Freddie Mac, Fannie Mae, and Ginnie Mae
Freddie mac or Federal Home Loan Mortgage Corporation (FHLM) is a federally -chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors. Freddie Mac thus provides lenders with funds for new homebuyers.
Ginnie Mae or Government National Mortgage Association (GNMA) is a government-owned corporation overseen by the U.S. Department of Housing and Urban Development. Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment.
Fannie Mae or Federal National Mortgage Association (FNMA) is a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors. Fannie Mae by purchasing mortgages, supplies funds that lenders may loan to potential homebuyers. Fannie Mae loans are conventional loans made at the risk of the lender without benefit of any government guarantee or government insurance.
Even though Freddie Mac and Fannie Mae have the same charters, Congressional mandates and regulatory structure. Freddie Mac and Fannie Mae, have different business strategies. . Freddie Mac was chartered by Congress in 1970. Fannie May was chartered in 1968. Both help to create a continuous flow of funds to mortgage lenders in support of home ownership and rental housing. With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.
Fannie Mae and Freddie Mac are the largest source of housing finance in the United States. Even though Fannie Mae and Freddie Mac are Congressionally chartered, they are also private, shareholder-owned corporations that have been regulated by HUD.
Their Congressional charters require each corporation to achieve public purposes that include providing stability and liquidity in the secondary mortgage market, providing secondary market assistance relating to mortgages for low- and moderate-income families, and promoting access to mortgage credit throughout the Nation, including underserved areas.
Both GSEs fund residential mortgages by purchasing loans directly from lenders, such as mortgage bankers and depository institutions, and holding these loans in portfolio or by issuing mortgage-backed securities (MBS) that are sold to a wide variety of investors in the capital markets.
The Secretary of HUD is the mission regulator for Fannie Mae and Freddie Mac, with oversight authority to ensure that both GSEs comply with the public purposes set forth in their Charters. An independent office of HUD, the Office of Federal Housing Enterprise Oversight (OFHEO), regulates both GSEs for safety and soundness by ensuring that they are adequately capitalized and operating their businesses in a financially sound manner .
Competition between the two ensures that the ultimate beneficiary is the consumer in the form of lower housing costs. Freddie Mac was chartered by Congress in 1970. Fannie May was chartered in 1968. Both help to create a continuous flow of funds to mortgage lenders in support of home ownership and rental housing.
The primary market lenders optionally sell these mortgages into what's called the secondary market -- the place where mortgages are bought and sold by different investors. Secondary market investors include various pension funds, insurance .companies, securities dealers, and other financial institutions including Fannie May and Freddie Mac. When lenders sell their mortgages to these groups, they replenish their funds so they can turn around and lend more money to home buyers. By doing so, they ultimately provide homeowners and renters with lower housing costs and better access to home financing.
The standard industry measure of mortgage rate is Freddie mac contract rate for30-year conventional mortgages . Freddie Mac contract rate had never dipped below 6.5 percent except briefly in june 2003 to 5.23 percent.
