Loan Officer Practice Exam

Conforming loans are specifically designed to meet the underwriting guidelines established by Fannie Mae and Freddie Mac. These two government-sponsored enterprises buy and securitize loans to facilitate the secondary mortgage market, ensuring that they adhere to standardized criteria that promote uniformity and manage risk. The guidelines encompass borrower creditworthiness, loan limits, and property standards, which help to make loans more accessible and affordable. Fannie Mae and Freddie Mac play pivotal roles in the mortgage industry by providing liquidity and stability. Their adherence to certain criteria allows lenders to confidently offer conforming loans, knowing that these loans can be sold on the secondary market without issue. This relationship is essential in maintaining a smooth flow of capital within the housing finance system. In contrast, the other options do not directly govern the conforming loan standards set forth by Fannie Mae and Freddie Mac.