Maybe you\u2019ve heard the names Fannie Mae and Freddie Mac tossed around in conversations about homebuying and wondered what they mean or who these famous figures are?! Surprise surprise, they\u2019re actually not people, but government-sponsored entities (gses) that play a massive role in the U.S. housing market. Understanding what they do can give you a big advantage as you navigate mortgages.<\/p>\n\n\n\n
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Fannie Mae (fnma):<\/strong> Short for the Federal National Mortgage Association<\/a>, Fannie Mae was established in 1938 as part of the new deal to support the housing market during the great depression. Think of it as a middleman in the mortgage process, ensuring lenders have funds to provide loans.<\/p>\n\n\n\n <\/p>\n\n\n\n Freddie Mac (fhlmc):<\/strong> The Federal Home Loan Mortgage Corporation<\/a>, or Freddie Mac, was created in 1970 to complement Fannie Mae and add competition. both aim to make homeownership more accessible and keep the housing market balanced.<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Buying mortgages:<\/strong> Fannie Mae and Freddie Mac purchase home loans from banks and credit unions. This provides lenders with cash to issue more loans.<\/p>\n\n\n\n Securitization:<\/strong> They bundle these mortgages into mortgage-backed securities (mbs) and sell them to investors. Each mbs represents a share of a larger pool of home loans, making them low-risk investments<\/a>.<\/p>\n\n\n\n Guaranteeing payments:<\/strong> They ensure investors get paid on time, even if homeowners default. This guarantee lowers interest rates for borrowers.<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\nHow do they actually work?<\/h3>\n\n\n\n
Why should homebuyers care?<\/h3>\n\n\n\n
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