Which two government-sponsored enterprises are the largest participants in the secondary market for purchasing mortgages?

The answer correctly identifies Freddie Mac and Fannie Mae as the largest participants in the secondary market for purchasing mortgages. Both of these government-sponsored enterprises play a vital role in providing liquidity and stability to the mortgage market by purchasing loans from lenders. This function allows lenders to free up their capital to make further loans, thus facilitating home ownership and increasing the availability of mortgage credit.

Freddie Mac and Fannie Mae engage in activities that help reduce the borrowing costs for homeowners. They purchase mortgages and either hold them in their portfolios or package them into mortgage-backed securities (MBS) that are sold to investors. By doing this, they also add a layer of security and standardization to the mortgage process, benefiting both borrowers and investors.

The other options include entities that do not play a similar role in the secondary mortgage market. Ginnie Mae, while impactful, primarily focuses on ensuring that mortgage-backed securities are backed by government-insured loans and does not purchase mortgages in the same way as Freddie Mac and Fannie Mae. FHA and VA are programs providing direct mortgage insurance and guarantees rather than operating within the secondary market for mortgage purchases. Finally, firms like Goldman Sachs and countries like China do not operate as government-sponsored enterprises in the mortgage market and are not primarily involved in