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Freddie & Fannie: Who Are These People?

The Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, is a public, government sponsored enterprise (GSE)** that was created in 1970 to expand the secondary market for mortgages in the US. Along with other GSEs, Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases. The name, "Freddie Mac", is an acronym of the company's full name that had been adopted officially for ease of identification.

The Federal National Mortgage Association commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. It is a government-sponsored enterprise (GSE)**, though it has been a publicly traded company since 1968.
The Fannie Mae’s purpose is to expand the secondary mortgage market by securing mortgages in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on savings and loan institutions.

** The GSE is a financial services corporation created by the US government with the sole purpose of enhancing the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The desired effect of the GSEs is to promote the availability and reduce the cost of credit to the targeted borrowing sectors of the economy: agriculture, home finance and education.