Trilogy Financial News and Resources

Sep 8

Freddie and Fannie...the guarantee is now explicit

The government took the final step some had anticipated may be required, taking control of two Government Sponsored Enterprises (GSEs) that are critical components in facilitating a liquid home mortgage market.
 
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) were formed as publicly owned enterprises that grew to own or guarantee about half of the $10+  trillion US mortgage market.  The two organizations actively buy mortgages from banks and other financial institutions and primarily repackage them for resale via mortgage-backed securities in which they guarantee the underlying mortgage payments.  The GSEs essentially provide a liquid market for financial institutions, buying the mortgages they write, and thus provide increased flexibility to write more mortgage loans than would be possible if they had to be retained on the financial institutions' balance sheets.

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