Fannie Mae, Freddie Mac & Ginnie Mae

History, what they do, and how a mortgage becomes a mortgage-backed security (MBS).

Brief History

Fannie Mae (1938) and Freddie Mac (1970) are congressionally chartered government-sponsored enterprises (GSEs) that support liquidity, stability, and affordability in the U.S. mortgage market. Ginnie Mae (1968) is a wholly owned U.S. government corporation within HUD that provides a full faith and credit guaranty on MBS backed by federally insured/guaranteed loans (FHA, VA, USDA/RD, and certain HUD programs).

From Mortgage Origination to MBS

Mortgage Origination to MBS Flow Borrower applies with lender, loan closes and is serviced, then sold to Fannie or Freddie (conforming) or issued into a Ginnie Mae pool (government loans), pooled and securitized, MBS sold to investors with relevant guaranty. Origination Post-Closing & Sale Securitization & Investors Borrower Applies for mortgage Lender / Originator Underwrites & closes loan Servicer Collects payments, escrows Conforming Loan? Meets GSE standards (LTV, DTI, size, docs) Government-insured/guaranteed? FHA / VA / USDA / certain HUD programs Sold to Fannie Mae or Freddie Mac Loan is pooled; GSE provides guaranty on MBS Fannie/Freddie MBS Issued Investors buy GSE-guaranteed MBS Ginnie Mae Program (via issuers) Issuer pools FHA/VA/USDA loans; Ginnie guaranty Ginnie Mae MBS Issued Explicit U.S. full faith & credit guaranty Investors (Pension Funds, ETFs, Banks, etc.) Receive P&I from MBS trust with guaranty Investors (Global MBS Market) Backed by U.S. full faith & credit (Ginnie)

Notes: Fannie Mae & Freddie Mac operate in the secondary market (they don’t originate loans). Ginnie Mae doesn’t buy or sell loans or issue MBS; approved issuers do, and Ginnie provides the guaranty.

GSE

Fannie Mae (Federal National Mortgage Association)

Founded/Chartered: 1938; rechartered in 1968 as a shareholder-owned company.

Expands access to mortgage credit by buying loans from lenders and packaging them into mortgage-backed securities (MBS) it guarantees.

  • What they do: Set loan/servicing standards, purchase eligible loans from lenders, and securitize/guarantee MBS.
  • Primary markets: Single-family & multifamily.
  • Why it matters: Provides steady secondary-market demand so lenders can keep making mortgages.
GSE

Freddie Mac (Federal Home Loan Mortgage Corporation)

Chartered: 1970 by Congress.

Supports liquidity by purchasing loans from lenders, then holding or securitizing them into MBS it guarantees.

  • What they do: Do not lend to consumers; buy, pool, and guarantee MBS backed by eligible loans.
  • Primary markets: Single-family & multifamily.
  • Why it matters: Adds liquidity and helps stabilize mortgage funding across cycles.
U.S. Government Corp.

Ginnie Mae (Government National Mortgage Association)

Created: 1968 (within HUD).

Provides the timely payment guaranty on MBS backed by federally insured/guaranteed loans—unique for its explicit U.S. full faith & credit.

  • What they do: Do not originate, buy, or issue; guarantee MBS created by approved issuers from FHA/VA/USDA/HUD loans.
  • Unique feature: Only MBS with explicit U.S. sovereign guaranty.
  • Historic note: Sponsored the first modern MBS in 1970.

At-a-Glance Comparison

Entity Type Charter/Creation Primary Role Full Faith & Credit? Regulator / Parent
Fannie Mae Government-Sponsored Enterprise (GSE) 1938; rechartered 1968 Buys loans from lenders; securitizes & guarantees MBS No (enterprise guaranty) FHFA (regulator)
Freddie Mac Government-Sponsored Enterprise (GSE) 1970 Buys loans from lenders; securitizes & guarantees MBS No (enterprise guaranty) FHFA (regulator)
Ginnie Mae U.S. government corporation (within HUD) 1968 Guaranty on MBS backed by FHA/VA/USDA/HUD loans Yes (explicit U.S. full faith & credit) HUD (parent)

Note: Fannie Mae & Freddie Mac do not lend directly to consumers. Ginnie Mae does not buy loans or issue securities; approved issuers do, and Ginnie guarantees them.

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