What are “Freddie Mac” and “Fannie Mae”?
Mortgages made by lenders and banks are generally sold on the secondary market to produce cash so the lenders can make more mortgages. The largest purchasers on the secondary market are the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). These two organizations, called government-sponsored enterprises, or GSEs, were originally created by the government to make mortgages available to more people with low and moderate incomes, although both organizations are now privately run. Freddie Mac and Fannie Mae have specific requirements for the loans they will purchase from banks and lenders, including a loan limit for single-family homes in the United States. Loans within this limit are the “conventional” or “conforming” loans you may hear about in the news.
Freddie Mac is short for the Federal Home Loan Mortgage Corporation (FHLMC). This federal agency purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and the Federal Loan Bank System. Fannie Mae is short for the Federal National Mortgage Association (FNMA). This is a private corporation that deals in the purchase of first mortgages at discounts.
