Which institution provides loans insured by federal agencies, allowing them to sell the mortgages they issue?

The correct answer is Ginnie Mae, which stands for the Government National Mortgage Association. This institution plays a vital role in the mortgage market by providing guarantees for loans that are insured or guaranteed by federal agencies, such as the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA). By insuring these loans, Ginnie Mae enables lenders to sell the mortgages they issue in the secondary market, which increases liquidity and helps expand access to mortgage credit for borrowers.

Fannie Mae and Freddie Mac, while also significant players in the secondary mortgage market, do not focus exclusively on federal loan guarantees. Instead, they primarily deal with loans that conform to specific guidelines and are not directly tied to federal agency insurance. HUD, which stands for the Department of Housing and Urban Development, is a government agency that oversees various housing programs, but it does not directly provide loan guarantees or operate in the same capacity as Ginnie Mae in the mortgage market.