Goverment Sponsored Enterprises Influencing the Residential Mortgage Market

There are two major Government Sponsored Enterprises (GSEs) that have a substantial impact on the residential mortgage market in the United States. They are commonly referred to as Secondary Market Agencies as the buying and selling of mortgages conforming to their underwriting guidelines are a very large part of the secondary market for mortgages. The key Government Sponsored Enterprises focused on the mortgage market are:

The Federal National Mortgage Association (Fannie Mae)
Fannie Mae is a Federally-chartered, privately-owned company with a public mission to provide stability and to increase the liquidity of the residential mortgage market and to help increase the availability of mortgage credit to low- and moderate-income families and in underserved areas. In carrying out its mission, Fannie Mae engages primarily in two forms of business: investing in portfolios of residential mortgages and guaranteeing residential mortgage securities. They do not lend money directly to home buyers. Instead, they work with lenders to make sure they don't run out of mortgage funds, so more people can achieve the dream of homeownership.

The Federal Home Loan Mortgage Corporation (Freddie Mac)
Freddie Mac is a shareholder-owned company that is congressionally chartered to stabilize the nation's mortgage markets and expand opportunities for home ownership and affordable rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. By doing so, they ultimately help homeowners and renters get lower housing costs and better access to home financing.

Through their Federal charters, Congress has equipped Fannie Mae and Freddie Mac with certain advantages to help them carry out their public missions. These include an exemption from State and local taxes (except real property taxes), and an exemption of their debt and mortgage securities from Securities and Exchange Commission registration requirements. Securities guaranteed and debt issued by these GSEs are solely their obligations and are not backed by the full faith and credit of the U.S. Government.