Law Offices of Charles A. Maglieri
Free Consultations

The story behind Fannie Mae and Freddie Mac

People who have obtained a mortgage in Connecticut, or are actively seeking one, have likely heard the names Fannie Mae and Freddie Mac. They might sound like the names of friendly new neighbors, but in reality, they are government-sponsored agencies who guarantee most of the mortgages in the United States.

To guarantee a loan is to make a promise to assume responsibility for paying a borrower's debt, either in whole or in part, in the event of a default. By providing mortgages, lenders take a significant financial risk. Having Freddie Mac and Fannie Mae guarantee the loans reduces the risk for lenders and makes mortgages more affordable for borrowers. 

According to the Federal Housing Finance Agency, the purpose of Fannie Mac and Freddie Mac is to make mortgages affordable and keep the market stable. They accomplish this by providing ready access to funds for banks and other lenders that finance house purchases through mortgages. The financial term for this ready access is liquidity. Banks can obtain more liquidity to engage in further lending by selling mortgages back to Freddie Mac and Fannie Mae. The companies then either package them into mortgage-backed securities or hold them in a portfolio. 

The Consumer Financial Bureau explains that, although Fannie Mae and Freddie Mac operated with the permission of the government, while subject to its regulation, they were both initially private companies. This changed with the financial crisis of 2008, which necessitated a takeover of operations of both companies by the government. Today, the two companies and the government each have a role to play in creating the eligibility requirements that a potential homebuyer must meet to qualify for a conventional mortgage loan. 

No Comments

Leave a comment
Comment Information

Discuss Your Case With A
Respected Bankruptcy Attorney

Contact my office to discuss your debt relief needs directly with me as your lawyer. I offer a free initial consultation to all new clients where you can learn more about your legal options and what I can do to help you. I am available during regular business hours and by appointment at other times. You can reach me by phone at 860-242-0574 and 860-952-3674 or via email.

My law firm is a debt relief agency as so designated by Congress in the year 2005. I help people file for bankruptcy relief under Title 11 of the United States Code, known as the Bankruptcy Code.

Schedule A Free Consultation

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Email Us For A Response

Bloomfield Office
34 Jerome Avenue
Suite 316
Bloomfield, CT 06002

Phone: 860-952-3674
Phone: 860-242-0574
Fax: 860-243-0106
Map & Directions

Marlborough Office
9 Austin Road
Suite 201
Marlborough, Connecticut 06447

Phone: 860-952-3674
Fax: 860-243-0106
Map & Directions