Freddie came in 1970 to expand the nation's secondary mortgage market, where lenders and investors buy and sell mortgages and their servicing rights. Fannie was created in 1938 during the Great Depression to provide access to loan funds on reasonable terms after defaults had drained funding for new mortgages.
FANNIE MAE AND FREDDIE MAC INTEREST RATES TODAY MAC
Fannie Mae and Freddie Mac were established by the U.S. Fannie and Freddie also have their own loan programs with distinct requirements. Though the two use similar underwriting programs, says Sonja Bullard, branch manager of Acopia Home Loans in Forsyth County, Georgia, Freddie's "automated underwriting tends to have more lenient findings than Fannie's."
You could meet the criteria for one but not the other, or one could be better for you than the other. Fannie- and Freddie-backed loans have different borrower requirements. Fannie Mae buys mortgages from larger commercial banks, and Freddie Mac purchases them from smaller banks. A loan that meets Fannie's or Freddie's requirements "indicates a certain quality of borrower and underwriting standards" that investors can expect, much like the standards of quality consumers might expect from a Hershey's bar.įannie Mae vs. "That brown-and-white wrapper around a chocolate bar symbolizes a certain type of chocolate, flavor and quality, no matter where you find them in the world," Gilpin says.
Brian Gilpin, senior vice president of capital markets at Embrace Home Loans, compares the Fannie Mae and Freddie Mac guarantee to a Hershey's wrapper on a chocolate bar. They accomplish this by purchasing home loans from banks, bundling those loans and then selling them to investors, which enables banks to finance more mortgages.Ī loan that meets the requirements to be purchased by Fannie Mae or Freddie Mac may also be called a c onforming loan.įannie and Freddie set the standards for the home loans they are willing to buy and guarantee payment of principal and interest to make the loans attractive to investors. These federally chartered, privately owned corporations are regulated by the Federal Housing Finance Agency and aim to provide liquidity, stability and affordability to the market in all economic conditions. The names Fannie Mae and Freddie Mac are simply creative takes on the acronyms for these companies, FNMA for the Federal National Mortgage Association and FHLM for the Federal Home Loan Mortgage Corp., respectively.
Fannie Mae and Freddie Mac are government-sponsored enterprises, organizations that help bring capital to the U.S.
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