Fannie Mae and Freddie Mac sound like they could be the names of a sweet, elderly couple. Turns out, they’re actually nicknames based on abbreviations for government-sponsored enterprises (GSEs). They both play a big role in helping the housing market: they set guidelines (like down payment requirements) for certain loans that lenders provide to borrowers, and they also buy loans from lenders.
How They Help
It’s common in the mortgage industry for home loans to be sold to other financial institutions or GSEs, like Fannie Mae and Freddie Mac. This practice frees up funds for banks and mortgage companies to be able to lend to more homebuyers.
For example, let’s say you buy a house that’s financed through PrimeLending. If Fannie Mae or Freddie Mac buys your loan from us, with the money we receive, we’re able to turn around and lend to yet another homebuyer. This helps more Americans be able to become homeowners, and it also allows us to offer more flexible loan options and competitive rates.
Helping more Americans become homeowners is essentially why Fannie Mae and Freddie Mac were both started. Fannie Mae, or the Federal National Mortgage Association, was created by Congress in 1938 as part of the New Deal. During the Great Depression, many homeowners were defaulting on their mortgages, so banks were broke and very limited in how much they could afford to lend to borrowers. But when Fannie Mae was created and started buying mortgages from the banks, it opened the door for more and more Americans to buy homes.
In 1968, Fannie Mae was privatized to help reduce the national budget. Freddie Mac was created by Congress in 1970 to create competition and prevent Fannie Mae from becoming a monopoly.
Whether you’re looking to buy a house, renovate or refinance your current mortgage, PrimeLending offers a wide variety of options. Contact us today to find the home loan that’s best for you.