Fannie Mae is a nickname for the Federal National Mortgage Association (FNMA), which was first chartered by the U.S. government in 1938. Freddie Mac is a nickname for the Federal Home Loan Mortgage Corporation (FHLMC), which was chartered by Congress in 1970 as a private company. Both Fannie Mae and Freddie Mac were created to help ensure a reliable and affordable supply of mortgage funds in the hopes of stabilizing the residential mortgage market and increasing home ownership and rental opportunities in the United States.
To put it in real-world terms, Fannie and Freddie buy conventional mortgages (and sometimes FHA, VA, and USDA loans) from lenders, pool them together and sell them as mortgage-backed securities to investors. They do this so that lenders can recoup the capital funds they need to continue providing mortgages to borrowers.
How Can Fannie Mae and Freddie Mac Help Me?
After the global financial crisis of 2008, Fannie Mae and Freddie Mac were put under direct government control at the Federal Housing Finance Agency (FHFA). The only major change that’s taken place since this shift in control was the establishment of the Home Affordable Refinancing Program, or HARP, in 2009. HARP was developed to enable borrowers who lack home equity to refinance through Fannie Mae or Freddie Mac, ultimately taking advantage of lower mortgage rates and avoiding foreclosure. Borrowers wishing to take advantage of HARP should do so as soon as possible, as this program is due to expire at the end of 2015.
If you are in the market to apply for a home loan or if you have some questions you need answered, please reach out to Cliffco Mortgage Bankers at (516) 408-7300 or fill out the contact form here.