Understanding Fannie Mae

What is the primary role of Fannie Mae in the housing market?

• To buy mortgages from lenders and ensure market liquidity

• To lend money directly to homebuyers

• To provide affordable housing options

• To regulate interest rates for all loans

When was Fannie Mae founded and for what purpose?

• In 1990, to offer low-interest loans

• In 2008, to bail out failing banks

• In 1938, to provide liquidity and stability in the housing market

• In 1968, to regulate the housing market

What significant event in 2008 affected Fannie Mae?

• It stopped buying mortgages

• It merged with Freddie Mac

• It was bailed out by the US Treasury

• It was privatized

How does Fannie Mae guarantee loans in the primary market?

• By lending money directly to borrowers

• By offering insurance for all home loans

• By buying loans from lenders and providing immediate cash

• By setting interest rates for all mortgages

What is a mortgage-backed security?

• A loan given directly to homebuyers

• A type of insurance for mortgages

• A bundle of mortgages sold as a security on the bond market

• A government bond issued to fund housing projects

Who typically purchases mortgage-backed securities?

• Institutions like insurance companies and pension funds

• Local governments

• Individual homebuyers

• Real estate agents

What is the minimum credit score typically required for a Fannie Mae-backed loan?

• 500

• 620

• 750

• 700

What is the maximum debt-to-income ratio allowed for most Fannie Mae loans?

• 50%

• 45%

• 40%

• 30%

What is the minimum down payment required for a one-unit primary residence under Fannie Mae guidelines?

• 1%

• 10%

• 20%

• 3%

Why does Fannie Mae require cash reserves from borrowers?

• To reduce the interest rate

• To ensure borrowers can cover mortgage payments in financial hardship

• To qualify for government subsidies

• To increase the loan amount