Interest Rate History - page 2
Fannie Mae and Freddie Mac
Fannie Mae was created in 1938 during the Great Depression as a government agency. Later it was transformed into a stockholder-owned corporation also with shares traded on Wall Street. It's role was to help american families to achieve their dream of home ownership. It was intended to buy up mortgages and sell them on to investors while providing stability and liquidity for home loan firms.
Fannie Mae started the secondary mortgage market and is able to borrow money also from foreign investors at low interest rates thanks to the financial support from the US Government. Fannie Mae profits from the difference between interest rates that homeowners pay and foreign lending institutions and banks charge.
Freddie Mac known as GSE was chartered by Congress in 1970 to provide competition to Fannie Mae. In 2003, Justice Department and the Securities Exchange Commission revealed errors of $4.5 billion. As a result of the crisis, 3 top executives were forced to quit. But that wasn't the worst period of time for them. The worst year has been 2008. They have already lost 74% of their investment this year. US government wants to ensure their survival because if Fannie and Freddie are not able to borrow money, they will not be able to buy mortgages from commercial lenders. This would create a very bad situation for home buyers, because the mortgages would become a lot more expensive.
Fannie Mae was created in 1938 during the Great Depression as a government agency. Later it was transformed into a stockholder-owned corporation also with shares traded on Wall Street. It's role was to help american families to achieve their dream of home ownership. It was intended to buy up mortgages and sell them on to investors while providing stability and liquidity for home loan firms.
Fannie Mae started the secondary mortgage market and is able to borrow money also from foreign investors at low interest rates thanks to the financial support from the US Government. Fannie Mae profits from the difference between interest rates that homeowners pay and foreign lending institutions and banks charge.
Freddie Mac known as GSE was chartered by Congress in 1970 to provide competition to Fannie Mae. In 2003, Justice Department and the Securities Exchange Commission revealed errors of $4.5 billion. As a result of the crisis, 3 top executives were forced to quit. But that wasn't the worst period of time for them. The worst year has been 2008. They have already lost 74% of their investment this year. US government wants to ensure their survival because if Fannie and Freddie are not able to borrow money, they will not be able to buy mortgages from commercial lenders. This would create a very bad situation for home buyers, because the mortgages would become a lot more expensive.
