Fannie Mae (Federal National Mortgage Association--FNMA) and Freddie Mac (Federal Home Loan Mortgage Corporation--FHLMC) are operated through the U.S. Department of Housing and Urban Development. They are former federal agencies that became independent entities and are now even listed on the New York Stock Exchange (NYSE). Yet they retain many government connections and support in the form of favorable interest rates, low capital requirements, and tax exemptions.
Fannie Mae got its start during the Great Depression, when Congress created the Federal National Mortgage Association in 1938 to make more dollars available for home loans to middle- and low-income citizens. In 1960, FNMA became partially separated from the government, then later went public and was listed on the NYSE in 1970. Yet, some government connections remain, and five of Fannie Mae's 18-member board of directors are appointed by the U.S. president.
Congress chartered Freddie Mac in 1970, and it went fully public in 1989. The youngster in the family, Freddie Mac has a smaller share of the mortgage market. But partly because of its smaller market share, it is currently growing faster than Fannie Mae is.
Freddie Mac and Fannie Mae create mortgage pools that are somewhat larger than those of Ginnie Mae (Government National Mortgage Association--GNMA), and investors look to them to also provide a relatively high return compared to other government securities.
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