The Government Sponsored Enterprises (GSEs) play a key role in the U.S. mortgage finance system. The public mission of the GSEs is to support homeownership. In practice, this is partly achieved by the GSEs purchasing residential mortgages that are originated by banks and other financial institutions. However, the GSEs require that these mortgages must meet certain risk standards such as: "we will not purchase any mortgage with a credit score below 620."

a. Briefly explain how the GSEs influence mortgage credit supply. b. Let's assume that are a U.S.-based borrower and that you have a credit score of 621. In terms of risk, what does the credit score represent in general? C. Given your credit score of 621, it seems much more likely that your local banker will be able to originate-and-sell your mortgage to a GSE. How might this ability-to-sell affect the incentives of your local banker to evaluate potential borrowers such as yourself? Explain. d.Given your new credit score of 619, does your local banker have different incentives when it comes to evaluating your loan application? Explain.