What Are Fannie Mae and Freddie Mac?

You’ve heard of Fannie Mae and Freddie Mac – but do you know what they are?

It’s okay if you don’t. Actually, most people don’t – so we’ll explain it here.

Fannie Mae and Freddie Mac are government-sponsored enterprises that help people get mortgages.

Fannie Mae

Fannie Mae actually stands for the Federal National Mortgage Association, or FNMA.

Freddie Mac

Freddie Mac stands for the Federal Home Loan Mortgage Corporation, or FHLMC.

Together, Fannie Mae and Freddie Mac help people get mortgage loans. Neither actually makes loans, but they purchase other lenders’ loans on the secondary market. They package the loans into mortgage-backed securities and sell them to investors, such as hedge funds.

When these two companies buy banks’ loans, they flood the companies with cash. Then, the banks can turn that money around and let more buyers borrow money.

That helps buyers who might not otherwise qualify get home loans.

Fannie Mae and Freddie Mac own or guarantee nearly half of all the residential mortgages in the United States.

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