Definition of Fannie Mae and Freddie Mac
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, provides financial products and services that increase the availability and affordability of housing for low, moderate, and middle-income Americans. The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, works with mortgage lenders to help people get lower housing costs and better access to home financing. This is the purpose of Fannie Mae and Freddie Mac.
History and Origins
Both Freddie Mac and Fannie Mae are government-sponsored enterprises. Freddie Mac was chartered by Congress in 1970 to provide liquidity, stability and affordability to the nation's housing market. Fannie Mae was founded in 1938 during the Great Depression as part of the New Deal, a set of economic programs enacted by President Franklin D. Roosevelt. Both Fannie Mae and Freddie Mac are in place to offer assistance to homeowners and communities to improve the economic and strategic progress of the nation’s housing market.
Real Life Applications
Freddie Mac is one of the largest sources of financing for multifamily housing and doesn’t make loans directly to homebuyers. Their primary business is to purchase loans from lenders, pool them and sell them as mortgage-backed securities to investors. The sale of these loans allows Freddie Mac to replenish their supply of funds so that they can make more mortgage loans to other borrowers.
Fannie Mae works to establish and implement industry standards‚ develop better tools to price and manage credit risk‚ build new infrastructure to ensure a liquid and efficient market‚ and facilitate the collection and reporting of data for accurate financial reporting and improved risk management. Fannie Mae can help you rent, buy, sell, refinance, modify, or avoid foreclosure to help homeowners remain in their homes.
The Last Word
Both programs are there to help provide products and services to the housing industry. If you are looking to get started on your home buying/selling journey, learn more about all the resources available to you.