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Fannie Mae Vs Freddy Mac Case Study

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Fannie Mae vs. Freddie Mac: Similarities and Differences
Fannie Mae and Freddie Mac are two companies established by the government to boost the housing market. These organizations are not only different in their genesis, but also in their target market and products. Taking an example, Fannie Mae buys mortgages from retail banks while Freddie Mac buys them from smaller thrift ones. (Fannie Mae vs. Freddie Mac)
The Roosevelt Administration established Fannie Mae in 1938 as a government agency. It bought Federal Housing Administration (FHA) mortgages and included them in its books. In 1968, it became a Government-Sponsored Enterprise (GSE). This meant that whereas the stockholders owned it, the U.S. government guaranteed its loans. That turned …show more content…

By the fourth quarter of 2007, Freddie Mac reported a $2 billion loss. In response, the agency raised $6 billion in new capital through the sale of preferred stock to shore up its reserves. However, this was not enough.
Nevertheless, They Did not Cause the Mortgage Crisis
Fannie Mae and Freddie Mac did not cause the subprime mortgage crisis. Their portfolios held a lower percentage of subprime loans than that of commercial and investment banks. Nonetheless, they did increase their acquisition of these loans to keep their shareholders happy in what had become a very competitive marketplace. Before the financial crisis, they owned or guaranteed $1.4 trillion, or 40 percent, of all United Stated mortgages. Of that, only $168 billion was in subprime mortgages,
They are Now Owned by the Government: What It Means
The government spent at least $150 billion to keep Fannie Mae and Freddie Mac mortgage companies functioning. It has been managing the two GSEs since September 2008, when the Federal Housing Finance Agency (FHFA) put them into receivership. This was supposed to be temporary, but housing conditions have never improved enough to release the government of this

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