What is the primary activity of Fannie Mae?

• A. Issue mortgage insurance
• B. Buy and pool blocks of conventional mortgages and sell bonds that use them as security
• C. Issue government-backed loans directly
• D. Regulate financial institutions

Answer: (D)

Fannie Mae operates in the secondary mortgage market, providing liquidity to lenders by buying blocks of conventional mortgages, pooling them, and using those pools to issue mortgage-backed securities that are sold to investors. This securitization process frees up capital for lenders so they can issue more loans, helping to keep mortgage markets functioning smoothly. It does not issue mortgage insurance itself, nor does it originate loans directly, and it does not regulate financial institutions. Those roles belong to mortgage insurers, government loan programs, and regulatory bodies respectively. So the primary activity is buying and pooling conventional mortgages and selling securities backed by those pools.