A conforming loan is defined as meeting guidelines established by which entities?

• A. FHA and VA
• B. HUD and USDA
• C. Fannie Mae and Freddie Mac
• D. FDIC and OCC

Answer: (C)

Conforming loans are conventional mortgages that follow the underwriting and eligibility guidelines set by Fannie Mae and Freddie Mac. These two government-sponsored enterprises buy loans that meet their standards, which gives lenders liquidity and standardized pricing in the secondary market. That’s why a loan that fits their guidelines is called conforming. The other programs—FHA/VA, handled through HUD and the VA or USDA—have their own distinct guidelines and guarantees, not the Fannie Mae/Freddie Mac framework. Bank regulators like the FDIC and OCC oversee banks, not the conforming loan standards themselves. When a loan stays within the conforming size limit and meets Fannie Mae/Freddie Mac requirements, it can be sold to or guaranteed by them; if it doesn’t, it’s typically non-conforming (often referred to as jumbo if the loan is large).