What does GSE stand for in the context of mortgage lending?

• A. Global Securities Exchange
• B. Government-Sponsored Enterprises
• C. General School Corporation
• D. Government Sector Earnings

Answer: (B)

In mortgage lending, GSE stands for Government-Sponsored Enterprises. These entities are created by Congress to support the housing finance system by providing liquidity to lenders and promoting affordable homeownership. They aren’t government agencies, but privately held companies with a public mission: they buy mortgages from lenders and issue mortgage-backed securities, helping lenders free up capital to make more loans. Their guarantee on the mortgage-backed securities helps attract investors and stabilizes funding for the mortgage market. Examples include Fannie Mae and Freddie Mac. After the 2008 financial crisis, they were placed under government conservatorship to ensure stability due to their size and importance to the housing market. The other options don’t relate to mortgage lending—Global Securities Exchange, General School Corporation, and Government Sector Earnings refer to different concepts.