What is the primary function of Fannie Mae and Freddie Mac?

The primary function of Fannie Mae and Freddie Mac is to provide liquidity and stability to the mortgage market. This is achieved by purchasing mortgages on the secondary market from lenders, which helps to free up capital for those lenders so they can issue more loans to consumers. By doing so, Fannie Mae and Freddie Mac play a vital role in ensuring that there is a steady flow of mortgage money available to homebuyers, regardless of fluctuations in the economy.

This liquidity also contributes to the overall stability of the housing market, allowing for more consistent lending practices and helping to keep mortgage rates favorable for borrowers. By underwriting and guaranteeing loans, these government-sponsored enterprises create confidence in the mortgage market, which is essential for both lenders and borrowers.

The other options provided do not accurately capture the primary role of Fannie Mae and Freddie Mac. While some may think it involves insurance for mortgage lenders or managing housing programs, these aspects are not their primary functions. Their focus is squarely on enhancing the liquidity and stability of the mortgage market, which directly impacts homeownership accessibility and market health.