The impact of financial intermediation by third parties such as Fannie Mae on the cost and availability of mortgages is that it provides lenders such as Bank of America an accessible and reliable source of capital. B of A issues mortgage loans and then is able to resell them to Fannie Mae for new capital to make new loans. By contributing to the creation of a secondary market Fannie Mae is able to provide a reliable source of fresh capital to the loan originators and the secondary market provides more opportunities for low income and middle class families to purchase residential mortgages. It also provides more options. The inventory and availability of mortgages held by Fannie may vast since they would be able to secure funding from the Treasury at a fraction of the purchase price paid by private financial organizations because of their government sponsored enterprise (GSE) status.…show more content… In respect to balance I feel Fannie Mae provides a valuable service as a third party financial intermediary; which is good for society. The secondary market they create makes it possible for lower income and middle class families to purchase residential mortgages by way of 30 year mortgages; whereas they this may not have been previously
