Fannie Mae, Freddie Mac, and Your Mortgage

By Karen Lawson
LoanPage.com Columnist

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These two companies with unusual names are frequently mentioned in the financial media. They are government sponsored enterprises that are publicly traded on the NYSE.

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What does this have to do with your new home loan? Fannie (FNMA) and Freddie (FRMC), as they are commonly known in the mortgage lending industry, provide billions of dollars of mortgage funds through their purchase of mortgage loans.

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Shortly after closing your mortgage and moving into your new home, your lender may notify you that your loan has been sold. Chances are it may be sold through Fannie Mae or Freddie Mac. Fannie and Freddie are major players in the secondary mortgage market and their policies set standards for conventional mortgage lending. Fannie Mae and Freddie Mac provide lender clients with everything they need to make mortgage loans conform to their requirements. Loans that meet FNMA or FRMC standards can be packaged together and sold as securities.

What Can Fannie and Freddie Do for Me and My Mortgage?

Fannie Mae was created in 1938 to ensure a supply of mortgage funds for Americans, making mortgages available in all areas and lowering the costs of buying homes. Freddie Mac followed in 1970 with a similar mission.

Recently, Fannie Mae and Freddie Mac jointly announced the development of standardized master loan documents and shorter mortgage and deed of trust documents. The new documents save preparation time for lenders, and reduce costs such as document preparation, copying, and recording fees charged to homeowners. Underwriting and loan administration policies and procedures established by Fannie and Freddie indirectly assist you in all aspects of getting and maintaining a new home loan. They also work with communities and housing agencies to promote opportunities for first-time homeowners.

Sources
Fannie Mae
Freddie Mac

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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