64. Which of these institutions buys mortgages from lenders on the secondary mortgage market?
Answer: C
Federal National Mortgage Association (Fannie Mae) buys mortgages from lenders on the secondary mortgage market.
Fannie Mae is a government-sponsored enterprise that plays a crucial role in the secondary mortgage market by purchasing mortgages from lenders, thereby providing them with liquidity to continue issuing new loans.
A) The Federal Reserve
The Federal Reserve does not primarily buy mortgages from lenders on the secondary mortgage market. Instead, it conducts monetary policy and may engage in buying various securities, including mortgage-backed securities, to influence interest rates, but this is not its main function.
B) Federal Housing Administration (FHA)
The FHA is not involved in buying mortgages on the secondary market. It primarily provides mortgage insurance to lenders to encourage them to lend to borrowers who may not qualify for conventional loans, thus facilitating home ownership rather than purchasing mortgages.
C) Federal National Mortgage Association (Fannie Mae)
Fannie Mae is indeed the correct answer as it actively buys mortgages from lenders on the secondary mortgage market. By doing so, it helps to ensure that lenders have the capital necessary to offer more mortgages, thus supporting the housing market.
D) Department of Housing and Urban Development (HUD)
HUD does not buy mortgages from lenders in the secondary market. Its main role involves overseeing federal housing programs, including those related to home ownership and rental assistance, rather than directly participating in mortgage transactions.
Conclusion
Fannie Mae's role in purchasing mortgages from lenders on the secondary mortgage market is essential for maintaining liquidity in the housing finance system. Other options, such as the Federal Reserve, FHA, and HUD, serve different functions that do not include the purchasing of mortgages in this specific context, making Fannie Mae the definitive choice.