________ guaranty allows mortgage lenders to obtain a better price for their mortgage loans available.

________ guaranty allows mortgage lenders to obtain a better price for their mortgage loans available.

• A. FHA guaranty
• B. GNMA guaranty
• C. FHLMC guaranty
• D. VA guaranty

Answer: (B)

The main idea is that a government-backed guarantee on mortgage-backed securities improves liquidity and lowers risk in the secondary market, helping lenders get a better price for the loans they sell. Ginnie Mae (GNMA) guarantees the timely payments on mortgage-backed securities that are backed by federally insured or guaranteed loans (such as FHA and VA loans). Because this guarantee comes from the government, investors see these securities as very safe, which broadens demand and drives up the price lenders can fetch for the loan pools. That enhanced market demand translates into better pricing for the loans when they’re sold. By contrast, loan-level guarantees (like those from FHA or VA on individual loans) protect the borrower or the loan itself rather than the pool of loans, and while agency guarantees from Freddie Mac or Fannie Mae exist, GNMA’s direct government-backed security guarantee is the mechanism most associated with achieving that better price for pools of loans.

The main idea is that a government-backed guarantee on mortgage-backed securities improves liquidity and lowers risk in the secondary market, helping lenders get a better price for the loans they sell.

Ginnie Mae (GNMA) guarantees the timely payments on mortgage-backed securities that are backed by federally insured or guaranteed loans (such as FHA and VA loans). Because this guarantee comes from the government, investors see these securities as very safe, which broadens demand and drives up the price lenders can fetch for the loan pools. That enhanced market demand translates into better pricing for the loans when they’re sold.

By contrast, loan-level guarantees (like those from FHA or VA on individual loans) protect the borrower or the loan itself rather than the pool of loans, and while agency guarantees from Freddie Mac or Fannie Mae exist, GNMA’s direct government-backed security guarantee is the mechanism most associated with achieving that better price for pools of loans.