California Real Estate Practice Exam

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

1. Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market

2. Finance the construction of low-cost residential housing

3. Lend money in the residential marketplace at lower than normal interest rates for lower-income families

4. Provide large sums of money for the building industry

The correct answer is: Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market

The primary purpose of the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is to expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market. By purchasing these loans from lenders, Fannie Mae provides liquidity to the mortgage market, allowing lenders to have more capital available to make additional loans. This process helps to lower the cost of borrowing and increase access to homeownership for a broader segment of the population. In the context of the other options, while FNMA is involved in activities that support affordable housing and the overall stability of the housing market, its core function is primarily centered around buying mortgage loans. It does not primarily finance construction projects, lend directly to families, or provide significant sums of money specifically for the building industry. Instead, its activities in the secondary market facilitate a more robust and accessible mortgage environment, which ultimately helps to support home-buying efforts across various income levels.