Which of the following Government Sponsored Entities does NOT buy mortgage loans in the secondary market?

The correct answer highlights the unique function of Ginnie Mae compared to Fannie Mae and Freddie Mac. Ginnie Mae, or the Government National Mortgage Association (GNMA), does not buy or sell mortgage loans in the secondary market like its counterparts, Fannie Mae and Freddie Mac. Instead, Ginnie Mae is primarily involved in guaranteeing mortgage-backed securities that are issued by approved lenders, which are secured by federally insured or guaranteed loans, such as those backed by the FHA, VA, or USDA.

This guarantee enhances the attractiveness of these securities to investors in the secondary market, as they carry low risk due to the federal backing. In contrast, Fannie Mae and Freddie Mac both buy large volumes of mortgages and pool them together to create mortgage-backed securities that can be sold to investors. As a result, while all three organizations play roles in the mortgage finance system, Ginnie Mae’s function is distinct as it operates strictly as a guarantor, rather than as a purchaser of loans.