Which of the following is a key GSE involved in mortgage lending?

The correct answer identifies Fannie Mae and Freddie Mac as key Government-Sponsored Enterprises (GSEs) involved in mortgage lending. These entities play a critical role in the secondary mortgage market by purchasing loans from lenders, thereby providing liquidity and stability to the housing finance system. By buying these loans, Fannie Mae and Freddie Mac allow lenders to free up capital, which they can then use to make new loans to borrowers. This function is essential for maintaining a consistent flow of funds for home mortgages and ultimately helps to make housing more affordable.

In contrast, while Bank of America and Chase are significant players in the mortgage lending industry, they are private financial institutions rather than GSEs. The U.S. Treasury, while it oversees the financial system and may have roles that impact mortgage lending, is not a mortgage lender and does not directly participate like Fannie Mae or Freddie Mac. Lastly, the FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) provide insurance and guarantees for loans, which support certain loans but do not operate as secondary market entities like Fannie Mae and Freddie Mac. Thus, the focus on GSEs in this context makes Fannie Mae and Freddie Mac the correct and relevant choice.