Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that work to provide affordable mortgages.
Fannie Mae and Freddie Mac operate in the U.S. secondary mortgage market. Instead of lending directly to borrowers, both GSEs buy home loans from approved lenders. They then package loans together into mortgage backed securities to sell to investors, which moves the credit risk on these loans to private investors. Because lenders have the money for principal and interest upfront, they are freed up to offer more loans to qualified borrowers. This also helps to keep interest rates stable, thereby allowing middle and lower income earners an opportunity to buy a home.
In order to get a loan backed by Fannie Mae and Freddie Mac, borrowers must conform to certain conditions, such as a loan limit, eligibility requirements, and mortgage insurance. These are also called conforming loans.
Fannie Mae
The Federal National Mortgage Association (FNMA), more commonly known as Fannie Mae, was founded in 1938 in response to the Great Depression. Fannie Mae’s mission is to “provide access to reliable, affordable mortgage financing in all markets at all times.”
Freddie Mac
Freddie Mac, or the Federal Home Loan Mortgage Corporation (FHLMC), was founded by Congress in 1970. Freddie Mac’s mission is to “to provide liquidity, stability, and affordability to the U.S. housing market in all economic conditions extends to all communities from coast to coast.”
Whether you secure a loan backed by Fannie Mae, Freddie Mac, or a private lender, New England Home Mortgage will walk you through the entire process.
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