What are Fannie Mae and Freddie Mac? Why the cute names?
Fannie Mae is the nickname of the Federal National Mortgage Association, while Freddie Mac is the Federal Home Loan Mortgage Corp. Fannie Mae is the older of the two. It was created as a government agency in 1938 under U.S. president Franklin Roosevelt’s New Deal. The idea was to give local banks federal money to finance home mortgages, since private lenders were leery of lending money. The government wanted to help more people buy homes, and encourage the building of affordable housing. In 1968 it became a private company. Freddie Mac was set up in 1970 to expand the secondary mortgage market, and ensure there was competition with Fannie Mae’s monopoly. Both companies buy loans from banks or mortgage firms, and re-sell these as mortgage-backed securities. Together they own or guarantee about half of U.S. mortgages. The two were put under “conservatorship” by the U.S. Federal Housing Finance Agency on Sept. 7 – essentially a takeover by the government.
