What is a key benefit of GSEs like Fannie Mae and Freddie Mac in the economy?

A key benefit of Government-Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac is their role in enhancing homeownership accessibility. These organizations were created to facilitate and increase the availability of mortgage credit for households. By purchasing mortgages from lenders, they provide liquidity to the mortgage market, which in turn enables those lenders to offer more loans, often at lower interest rates due to the perceived reduction of risk associated with GSE backing.

This support makes it easier for individuals and families, particularly those who might not meet conventional lending criteria, to qualify for home loans. The end result is broader access to homeownership, supporting the broader economic goal of making housing affordable and attainable for more people.

Other options, such as increasing competition among banks or reducing taxes for homeowners, do not directly capture the main function of GSEs. Although GSEs might influence competition indirectly, their primary purpose is not to drive competition among lenders. Similarly, while GSEs can impact interest rates, their primary mandate aligns more closely with enhancing accessibility to home financing rather than directly lowering taxes or interest rates.