What exactly are Fannie Mae and Freddie Mac?

When the housing market comes up in the news, it seems like the names Fannie Mae and/or Freddie Mac always enter in to the conversation. However, no one ever explains who Fannie Mae or Freddie Mac is, just assuming that everyone knows. Most people have no clue. So, here’s a short guide to who Fannie & Freddie are, and why you should (or shouldn’t) care.

The first reason you might care about Fannie Mae or Freddie Mac is because they might own your mortgage! But let’s understand the history first before getting to that…

Fannie Mae is a nickname for the Federal National Mortgage Association. The Federal National Mortgage Association is a strange entity that is sort of half government and half private. It was created a long time ago by the Franklin Roosevelt administration as a “government-sponsored enterprise” that would help banks do more lending by purchasing the mortgages the banks gave to their customers. The United States was in the midst of the Depression at the time, and banks were not necessarily forthcoming when people asked for mortgages. However, once they knew the government was willing to buy that mortgage and take all the risk of repayment while the bank got the upfront profit, they changed their tune.

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