by Gil V

Created on: August 20, 2008

So your looking into getting a mortgage. You better get used to the three names that control the home mortgage industry. Freddie, Fannie, and Ginnie. Who are these people? Well they are not people at all, they are institutions. They purchase your home loans from the original lender and you make your payment to them. So, with this in mind, they control the mortgage market.

Here is how you get a mortgage. You go to your local bank. Fill out a loan application and submit. You might talk to a loan broker. But, in reality when you make your payments, you make them to someone who bought your loan from the original lender. This is how it works.

Fannie, short for Fannie Mae or Federal National Mortgage Association. Fannie Mae originated in 1938 as part of Franklin D Roosevelt's New Deal. It was designed to assist local banks in loaning money for home mortgages. This was started due to the Great Depression. Most banks did not want to risk, so the Federal Government assisted these banks with the loans. Fannie Mae was privatized in 1968 by Lyndon B Johnson. He did this in order to remove FNMA from the National Budget. This brought on the beginning of Freddie.

Freddie Mac, or Federal Home Loan Mortgage Corporation was created to keep Fannie Mae from monopolizing the mortgage market. Freddie was created in 1970. Currently Freddie and Fannie control about 90% of the mortgage market. They are both fortune 500 companies. They are also the only companies in the list that do not have to report any financial problems that they might be having. If there is a accounting or financial collapse with in these two giants, its the taxpayers that might be held responsible for the debt.

Ginnie Mae is another entity in the home mortgage market. Ginnie, or Ginnie Mae is short for Government National Mortgage Association. They do not sell or buy loans or issue mortgage backed securities. What they do is, make affordable housing a reality for millions of low- and moderate-income households across America. They guarantee a timely repayment of the principals and interest on loans that are backed by the US Government.

Ginnie Mae securities are the only MBS to carry the full faith and credit guaranty of the United States government, which means that even in difficult times an investment in Ginnie Mae MBS is one of the safest an investor can make.

I hope that after reading this, you have a better understanding of the Mortgage Market.

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