additional loans.

When Fannie Mae acquires these loans, they often bundle them into mortgage-backed securities, which can then be sold to investors. This not only creates an investment vehicle but also helps stabilize the housing market by ensuring there is a consistent flow of funds for mortgages. As a government-sponsored enterprise, Fannie Mae aims to support the availability and affordability of housing by ensuring that a stable supply of mortgage credit is available.

The other options do not accurately reflect Fannie Mae's role: it does not underwrite loans directly, provide insurance on mortgage loans, or issue mortgages directly to consumers. Instead, it acts as a secondary market facilitator, enhancing the overall functioning of the mortgage lending process.