Question

The initial solution to the challenges in the development of a secondary mortgage market was to?

1) pass regulation to standardize mortgages
2) provide guarantees on mortgages through the Government National Mortgage Association (Ginnie Mae)
3) create the Federal National Mortgage Association (Fannie Mae) to buy FHA mortgages
4) encourage smaller investors to buy into mortgage pools

Answer 1

The initial solution to the challenges in the development of a secondary mortgage market was to 3) create the Federal National Mortgage Association (Fannie Mae) to buy FHA mortgages.

Step-by-step explanation:

The initial solution to the challenges in the development of a secondary mortgage market was to create the Federal National Mortgage Association (Fannie Mae) to buy FHA mortgages. Fannie Mae was established in 1938 as a government-sponsored enterprise with the goal of providing liquidity to the mortgage market.

By purchasing FHA mortgages, Fannie Mae provided a stable source of funding for lenders, which encouraged them to make more mortgages. This helped to stimulate the availability of affordable home loans and promote homeownership in the United States.

Fannie Mae's role in the secondary mortgage market has evolved over time, but its initial creation was a significant step in addressing the challenges of the mortgage market and promoting economic stability.