What is the Difference Between Fannie Mae and Freddie Mac?

Fannie Mae and Freddie Mac are both government-sponsored enterprises (GSEs) created by the U.S. Congress to provide liquidity, stability, and affordability to the mortgage market. They buy and sell home loans on the secondary mortgage market, ensuring that banks and mortgage companies have access to funds on reasonable terms. Despite their similarities, there are some key differences between the two entities:

• Mortgage Sourcing: The primary difference between Fannie Mae and Freddie Mac is the types of lenders they source their mortgages from. Fannie Mae buys mortgages from larger, commercial banks, while Freddie Mac buys them from much smaller banks.
• Intended Purpose: Fannie Mae was created in 1939 to combat the lack of affordable housing during the Great Depression, while Freddie Mac was established in 1970 with a similar purpose of ensuring reliable, affordable mortgage funds nationwide.
• Loan Programs: Fannie Mae and Freddie Mac offer different loan programs. Fannie Mae's HomeReady program targets buyers who make no more than 80% of the median income in their area, while Freddie Mac's Home Possible program permits down payments as small as 3%.

Although they have different histories and sources of mortgages, Fannie Mae and Freddie Mac serve similar purposes in the mortgage market. They both help make affordable financing available to home buyers by providing mortgage lenders with the necessary funds.

Comparative Table: Fannie Mae vs Freddie Mac

Fannie Mae and Freddie Mac are government-sponsored entities (GSEs) that play crucial roles in ensuring the stability and affordability of the mortgage market. While they share similar objectives, there are some key differences between them:

Despite these differences, both Fannie Mae and Freddie Mac share a common mission to ensure liquidity, stability, and affordability in the mortgage market, enabling millions of Americans to become homeowners.