Products & Their RisksQuestion 128 of 398
Fannie Mae (FNMA) is best described as a:
a.Government-sponsored enterprise that buys mortgages and issues mortgage-backed securities
b.Federal agency wholly owned by the U.S. Treasury
c.Private hedge fund that trades Treasury bonds
d.Municipal issuer of tax-exempt housing bonds
Explanation
Fannie Mae is a publicly traded government-sponsored enterprise (GSE) that purchases mortgages from lenders and packages them into mortgage-backed securities. Its securities are not directly guaranteed by the U.S. government, so they typically yield slightly more than Treasuries or Ginnie Maes to compensate for the modestly higher perceived risk.
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- Which agency mortgage security is backed by the full faith and credit of the U.S. government?
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