Fannie Mae and Freddie Mac's dominance of the secondary mortgage market during 1995-2008 encouraged mortgage originators to
A) extend only 30-year, fixed-rate mortgages.
B) require higher down payments in order to obtain a home mortgage.
C) loosen lending standards as long as the mortgages were acceptable to Fannie Mae and Freddie Mac.
D) scrutinize the credit-worthiness of borrowers more carefully.

Question

Quizplus · Accepted Answer

Fannie Mae and Freddie Mac's dominance in the secondary mortgage market provided a guarantee for mortgage originators that loans meeting their standards would be purchased. This encouraged originators to loosen lending standards to increase the volume of loans that could be sold to these entities.

Fannie Mae and Freddie Mac's Dominance of the Secondary Mortgage