Difference between Fannie Mae, Freddie Mac and Ginnie Mae
While they may sound like the names of the members of a family of Southern persuasion, Fannie Mae, Freddie Mac and Ginnie Mae actually refer to federal lending and home loan programs instituted under HUD or the United States Housing and Urban Development department. In addition to providing would-be homeowners with a chance to purchase their first home by way of a loan, these programs also provide assistance to victims of natural calamities and even elderly homeowners. Let's go into some of their key characteristics and differences.
Establishment
The Federal National Mortgage Association, also known as FNMA or Fannie Mae, was established as a stockholder-owned service. It was actually founded in 1938, although the United States Congress officially chartered it in 1968. Freddie Mac or FHLMC (Federal Home Loan Mortgage Corporation) on the other hand, was established in 1970 with the goal of increasing the United States market for mortgages. As for the Government National Mortgage Association, also known as GNMA or Ginnie Mae, it was created in 1968 with a similar goal of encouraging people to purchase homes.
Purpose
All three of these programs actually have the same basic goal, which is to purchase mortgages on the secondary market, thereby enabling banks and other lending institutions to provide more home loans to the public. In essence, these programs don’t actually provide funds to the public directly as much as they purchase mortgages from lending institutions and pass them on to the would-be buyer. Aside from that similarity, each of these programs has a specific purpose. Fannie Mae for instance has the goal of “securitizing” mortgages, making more funds available to lending institutions that cater to potential home buyers. Freddie Mac functions in pretty much the same way, although it purchases mortgages on the secondary market, and passes them on to investors. This also has the effect of freeing up more funds for lending institutions. Ginnie Mae for its part sources out global capital and funnels them into the home finance markets. This allows lending institutions to get a better return on their loans, which in turn frees up more funds to be channeled back into even more mortgage loans for potential home buyers.
Ownership And Funding
Fannie Mae and Freddie Mac are both essentially private entities, with ownership assigned to stockholders. Ginnie Mae for its part is owned, managed and insured by the government of the United States.
Summary
Fannie Mae
- Overseen by the U.S. Housing and Urban Development (HUD) department
- Was established as a stockholder-owned corporation
- Founded in 1938
- Came under government jurisdiction in 1968
Freddie Mac
- Falls under the HUD department
- Established in 1970
- Intended to strengthen the market for mortgages in the United States
Ginnie Mae
- Overseen by the HUD or Housing and Urban Development department as well
- Established in 1968 to encourage home ownership
