What is the primary function of GMNA in the mortgage market?

The primary function of GMNA (Government Mortgage National Association) in the mortgage market is centered around the buying and selling of mortgage-backed securities (MBS). By purchasing mortgages from lenders, GMNA pools these loans together and then issues MBS to investors. This process increases liquidity in the mortgage market, enabling lenders to free up capital, which can then be used to originate more loans.

This activity plays a crucial role in supporting the housing finance system, as it allows various investors—such as pension funds, insurance companies, and other institutional investors—to invest in the mortgage market with a level of security and diversification that comes from the pooling of individual mortgage loans. Therefore, the sale of mortgage-backed securities is not just a key function; it is a fundamental mechanism that underpins the operation of the mortgage market and facilitates home ownership by making more capital available for home loans.

In contrast, the other options relate to functions not directly performed by GMNA. Providing loans directly to consumers is typically the role of banks and mortgage lenders. Managing cash reserves is more aligned with the responsibilities of financial institutions rather than GMNA's focus on securities. Insuring mortgages against default is a function associated with mortgage insurance companies. Hence, the choice highlighting GMNA's involvement