Finance
Which government-sponsored enterprise (GSE) purchases conventional conforming mortgage loans on the secondary market?
AFHA
BVA
CFannie Mae (FNMA)✓ Correct
DHUD
Explanation
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are GSEs that purchase conventional conforming loans from lenders, providing liquidity to the mortgage market.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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