What is the primary purpose of Government-Sponsored Enterprises (GSE) in residential financing?

The primary purpose of Government-Sponsored Enterprises (GSE) in residential financing is to enhance the liquidity, stability, and affordability of the mortgage market. GSEs, such as Fannie Mae and Freddie Mac, play a crucial role in the financial system by operating in the secondary mortgage market, where they buy loans from lenders. This process allows lenders to replenish their funds more quickly, encouraging them to continue providing loans to homebuyers.

By improving liquidity, GSEs ensure that there is a steady supply of mortgage money available, which contributes to market stability. Additionally, they often support initiatives aimed at making homeownership more affordable for a wider range of consumers by promoting lower interest rates and facilitating access to mortgage credit. Their involvement ultimately leads to a more robust and efficient mortgage market, benefiting both lenders and borrowers.