Question 62

Ginnie Mae provides secondary market support by purchasing FHA and VA loans.

Ginnie Mae is the government agency responsible for providing secondary market support by purchasing Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans. This role is crucial for ensuring liquidity in the housing finance market.

A) Federal Reserve

The Federal Reserve primarily focuses on monetary policy, regulating banks, and maintaining financial stability rather than directly purchasing FHA and VA loans. While it plays a significant role in the broader economy, it does not specifically provide secondary market support for these loan types.

B) Fannie Mae

Fannie Mae operates in the secondary mortgage market but primarily deals with conventional loans, not directly purchasing FHA and VA loans. Its focus is on ensuring liquidity for conforming loans, which distinguishes it from Ginnie Mae's specific mandate regarding government-insured loans.

C) Ginnie Mae

Ginnie Mae is indeed the correct answer because it directly purchases FHA and VA loans, providing essential secondary market support that helps maintain the flow of capital in the housing sector. Its role is specifically tailored to support these government-backed loans.

D) Farmer's Home Administration

The Farmer's Home Administration (now part of the Rural Development agency) focuses on providing loans and grants for rural housing and community development. It does not engage in the secondary market for FHA and VA loans, making it irrelevant to the question.

Conclusion

Ginnie Mae is the definitive correct answer as it directly supports the secondary market for FHA and VA loans, unlike the other options which do not have this specific function. The Federal Reserve and Fannie Mae, while significant in their roles, do not fulfill the particular mandate of purchasing these government-backed loans, and the Farmer's Home Administration operates in a different sector entirely.