Freddie Mac vs Fannie Mae

Differences Between Freddie Mac vs Fannie Mae

We study here the differences between Freddie Mac vs Fannie Mae. If you’re on the hunt for a new house or have bought one in the past, you’ve probably come across Fannie Mae and Freddie Mac, and wondered what role they might play in helping you move into your dream home.

Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp., are both government-sponsored enterprises, or GSEs for short.

One of the main ways these two GSEs benefit borrowers across the country is by helping to keep affordable mortgages widely available. They keep mortgage money flowing, guarantee home loans to make them less risky to investors and offer mortgages designed to help middle- and lower-income buyers get homes.

“Their mission is to expand, promote and support homeownership,” Kapfidze said.

What is a GSE?

The federal government created GSEs to help make it easier to buy homes. In the early 1900s, single-family homeownership was becoming more important to the U.S. economy, but it was still difficult to get a mortgage to buy a house.

Banks would make home loans, but buyers often had to put at least 50% down and repay the loan within five years. These terms put mortgages out of reach of many consumers.

While GSEs were created by Congress to address this problem, they are not government agencies, and they’re not run by the federal government. GSEs are private companies that are important to the U.S. economy and play a role in the public good. GSEs are privately owned, and each one answers to a board of directors.

Today, Fannie Mae and Freddie Mac help mortgage markets work more smoothly by making mortgages more affordable, making more cash available for home loans and helping to keep mortgage markets stable.

However, borrowers don’t interact directly with Fannie Mae or Freddie Mac, Kapfidze said. “You get your loan from your lender, and the lender’s the one dealing with Fannie and Freddie,” he said.

What Fannie and Freddie do

Fannie Mae and Freddie Mac help mortgage markets work better by performing several important functions. For example, Fannie and Freddie:

  • Buy mortgages from lenders. Fannie Mae and Freddie Mac buy mortgages from banks and other lenders. The lenders can then use the money from those sales to make more loans.
  • Guarantee mortgage securities. After buying the mortgages, Fannie and Freddie sometimes package them into mortgage-backed securities (MBS) that can be sold to investors. Fannie and Freddie make these investments safer by guaranteeing that the mortgages will be paid on time. “It’s like an insurance program that they offer,” Kapfidze said. “So if somebody defaults on a loan, Fannie and Freddie make sure that the investors get paid.”
  • Provide liquidity to the housing market. Fannie and Freddie offer banks, mortgage companies and other lenders a steady, ongoing supply of cash that can be used to make home loans.
  • Help make housing more affordable. Both Fannie and Freddie work with lenders to offer affordable mortgages with low down payments for buyers who might have a hard time qualifying for a conventional mortgage. They also offer programs that help both homeowners and renters stay in their homes.
  • Add stability to mortgage markets. Fannie Mae and Freddie Mac help to keep mortgage markets stable during recessions and other tough times in which it becomes harder to borrow and some homeowners are at risk of losing their homes.

Fannie Mae

Congress created Fannie Mae in 1938 in response to a housing crisis during the Great Depression. At the time, it was common to buy homes with short-term loans that did not offer the best terms, and many Americans lost their homes during the Depression. Fannie Mae made it possible for banks to offer 30-year mortgages with fixed interest rates that made it easier for Americans to buy homes.

The formation of Fannie Mae was one government response to the economic challenges that the country had gone through, Kapfidze said. “The idea was, let’s help people build wealth and be able to finance and buy homes,” he said.

Fannie Mae offers the HomeReady® Mortgage, and other mortgage programs, to help low- and moderate-income buyers get affordable mortgages. Fannie Mae also offers shared equity programs to let low-income buyers purchase homes at below-market rates. And Fannie Mae helps renters by making financing available to investors to buy multifamily buildings and offering affordable leases to help renters stay in foreclosed homes.

Freddie Mac

Freddie Mac was chartered by Congress in 1970, when it began buying loans from lenders to allow them to make more loans. Freddie Mac currently buys conventional mortgage loans from single-family homes and funds loans for multifamily housing units, most of which are rented at rates affordable to low- and moderate-income tenants. Freddie Mac also adds to the liquidity of the mortgage markets by investing in mortgage-related securities.

Freddie Mac offers a variety of mortgage programs, including the Home Possible® Mortgage for low- and moderate-income homebuyers and no-cash-out refinancing, as well as the HomeOne(SM) Mortgage for first-time homebuyers. Freddie Mac also works with lenders to help struggling borrowers avoid foreclosure and keep their homes.

