Both nationally and here in Utah, the real estate market is changing and so is the mortgage market. Over the last year or so the number of Utah foreclosures have been increasing and there is always a headline about the mortgage crunch. As Utah real estate consumers, residents, and homeowners, we hear the terms FannieMae and Freddie Mac, and when listening to the newscaster or radio broadcaster talking it is easy to cloud over the details and just here the words "real estate", "buying", "mortgage", "FannieMae", and/or "Freddie Mac". I had to laugh the other day, as my close friend and I were driving down the street and she turned to me and said, "What are they talking about? Who is Fannie and is she related to Freddie?"
So this post is dedicated to answering the question who is FannieMae and Freddie Mac.
FannieMae - It's true name is the Federal National Mortgage Association (FNMA). It is an enterprise owned by share-holders and it is a large part of the secondary mortgage market. It's mission is to replenish the supply of money available for mortgages and ensures that money continues to be available for new home purchases. You don't actually borrow money from the Fannie Mae group themselves, you borrow it from the lender with the Fannie Mae guarantee. A common misconception with Fannie Mae is the government's involvement. Fannie Mae is not backed or funded by the U.S. Government. Fannie Mae also helps finance affordable housing and community development projects.
Freddie Mac - It's true name is the Federal Home Loan Mortgage Corporation (FHLMC). It is owned by stock-holders and chartered by Congress to increase the supply of funds that lending institutions can make available to home buyers and multi-family investors. Freddie Mac does not make loans directly to home buyers. After a borrower closes on a property or refinances their current mortgage, Freddie Mac buys those mortgages from lenders that they approve. They do this so that the lenders have a fresh supply of funds available to loan to home buyers. If a lender is backed by Freddie Mac then the available money is often considered safer than that of a non-Freddie approved lender. As with Fannie Mae this organization is not owned or funded by the US Government.