EXTRA CREDIT H/WORK
FANNIE MAE AND FREDDIE MAC
1. Fannie Mae was started in 1938 by President Franklin Roosevelt. He wanted to create a system or a new deal which would benefit people who didn’t have homes. Fannie Mae is the nickname of what is known as the federal National Mortgage Association, and Freddie Mac is the nickname for Federal Home Mortgage Corporation.
2. The great depression was the major reason for such a system to be put in place simply because private lenders weren’t investing in the home loans because of the stock market crash.
3. Both these two companies were privately owned and they sold shares to the public. Apart from them being privately owned these companies were and are still financially protected by the Federal government. …show more content…
Fannie Mae had the ability to borrow money from foreign investors at low interest rates and then it would lend money to local banks, so that local banks would provide mortgages to homebuyers at low interest rates and low mortgage monthly premiums and low down payments.
7. Because of the Vietnam War (financial problems resulted from it), Fannie Mae was removed from the National budget and was operating as Government Sponsored Enterprise (GSE).
8. In 1970, Freddie Mac was introduced in order to stop further monopolization of the mortgage market. Freddie Mac was also a privately owned company which was also sponsored by the government.
9. While operating as GSEs there were still exempted from taxation and also there were still going to be backed up by the government incase they fail or incase something would occur. These two companies are the only two companies out of the fortune 500 that weren’t required to report to anyone incase they had shakedowns or problems in their systems. After what happened at Wall Street these past few days, it was discovered there were errors in the systems of these two companies amounting almost up to U.S. 5 billions