The Federal National Mortgage Association is officially known as Fannie Mae and is a United States Government-sponsored corporation insured by the Federal Housing Administration (FHA). Fannie Mae was created prior to Freddie Mac and is a competitor to the similar corporation. Fannie Mae’s role in the mortgage lending process is to buy mortgages from lenders and sell them to investors on the open market. This process is essential in replenishing the supply of lend-able money available for new home purchases.
The Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, is a government sponsored enterprise of the United States federal government. Freddie Mac was created in 1970 to expand the secondary market for mortgages in the US. Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases.
Now that you are introduced …
Now that you know more about these corporations, you understand that Fannie and Freddie do not issue mortgages but buy them from banks. Then, they guarantee the securities and bundle them for resale on the secondary mortgage market.
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