Miranda Marquit has been covering personal finance, investing and business topics for almost 15 years. Miranda is completing her MBA and lives in Idaho, where she enjoys spending time with her son playing board games, travel and the outdoors. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree.
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Miranda Marquit Contributor. Benjamin Curry Editor. What do they do exactly? Put simply: They provide liquidity to the mortgage market. The whole point is to keep money flowing into the mortgage market. Fannie Mae and Freddie Mac both purchase conventional, conforming loans -- which are loans that fall under the conforming loan limit.
Instead, they set the standards for these loans and then buy them from lenders to provide liquidity. And in order to put money back into the market for further lending, Fannie and Freddie need those investors to buy up.
Therefore, they focus on loan products aimed at good-credit borrowers who are more likely to repay their debts. Fannie Mae was created first, decades before the idea of Freddie Mac was even on the radar. The company was founded by Congress in , not long after the Great Depression. At this time, it purchased FHA loans only and functioned on a government budget until , when it became a private, shareholder-owned corporation.
Shortly after, Fannie Mae pivoted to purchasing conventional loans, which it still does to this day. In , after the financial crisis and housing crash, the Federal Housing Finance Agency put Fannie Mae into conservatorship, purchasing Though the company is still in a conservatorship as of now, that status is currently being challenged in court by both Fannie and Freddie shareholders.
Giving Fannie competition -- as in any industry -- would help keep prices down and make mortgages more affordable. While Freddie Mac also purchases conforming, conventional loans, the company tends to purchase more from smaller lenders and banks than Fannie does. This helps provide even more liquidity to the mortgage market and keeps smaller institutions well-funded for lending. Overall, Freddie Mac enjoys the same treatment as Fannie Mae.
The government placed it into conservatorship in , and the company is exempt from most taxes just the same. Fannie Mae and Freddie Mac are very similar, at least where it counts. They both purchase conforming, conventional loans, and they both help provide liquidity to the mortgage market. Still, the companies do have a few key disparities. First, Fannie Mae tends to purchase loans from larger lenders and big-name banks. Freddie Mac focuses more on smaller banks and lenders, like savings banks and credit unions.
Both Fannie and Freddie have their own unique loan products, too. At Fannie Mae, there are 12 different loan products to choose from, including ones for renovating a home, refinancing, or making energy-efficient home improvements.
Freddie Mac, on the other hand, has over 20 loan programs. Talk to a mortgage advisor for more personalized advice. Our team of analysts agrees. The deadline was extended several times throughout the pandemic and finally expired on July 31, You can request a mortgage forbearance for up to days and potentially extend it another days if you have a financial hardship due to the COVID pandemic.
Additionally, the FHFA also put into place more flexible lending and appraisal standards to make sure that homebuyers can close on loans during the pandemic and that all parties involved can maintain social distancing throughout the process. The federal government provided assistance for individuals who became unemployed as a result of the pandemic.
These three unemployment-related programs expired on Sept. Unemployed individuals may still qualify for benefits as long as they are within the first 26 weeks of their benefits. If you have a Fannie Mae mortgage and can't make your payment due to a COVIDrelated job loss, income reduction, or illness, your mortgage servicer can help with mortgage relief options, including:. The counselors can create personalized plans, provide financial coaching and budgeting, and support you for up to 18 months.
If you're worried about making your mortgage payments, call your mortgage servicer—the company listed on your monthly statement—to ask for help. If you have a Freddie Mac-owned mortgage, you may be eligible for help if you have been directly or indirectly impacted by the COVID pandemic. There are currently several mortgage relief options if you can't make your mortgage payment due to a loss or decline in income, including:.
Forbearance is not forgiveness. Ask your mortgage servicer about your post-forbearance options. Be wary if the option is a balloon payment rather than simply adding the unpaid months to the end of your mortgage. The easing of lending and appraisal standards for homebuyers applying for a Fannie Mae- and Freddie Mac-backed mortgage during the pandemic was extended by the FHFA to July 31, , as the final deadline.
They allowed:. Fannie Mae and Freddie Mac are charged with keeping the U. Both companies buy mortgages from various lenders, which helps maintain a steady and reliable source of mortgage funding for individuals, families, and investors. The housing industry has kept a watchful eye on how the COVID situation has impacted Fannie Mae and Freddie Mac, not to mention the 28 million homeowners with mortgages backed by these agencies.
The FHFA anticipated the pandemic would lead to billions in additional expenses to be shouldered by both Fannie Mae and Freddie Mac because of the pandemic—at least until the moratorium expired. The full extent will only be known when the agencies release details at the end of the fiscal year. Congressional Budget Office. Accessed Sept. Fannie Mae. Department of Housing and Urban Development. Federal Housing Finance Agency. Federal Reserve Bank of St. Louis Review. Library of Congress.
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