Final answer:
The Federal National Mortgage Association (Fannie Mae) purchases mortgages and bundles them into mortgage backed securities. The Federal Reserve also bought securities from Fannie Mae and Freddie Mac during QE to stabilize the financial system but does not bundle mortgages itself. Option d
Step-by-step explanation:
The entity that purchases mortgages which meet certain qualifications and bundles them into mortgage backed securities is the Federal National Mortgage Association, commonly known as Fannie Mae.
This government-sponsored enterprise (GSE) operates in the U.S. secondary mortgage market by purchasing mortgages from lenders, thus providing them with liquidity to issue more home loans. Fannie Mae then pools these loans and issues mortgage-backed securities, which offer investors interest income that comes from the mortgage payments.
During quantitative easing (QE), the Federal Reserve System purchased mortgage-backed securities from government enterprises Fannie Mae and Freddie Mac, especially during the first round of QE that started in November 2008.
However, the Federal Reserve's role in this context was more about stabilizing the financial system by acquiring these securities rather than directly engaging in the creation of mortgage-backed securities from individual mortgages. Option d