If you are shopping for a mortgage loan you will run across the names Fannie Mae and Freddie Mac at some point. While these organizations are not mortgage lenders themselves, they directly influence the mortgage you get. Here are the basics of these organizations and how they impact your mortgage loan. Fannie Mae and Freddie Mac help keep the mortgage industry on track by ensuring that mortgage lenders have cash to lend when you apply for a mortgage. These organizations purchase mortgage debt and repackage this debt as securities that are sold to investors. The capital raised by selling this debt is used to purchase more mortgage loans resulting in a cycle of buying and selling mortgage debt to fuel the industry. So what does all this have to do with you, the prospective homeowner? By doing what they do, Fannie Mae and Freddie Mac ensure that the mortgage financing you need is available. Before these organizations existed it was much more difficult to qualify for a mortgage because banks simply did not have enough money to go around. Because of Fannie Mae and Freddie Mac interest rates are at the low levels they are today. What is Fannie Mae? Fannie may is the Federal National Mortgage association which was established by legislation in Congress. Founded in 1938, Fannie Mae had been regulated by the government until 1968. Fannie Mae is now a public company traded on the New York Stock Market. Today, Fannie Mae is the biggest supplier of money for home mortgages in the United States. Fannie Mae sponsors a number of programs to make mortgages more affordable. Many of the new mortgage loans on the market today were introduced by Fannie Mae; these programs include interest only loans, and bad credit home loans. What is Freddie Mac? Freddie Mac is the Federal Home Loan Mortgage Corporation, another financial institution that purchases mortgages from lenders. Freddie Mac is regulated by the Federal government and is also a publicly traded company. Freddie Mac is very similar to Fannie Mae; these two companies are in direct competition with each other. Freddie Mac sponsors similar programs to promote homeownership including no money down mortgages and other bad credit mortgage offerings. If you have every owned a home chances are Freddie Mac or Fannie Mae played some role in your financing. To learn more about mortgage loans and how to avoid common homeowner mistakes, register for a free mortgage guidebook using the links below. |
