From the course: Applied Fixed Income

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Fannie Mae (FNMA) and Freddie Mac (FHLMC)

Fannie Mae (FNMA) and Freddie Mac (FHLMC)

From the course: Applied Fixed Income

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Fannie Mae (FNMA) and Freddie Mac (FHLMC)

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- [Narrator] While no longer the biggest GSEs anymore, no discussion of US agencies should begin without discussing Fannie Mae and Freddie Mac, the Federal National Mortgage Association, known as Fannie Mae and Federal Home Loan Mortgage Corporation, Freddie Mac, are often clumped together in conversation, owing to the fact that they both buy and hold residential mortgages, as well as repack them as MBS, mortgage-backed securities, with their guarantee in exchange for a fee. They were also bailed out together in 2008 by the US government, due to losses stemming from their holdings of riskier mortgage collateral and assets in the wake of the US housing crisis, putting them into conservatorship, where the government stripped management control of the two enterprises. Additionally, while their stocks are still trading in the markets, conservatorship requires most of the profits to be paid to the government and not to the shareholders. While the eventual plan is for the GSEs to exit…

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