What is the purpose of Secondary Market Players such as Fannie Mae and Freddie Mac?

The purpose of Secondary Market Players such as Fannie Mae and Freddie Mac is to provide cash and liquidity to primary lenders. These entities operate in the secondary mortgage market, where they purchase loans from primary lenders, such as banks and credit unions, thereby allowing those lenders to free up capital. This process enables primary lenders to issue more loans to consumers, ultimately increasing the availability of mortgage credit.

By buying these loans, Fannie Mae and Freddie Mac facilitate the flow of money within the housing finance system and help stabilize the mortgage market. They play a crucial role in ensuring that lenders have the necessary liquidity to continue financing home purchases and refinancing existing loans. This function is essential for maintaining a robust housing market and keeping mortgage interest rates competitive for borrowers.

Options that involve directly lending to homeowners, regulating interest rates, or offering tax benefits to borrowers do not align with the actual roles and functions of these secondary market players, making them less relevant in this context.