Who Are Fannie Mae, Freddie Mac and Ginnie Mae?
If you keep reading the names Fannie Mae, Freddie Mac and Ginnie Mae on mortgage and home loan articles, chances are you might be clueless as to “who” they are. But in reality, these names do not pertain to people—they are actually shortened names for large institutions.
“Who” are they?
These three, Fannie, Freddie and Ginnie, are the three big institutions that buy the majority of mortgages for all homes across the nation. They set some regulations and guidelines for lenders to follow so consumers can avail of lower risk loans. Many recent foreclosures have caused these guidelines to become a little bit more strict than usual, and that more documentation is required to close a loan.
How to they work?
Fannie, Freddie and Ginnie, or the “big three” are what you call secondary market lenders. Often, many retail lenders actually receive their funds from a secondary market lender. These secondary lenders have assisted the national mortgage market by allowing money to flow easily from one state to another. The movement of these loan funds helps in avoiding situations where mortgages are only available in certain areas, cities or states. This is to benefit everyone who are in need of loans, no matter where they reside.
Mortgage lenders sell your loan to another company which sells it to one of the big three, or sometimes the lender you got your loan from itself does that. In turn, Fannie, Freddie and Ginnie buy “pools” of loans which get grouped according to size, interest rate and type. The servicer then gets a monthly fee (about 3/8 of a percent) from the institution for doing all the necessary actions regarding your loan and its payments. It may seem small, but when the “pool” gets big enough it can create quite a big amount when sold to any of the big three.
How did they get their names?
The names of these “big three” actually come from their acronyms, pronounced phonetically. Fannie Mae (FNMA) is the Federal National Mortgage Association, Freddie Mac (FHLMC) is the Federal Home Loan Mortgage Corporation, and Ginnie Mae (GNMA) is the Government National Mortgage Association.
Now that you know “who” Fannie, Freddie and Ginnie are, you know you’re in good hands when you obtain your home loans.