Which agency is known for purchasing government-related loans?

The agency known for purchasing government-related loans is Ginnie Mae. This entity plays a vital role in the housing finance system by backing and guaranteeing mortgage securities that are made up primarily of loans insured or guaranteed by government agencies, such as the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA). This support helps to ensure that lenders are willing to provide mortgages to borrowers with government-backed loans, thereby promoting access to homeownership.

Ginnie Mae does not buy or sell loans directly; instead, it issues mortgage-backed securities, which are then bought by investors. The appeal of these securities comes from Ginnie Mae’s guarantee that investors will receive timely principal and interest payments, thanks to the backing of federal agencies. This significantly enhances liquidity in the mortgage market, making it easier for banks and lenders to originate more loans.

Other agencies mentioned in the choices, such as Fannie Mae and Freddie Mac, deal with conventional loans rather than those specifically insured by government programs, thus differentiating their roles in the market. The Fed, while influential in monetary policy and interest rate management, does not specifically engage in purchasing government-related loans.