What is the primary purpose of Fannie Mae?

What is the primary purpose of Fannie Mae?

• A. Provide tax breaks for homeowners
• B. Provide mortgage market liquidity
• C. Encourage affordable housing
• D. Regulate mortgage rates

Answer: (B)

The primary purpose of Fannie Mae, officially known as the Federal National Mortgage Association, is to provide liquidity in the mortgage market. By purchasing mortgages from lenders, Fannie Mae enables these lenders to have the capital available to issue more loans to homebuyers. This process of buying and selling loans helps ensure that there is a steady supply of money flowing into the mortgage market, which in turn promotes stability and allows for more individuals to access home loans. Fannie Mae plays a crucial role in the housing finance system by facilitating affordable homeownership. Its operations help lower the cost of borrowing by creating a secondary market for mortgages, allowing lenders to free up their balance sheets and lend more. While Fannie Mae's activities may indirectly support affordable housing and provide some level of market stability that could influence mortgage rates, its core mission focuses on enhancing liquidity in the mortgage market.

The primary purpose of Fannie Mae, officially known as the Federal National Mortgage Association, is to provide liquidity in the mortgage market. By purchasing mortgages from lenders, Fannie Mae enables these lenders to have the capital available to issue more loans to homebuyers. This process of buying and selling loans helps ensure that there is a steady supply of money flowing into the mortgage market, which in turn promotes stability and allows for more individuals to access home loans.

Fannie Mae plays a crucial role in the housing finance system by facilitating affordable homeownership. Its operations help lower the cost of borrowing by creating a secondary market for mortgages, allowing lenders to free up their balance sheets and lend more. While Fannie Mae's activities may indirectly support affordable housing and provide some level of market stability that could influence mortgage rates, its core mission focuses on enhancing liquidity in the mortgage market.