Which type of loans are Fannie Mae and Freddie Mac primarily involved with?

• A. Non-conforming loans
• B. Conventional loans
• C. Conforming loans
• D. Subprime loans

Answer: (C)

Fannie Mae and Freddie Mac are primarily involved with conforming loans. These are loans that meet specific criteria set by these government-sponsored enterprises (GSEs), including limits on the loan amount, borrower creditworthiness, and documentation requirements. By adhering to these standards, conforming loans can be easily packaged and sold as securities in the secondary mortgage market.

Conforming loans play a critical role in promoting access to mortgage credit and enhancing liquidity in the market. Since Fannie Mae and Freddie Mac were created to provide stability and affordability in the housing market, their focus on conforming loans helps ensure that more borrowers can obtain financing under consistent guidelines, ultimately allowing for a healthier housing market.