Which organization is known for establishing a market for selling government-insured mortgages?

• A. Fannie Mae
• B. Ginnie Mae
• C. Freddie Mac
• D. Maggie Mae

Answer: (A)

The main idea here is the creation of a secondary market that increases liquidity for lenders by buying and securitizing home loans, especially those insured by government programs. Fannie Mae was established to develop this market for mortgages backed by government insurance (like FHA loans). By purchasing these government-insured loans from lenders and pooling them into securities, Fannie Mae provides a steady source of capital for lenders to fund more loans, which helps lower borrowing barriers and stabilizes the mortgage market.

Ginnie Mae operates differently: it guarantees securities that are backed by government-insured loans but does not itself buy mortgages or securitize them, so it doesn’t establish the market in the same way. Freddie Mac also supports the secondary market, focusing on a broader mix of conventional mortgages rather than being tied exclusively to government-insured loans. Maggie Mae isn’t a real organization.