Latest Gossip Item? Fannie and Freddie
July 22, 2008
It is interesting to have Freddie Mac and Fannie Mae so prominent in the media. Op ed pieces, news releases, interviews abound. The question: Are Freddie and Fannie going together? That is, are they both going to fail ? This morning on Bloomberg News, the interviewee in addressing Freddie Mac seemed to think it will not need government intervention to bail it out. At the moment there seems to be less talk about Fannie Mae than about Freddie Mac. However, they are closely linked because they are the same type of entities.
So what are they? They are GSEs, government sponsored enterprises.
Fannie Mae was created in 1938 by President Franklin D. Roosevelt to expand the flow of mortgage funds to all communities, at all times, under all economic conditions, and to help lower the costs to buy a home. In 1968, Fannie Mae was rechartered by Congress as a shareholder-owned company, funded solely with private capital raised from Wall Street and around the world.
Freddie Mac was created in 1970 and is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage brokers, savings institutions and credit unions, can make available to homebuyers and multifamily investors.
At one time, home mortgage lenders would make loans from their deposit assets. They were limited by the amount of their deposits in the amount of lending that they could do. The loans that they made were held in their asset portfolios. With the establishment of , first Fannie Mae, the Federal National Mortgage Association, and then Freddie Mac, the Federal Home Loan Mortgage Corporation, the sale of loans form lenders to these entities allowed the lenders to replenish their supply of funds and thereby make additional loans. The fear that is present in the credit markets has spread to concern about these two purchasers of loans.
This will probably be an ongoing news item for some time. Some of it may in fact be "gossip". Some of course may well be reality.
It is interesting to have Freddie Mac and Fannie Mae so prominent in the media. Op ed pieces, news releases, interviews abound. The question: Are Freddie and Fannie going together? That is, are they both going to fail ? This morning on Bloomberg News, the interviewee in addressing Freddie Mac seemed to think it will not need government intervention to bail it out. At the moment there seems to be less talk about Fannie Mae than about Freddie Mac. However, they are closely linked because they are the same type of entities.
So what are they? They are GSEs, government sponsored enterprises.
Fannie Mae was created in 1938 by President Franklin D. Roosevelt to expand the flow of mortgage funds to all communities, at all times, under all economic conditions, and to help lower the costs to buy a home. In 1968, Fannie Mae was rechartered by Congress as a shareholder-owned company, funded solely with private capital raised from Wall Street and around the world.
Freddie Mac was created in 1970 and is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage brokers, savings institutions and credit unions, can make available to homebuyers and multifamily investors.
At one time, home mortgage lenders would make loans from their deposit assets. They were limited by the amount of their deposits in the amount of lending that they could do. The loans that they made were held in their asset portfolios. With the establishment of , first Fannie Mae, the Federal National Mortgage Association, and then Freddie Mac, the Federal Home Loan Mortgage Corporation, the sale of loans form lenders to these entities allowed the lenders to replenish their supply of funds and thereby make additional loans. The fear that is present in the credit markets has spread to concern about these two purchasers of loans.
This will probably be an ongoing news item for some time. Some of it may in fact be "gossip". Some of course may well be reality.
posted by shirley harry at 8:45 AM
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