Who are Fannie Mae & Freddie Mac? Lender Lessons

Fannie Mae or Freddie Mac are two of the most popular names in the home buying market. But what are they? These entities are government-created and were both created with the main purpose of supporting the housing market.

Fannie Mae is the Federal National Mortgage Association. Freddie Mac stands for Federal Home Loan Mortgage Corporation. Both have the same goal of helping people achieve their American Dream of homeownership.

Through the Federal Home Loan Bank Act, President Franklin D. Roosevelt founded Fannie Mae in 1938.It works by buying loans from banks, repackaging them as mortgage-backed securities, and selling them to investors to protect their money.

Freddie Mac, on the other hand, was established by Congress in 1970 and is a GSE (Government-Sponsored Enterprise) that also buys mortgages. However, unlike Fannie Mae, Freddie Mac is able to purchase any type or mortgage. Fannie Mae retains all of its mortgages. Freddie Mac focuses on purchasing 30-year mortgages from banks, and then selling them to secondary markets.

This is it - Fannie Mae, Freddie Mac and other organizations help support the housing market and make homeownership more affordable. Let me clarify the differences.

Fannie & Freddie: The Difference

Fannie Mae & Freddie Mac might look similar at first glance but there are key differences. One of their most striking differences is how they source their mortgages. Fannie Mae buys its mortgages mostly from large commercial banks while Freddie Mac purchases its mortgages from smaller banks. Both organizations offer many programs to help people make a large down payment. Whether you work with Fannie Mae, Freddie Mac or both, you will find a variety of options and support that will help you reach your homeownership goals.

They aren't the only thing that makes them different! They also offer programs to help people with low down payments. Fannie Mae offers a Home Ready Loan program, which is available only to those who make less than 80% of their local median income. Freddie Mac's Home Possible Program, on the other hand is available to those who reside in the home but earn less than the area average.

Fannie Mae, Freddie Mac and other financial institutions have different histories. They were also founded for different purposes. As you can see, these entities have a lot more in common than what meets the eye.

What do these companies do?

Fannie Mae, Freddie Mac and other mortgage-related entities may appear mysterious. However, they play a crucial role in the world. These companies operate in a similar way: They buy mortgages from lenders and then either repackage them into mortgage-backed securities for sale or keep them in their own portfolios. This allows lenders to generate more money, which then helps individuals, families and investors get a steady flow of mortgage financing.

Fannie Mae, Freddie Mac, and other core functions are responsible for maintaining stability in the residential mortgage market, increasing liquidity of mortgage investments, as well as promoting access to mortgage financing. Fannie Mae and Freddie Mac have the mandate to support residential mortgage secondary markets. Fannie Mae also has the responsibility of liquidating federally-owned mortgage portfolios and managing them in a manner that minimizes government losses and minimizes the impact on residential mortgage market.

Remember that Fannie Mae and Freddie Mac are both companies working behind the scenes to keep the mortgage market running smoothly.

Fannie Mae & Freddie Mac during the 2008 Housing Market Crisis

Fannie Mae, Freddie Mac and other Wall Street firms had a long history of being major players in the mortgage market. They were able to make significant profits during the 1990s and 2000s thanks to this advantage. This period saw much debate and questioning around these two organizations. Many people wondered if the government's support was actually helping homeowners in the U.S. or just helping companies and those who invested in them.

Fannie Mae, Freddie Mac held a near-monopoly over a large portion of the secondary mortgage market in the country at the time. This was because they were sponsored by the government. The combination of this monopoly and the guarantee that these companies would be kept afloat by the government ultimately led to the collapse in the mortgage market.

Both Fannie Mae, Freddie Mac and others began to lose large portions of their portfolios in 2007, particularly the ones related to Alt-A and subprime investments. The Federal Housing Finance Agency (FHFA), due to the volume of their mortgage guarantees, had declared them bankrupt in 2008. The market saw that both companies were in financial trouble in September 2008.

The FHFA placed them both in conservatorship which included $190 billion of bailout funding. Although Fannie Mae & Freddie Mac have both paid back the funding, they are still under conservatorship.

Fannie Mae & Freddie Mac During Covid-19

There are resources that can help you if you are feeling the effects of COVID-19, and you are concerned about your ability to pay your rent or mortgage. To provide temporary assistance for those affected by the pandemic, the Coronavirus Aid, Relief and Economic Security Act (CARES) was established. It includes programs such as Pandemic Unemployment Compensation, Pandemic Unemployment Assistance, and Federal Pandemic Unemployment Compensation.

This is not all. Homeowners with Fannie Mae and Freddie Mac mortgages are also protected by the CARES Act. This means that lenders and loan services are prohibited from starting a foreclosure against your home during this period. The CARES Act was extended by President Biden to June 30, 2021. This gives you even more time for the help you need.

You can request a forbearance of your mortgage for up 180 days if you are experiencing financial difficulties due to COVID-19. This allows you to temporarily suspend your mortgage payments. If you are still experiencing financial hardship, you might be able extend the forbearance by up to 180 days.

Don't worry if you are looking to purchase a home. The Federal Housing Finance Agency has made lending and appraisal standards more flexible so that you can still get a loan in the midst of the pandemic. There are many options to help you get through this difficult time, regardless of your housing situation.

Fannie Mae Mortgage Relief Programs

Fannie Mae's Mortgage Relief Program is available to help you if you are having difficulty making your mortgage payments due to COVID-19-related income loss, job loss or illness. You will be exempted from late fees, have a plan of forbearance that suspends, lowers, or suspends your mortgage for up 12 months, as well as protection from foreclosure and eviction. You may also be offered options to repay your loan after the forbearance period. These include a repayment plan to catch up, or a loan modification plan that lowers your monthly payment.

Fannie Mae has a Disaster Response Network, which assists people who have experienced financial difficulties as a result the COVID-19 pandemic. This program provides access to HUD-approved housing counsellors for homeowners and renters of Fannie Mae properties. These counselors will work with you to develop a personal plan, offer financial coaching, budget advice, and support you for up to 18 month. Fannie Mae offers resources to assist you if you are struggling to make ends met because of COVID-19.

Programs for Mortgage Forbearance through Freddie Mac

Freddie Mac may be able help you if you are having difficulty paying your mortgage because of COVID-19. You may be eligible to receive assistance from Freddie Mac if you have suffered a loss or decline in income due to the pandemic. These options include waived late fees, penalties and mortgage forbearance for up to 12 months. There are also loan modification options that can help you lower or keep your monthly payments. Freddie Mac also ended all evictions, foreclosure actions (this was only in effect until March 31, 2021). If you are having trouble making your mortgage payments due to COVID-19, Freddie Mac can help.

Conclusion

Fannie Mae (and Freddie Mac) are government-sponsored agencies that play a crucial role in the support of the housing market and making homeownership more affordable. Although they share similar goals and work in similar ways they do have key differences. These include the way they source mortgages and the programs that they offer to help people pay large down payments. Both are responsible for maintaining stability in the residential mortgage market, increasing liquidity of mortgage investments, as well as promoting access to mortgage financing. Fannie Mae has the additional responsibility of managing federally-owned mortgage portfolios and liquidating them. Fannie Mae, Freddie Mac and other federally-owned mortgage portfolios have had their ups and downs. They played a major role in 2008's housing market crisis. They are still important players in the mortgage market, helping people realize their dream of homeownership.

 

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