Finance
In South Dakota, which entity purchases conforming mortgages in the secondary market to provide liquidity to lenders?
ASouth Dakota Housing Development Authority (SDHDA) only
BFannie Mae and Freddie Mac (government-sponsored enterprises)✓ Correct
CFederal Deposit Insurance Corporation (FDIC)
DThe Federal Reserve
Explanation
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) purchase conforming mortgages from lenders, providing liquidity that enables lenders to make more loans.
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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.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
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