Which federal agency is known for purchasing conforming loans?

• A. The Federal Reserve
• B. Fannie Mae
• C. The Department of Housing and Urban Development
• D. Freddie Mac

Answer: (B)

The correct answer is Fannie Mae, which is well-known for purchasing conforming loans. Conforming loans are those that meet certain guidelines set by Fannie Mae and Freddie Mac, including limits on the loan amount and borrower credit requirements. By purchasing these loans from lenders, Fannie Mae provides liquidity and stability to the mortgage market, allowing lenders to continue offering mortgages to borrowers.

This agency was created to expand the secondary mortgage market, ensuring that there is always capital available for mortgage lending. By purchasing loans, Fannie Mae guarantees them and allows lenders to free up their balance sheets, creating more capital for additional loans.

Fannie Mae plays a critical role in supporting homeownership and affordable housing, which aligns with its mission to promote access to housing finance. This is essential for maintaining a stable housing market, especially in times of economic fluctuation.