Which government entity supports the mortgage market by guaranteeing mortgage-backed securities?

The Government National Mortgage Association, commonly known as Ginnie Mae, plays a crucial role in supporting the mortgage market by guaranteeing mortgage-backed securities. By doing so, Ginnie Mae helps to ensure that investors can confidently purchase these securities, which, in turn, provides lenders with the liquidity needed to offer more loans to homebuyers.

This guarantee is significant because it reduces the risk for investors, encouraging them to invest in mortgage-backed securities that are backed by government-insured loans. As a result, Ginnie Mae's activities help stabilize the mortgage market and promote affordability in housing.

Other entities listed are involved in the housing finance system but have different roles. The Federal Housing Administration (FHA) provides mortgage insurance that protects lenders against losses when borrowers default. Fannie Mae, the Federal National Mortgage Association, also supports the mortgage market but focuses on buying mortgages and providing liquidity. The Department of Housing and Urban Development (HUD) oversees national policies, mainly related to housing, but does not guarantee securities. Therefore, Ginnie Mae is correctly identified as the government entity that guarantees mortgage-backed securities.