Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 1

Which of the following is a type of government-sponsored loan?

1. Direct loan

2. Fannie Mae

3. Private equity loan

4. Hard money loan

The correct answer is: Fannie Mae

Fannie Mae, or the Federal National Mortgage Association, is a government-sponsored enterprise (GSE) that plays a crucial role in the U.S. housing finance system. It was established to enhance the flow of credit to the housing market and facilitate home ownership by purchasing mortgages from lenders. This process helps to increase liquidity in the mortgage market, making it easier for lenders to provide loans and thus increase housing availability. The uniqueness of Fannie Mae as a government-sponsored loan lies in its purpose of stabilizing the mortgage market and providing access to home financing for low- and moderate-income families. It essentially backs loans by guaranteeing them, which reduces the risk for lenders and can lead to more favorable borrowing conditions for consumers. In contrast, options such as a direct loan refer to loans made directly from government agencies to individuals or businesses, but they do not encompass the broader support provided by agencies like Fannie Mae. Private equity loans and hard money loans involve private investors and typically feature much higher risk and interest rates, lacking the government support and assurance that characterize government-sponsored loans. Thus, Fannie Mae stands out as a definitive example of a government-sponsored loan option due to its significant impact on the mortgage landscape and governmental backing.