What is the primary purpose of the Federal National Mortgage Association (Fannie Mae)?

The primary purpose of the Federal National Mortgage Association, commonly known as Fannie Mae, is to act as a secondary mortgage market facility. Fannie Mae was created to enhance the flow of mortgage funds by buying mortgages from banks and other lenders, which allows those institutions to free up capital and make new loans. This process helps to ensure that mortgage funds are available to potential homebuyers, thereby promoting homeownership and affordability.

By operating in the secondary market, Fannie Mae plays a crucial role in stabilizing the housing market and ensuring liquidity. It does this by purchasing mortgages, bundling them into mortgage-backed securities (MBS), and selling them to investors. This mechanism attracts more capital into the mortgage market, which ultimately supports lower interest rates and provides more access to home financing for consumers.

The other options describe functions related to aspects of finance or housing but do not accurately represent Fannie Mae's role. For example, while mortgage insurance is important for lenders to mitigate risk, Fannie Mae does not provide insurance itself. Additionally, managing deposit insurance is a function typically associated with other entities, such as the Federal Deposit Insurance Corporation (FDIC). Credit scoring, on the other hand, is a separate process related to evaluating a borrower’s creditworthiness, which