Final answer:
Congress established the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to increase the availability of mortgages in the secondary market, creating liquidity and stability.
Step-by-step explanation:
The two institutions that Congress created to increase the availability of mortgages in a secondary market are the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).B. “Fannie Mae” and “Freddie Mac” are the two institutions created by Congress.The need for a stable mortgage market led Congress to establish two government-sponsored enterprises (GSEs): Fannie Mae and Freddie Mac. These institutions play a vital role in the secondary mortgage market by purchasing mortgages from original lenders, such as banks and mortgage companies.
This process ensures that the lenders have the capital to issue new loans, thereby enabling more people to buy or refinance homes. Fannie Mae was created in 1938 as part of the New Deal to stimulate the housing market during the Great Depression. Freddie Mac was established in 1970 to expand the secondary market for mortgages and compete with Fannie Mae. Both entities buy mortgages from lenders, then either hold these mortgages in their portfolios or package them into mortgage-backed securities that can be sold to investors. This significantly increases the liquidity in the market, providing lenders with the funds needed to grant more home loans.