What is low down on the whole Fannie Mae and Freddie Mac?

Question

What is low down on the whole Fannie Mae and Freddie Mac?

Answer 1

Fannie and Freddie are nicknames for the para-governmental agencies established by the federal government to provide mortgages.  They are like the manufacturer, and the banks are like the distributors who sell the mortgages and accept the payments and provide the customer service.

The majority of mortgages are financed by these two entities, but there are also private investors and banks that use their own money esclusively or in concert with FNMA& FHLMC.  While most of the private mortgage lenders have shut down by now due to their customers filing for foreclosures, Fannie & Freddie are still funding loans.  They are not part of the problem with subprime lending or exotic mortgages, but they did offer 100% financing options and Adjustable Rate Mortgages, and are having problems with borrowers defaulting on loan payments, leading to foreclosures.  They have identified the types of loans that "don't perform" and have drastically tightened their underwriting guidelines making it harder to qualify for a loan, and eliminating the higher risk, 100% financing option.  Buyers now have to have at least 3% down payment to qualify for a home, but there are flexible sources for how you can obtain that down payment.

They have been under increased scrutiny from the government to ensure that they are operating and making the right decisions.  Because they play such a critical role in the housing market, the government will insure that they remain solvent, to not would be to cripple the entire economy.

Answer 2

As with every other business associated with the housing market, they are in trouble.