Over time Congress expanded Fannie Mae’s ability to participate in the mortgage market. In the beginning, FNMA was designed to maintain liquidity for government-backed loans from the Federal Housing Administration and the Veterans Administration. Many investors who hold stock in the two companies are eagerly waiting for them to emerge from government control so their stock can trade on public exchanges again.įannie Mae is formally known as the Federal National Mortgage Association (FNMA).
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This means they believe the government would bail out Fannie and Freddie if they couldn’t pay back their debts.Įven though Freddie Mac and Fannie Mae are technically shareholder-owned, they have been under government conservatorship since the Great Recession. Because of the large role they play in the economy and their governmental affiliation, some investors assume they are implicitly guaranteed by the federal government. While GSEs are publicly traded companies, they all serve a very public mission of supporting the nation’s financial system. There are several other GSEs, like the Farm Credit System. Fannie Mae and Freddie Mac Are Government Sponsored Enterprisesįannie and Freddie are private corporations that were chartered by Congress-the formal term for this kind of company is a Government Sponsored Enterprise (GSE). Fannie Mae was privatized in 1968, and Freddie Mac was created in 1970 as a competitor to dilute its monopolization of the market. Fannie Mae changed the way mortgage lending worked, making it possible for lenders to extend long-term mortgage loans with smaller down payments, and it greatly expanded the mortgage credit market.įannie Mae remained a government owned entity for the first three decades of its existence, with a near monopoly over the secondary mortgage market. The crisis had wreaked havoc on the housing market, and leaders wanted to increase funding for home buying and make homeownership more affordable and accessible. This keeps money flowing back into lending institutions so they have plenty of funding on hand to write more mortgages and help more people buy homes.įannie Mae was chartered by Congress in 1938 during the Great Depression. Instead, they buy mortgage loans from the banks and financial institutions that originate them. But they don’t lend money to individuals. How Fannie Mae and Freddie Mac Help You Get a Mortgageįannie Mae and Freddie Mac exist to support the U.S. Fannie Mae and Freddie Mac do this by purchasing mortgages from lenders, packaging them into securities, and selling the securities to investors.
If you want a home mortgage loan and you can afford it, usually you’ll have no trouble finding one.Ĭommonly referred to as Fannie and Freddie, these two companies were chartered by Congress to support the U.S home finance system.
The market for mortgages in the United States is highly liquid and very stable, thanks to Fannie Mae and Freddie Mac.
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