Differences between Fannie Mae and Freddie Mac

Fannie Mae vs. Freddie Mac

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are government-sponsored enterprises (GSEs) chartered by the United States Congress. These entities operate in the secondary mortgage market, where they purchase mortgages from lenders, package them into mortgage-backed securities, and sell them to investors. This process provides liquidity to the housing market by ensuring that banks and other lenders have a continuous supply of funds to issue new home loans. While both organizations share the same broad mission, they differ in their history, the types of lenders they serve, and their specific corporate structures prior to federal conservatorship.

Comparison table

Category	Fannie Mae	Freddie Mac
Full name	Federal National Mortgage Association (FNMA)	Federal Home Loan Mortgage Corporation (FHLMC)
Year established	1938	1970
Primary sources	Large commercial banks	Smaller "thrift" banks and savings associations
Founding purpose	To provide liquidity during the Great Depression	To provide competition and expand the secondary market
Regulator	Federal Housing Finance Agency (FHFA)	Federal Housing Finance Agency (FHFA)
Current status	Federal conservatorship	Federal conservatorship
Common stock symbol	FNMA	FMCC

Venn diagram comparing Differences between Fannie Mae and Freddie Mac

History and origin

Fannie Mae was established in 1938 as part of the New Deal under President Franklin D. Roosevelt. At the time, the United States was recovering from the Great Depression, and the housing market had largely collapsed. The federal government created Fannie Mae to buy mortgages insured by the Federal Housing Administration (FHA), allowing local banks to lend more money to prospective homeowners. In 1968, Fannie Mae was converted into a private, shareholder-owned corporation, and its portfolio of government-backed loans was split off into a separate entity known as Ginnie Mae.

Freddie Mac was created in 1970 through the Emergency Home Finance Act. Its primary goal was to provide competition to Fannie Mae and to support smaller thrift institutions, such as savings and loan associations, which were not as well-served by Fannie Mae. By introducing a second GSE, Congress sought to further stabilize the supply of money available for home mortgages across different types of financial institutions.

Operational differences

The most significant operational difference between the two entities involves their primary customer base. Historically, Fannie Mae purchased mortgages from large, national retail banks. Freddie Mac focused on purchasing loans from smaller "street" lenders and thrift organizations. Over time, these distinctions blurred as both entities began competing for the same types of loans, but the underlying infrastructure of each organization still reflects these separate origins.

Both entities primarily purchase conventional mortgages that meet "conforming" loan limits set by the Federal Housing Finance Agency. They do not originate loans directly to consumers; instead, they act as intermediaries between the lenders and the global capital markets.

Conservatorship and regulation

In September 2008, during the global financial crisis, both Fannie Mae and Freddie Mac were placed under the conservatorship of the Federal Housing Finance Agency (FHFA). This move followed concerns that the entities lacked sufficient capital to cover losses on the mortgages they had guaranteed. Since that time, both organizations have remained under government control. The U.S. Department of the Treasury provides financial support to the enterprises in exchange for senior preferred stock. Profits generated by both entities are now largely used to pay dividends to the Treasury or to build capital reserves as directed by federal regulators.