The bank,
credit union,
or mortgage banker
you go to for a home loan doesn’t use its own funds to lend
you money. Most
mortgage
money comes from three major institutions:
Freddie Mac,
Fannie Mae,
and
Ginnie Mae.
Those
institutions buy what are known as conforming mortgages, or mortgages
that meet their standards, from the lenders. Then they package
the loans as
mortgage-backed
bonds,
and sell them to individual and institutional investors,
including mutual funds. By selling the securities, Freddie Mac,
Fannie Mae, and Ginnie Mae increase the amount they have available
to buy more mortgages, providing lenders with another round of
money to lend to new borrowers.
Freddie Mac and Fannie Mae are
publicly held
companies,
meaning their stock is owned and traded by individual
and institutional investors. Ginnie Mae is an agency of the U.S.
Department of Housing and Urban Development. All three organizations
were created initially by Congress to help provide
liquidity
in
the housing market and make it easier for people to buy.
Dwight
P. Robinson, Senior Vice President, Corporate Relations,
Freddie Mac
Dwight P. Robinson of Freddie Mac writes about the benefits of securitization.
What’s essential to affordable rates is that there’s money available to lend nationwide. That’s the case because investors — sometimes referred to collectively as Wall Street — consider U.S. mortgages among the safest, most stable investments in the world. So Wall Street buys mortgage-backed bonds, expecting, and getting, a strong return. And those investment dollars are put to use making even more loans.
Those
institutions buy what are known as conforming mortgages, or mortgages
that meet their standards, from the lenders. Then they package
the loans as
Dwight
P. Robinson, Senior Vice President, Corporate Relations, 