HomeReady and Home Possible

Both Fannie Mae and Freddie Mac offer mortgage programs to help borrowers with low to moderate incomes. Here are details on two of these programs:

HomeReady Mortgage

The HomeReady Mortgage from Fannie Mae is available to homebuyers with low to moderate income and a credit score of at least 620. There are no income caps if buying in a low-income census tract, but in other areas, the maximum income is 100% of the area median income (AMI). The loan also is available for homeowners who want to refinance their current loan. The benefits of the HomeReady Mortgage include:

  • A low down payment of 3%
  • Down-payment funds can come from multiple sources, including gifts. “Typically you would have to have a down payment that’s from your own funds, but this helps folks access down payments in different ways,” Kapfidze said.
  • The borrower can cancel mortgage insurance when his or her loan balance reaches less than 80% of home value. Mortgage insurance is typically required when borrowers put less than 20% down on a home, and being able to nix it as soon as equity rises high enough can save homeowners a lot of money over the life of the loan.

HomeReady borrowers must complete an online homeowner education course in order to qualify for the loan.

Home Possible Mortgage

The Home Possible Mortgage from Freddie Mac is available to low- and moderate-income homebuyers. There are no income limits when buying in low-income census tracts. Otherwise, income can be no higher than 100% of AMI. Pros of the program include:

  • Down payment as low as 3%
  • Borrowers can use flexible funding sources, including cash gifts, employee assistance programs and even “sweat equity” to help pay their down payment and closing costs
  • Can apply with co-borrowers who will not live in the home
  • Home borrowers with no credit score may still be able to qualify
  • The borrower can cancel mortgage insurance after loan balance drops below 80% of home value

Photo of author

Author D Laidler

I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go.  I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.

Thank you for visiting

Leave a Comment

Business Finance

About Us

Business Finance News is a brand oriented to business owners and dedicated to analyzing and comparing the cost and conditions of B2B procurement of goods and services through free quotes delivered by business partners.


Address 5050 Quorum Drive, (75254) Dallas TX

telephone 844-368-6072


A personal loan is a medium term loan with a fixed interest rate that is repaid in equal monthly payments and it's usually limited to 24 months. Loan offers and eligibility depend on your individual credit profile. Our lenders can help you obtain as much as $3,000 depending on the lender, your state and your financial situation.

The owner and operator of is not a lender and is not involved into making credit decisions associated with lending or making loan offers. Instead, the website is designed only for a matching service, which enables the users contact with the lenders and third parties. The website does not charge any fees for its service, nor does it oblige any user to initiate contact with any of the lenders or third parties or accept any loan product or service offered by the lenders. All the data concerning personal loan products and the industry is presented on the website for information purposes only. does not endorse any particular lender, nor does it represent or is responsible for the actions or inactions of the lenders. does not collect, store or has access to the information regarding the fees and charges associated with the contacting lenders and/or any loan products. Online personal loans are not available in all the states. Not all the lenders in the network can provide the loans up to $3,000. cannot guarantee that the user of the website will be approved by any lender or for any loan product, will be matched with a lender, or if matched, will receive a personal loan offer on the terms requested in the online form. The lenders may need to perform credit check via one or more credit bureaus, including but not limited to major credit bureaus in order to determine credit reliability and the scopes of credit products to offer. The lenders in the network may need to perform additional verifications, including but not limited to social security number, driver license number, national ID or other identification documents. The terms and scopes of loan products vary from lender to lender and can depend on numerous factors, including but not limited to the state of residence and credit standing of the applicant, as well as the terms determined by each lender individually. 


APR (Annual Percentage Rate) is the loan rate calculated for the annual term. Since is not a lender and has no information regarding the terms and other details of personal loan products offered by lenders individually, cannot provide the exact APR charged for any loan product offered by the lenders. The APRs greatly vary from lender to lender, state to state and depend on numerous factors, including but not limited to the credit standing of an applicant. Additional charges associated with the loan offer, including but not limited to origination fees, late payment, non-payment charges and penalties, as well as non-financial actions, such as late payment reporting and debt collection actions, may be applied by the lenders. These financial and non-financial actions have nothing to do with, and has no information regaining whatsoever actions may be taken by the lenders. All the financial and non-financial charges and actions are to be disclosed in any particular loan agreement in a clear and transparent manner. The APR is calculated as the annual charge and is not a financial charge for a personal loan product. 

Late Payment Implications

It is highly recommended to contact the lender if late payment is expected or considered possible. In this case, late payment fees and charges may be implied. Federal and state regulations are determined for the cases of late payment and may vary from case to case. All the details concerning the procedures and costs associated with late payment are disclosed in loan agreement and should be reviewed prior to signing any related document. 

Non-payment Implications

Financial and non-financial penalties may be implied in cases of non-payment or missed payment. Fees and other financial charges for late payment are to be disclosed in loan agreement. Additional actions related to non-payment, such as renewals, may be implied upon given consent. The terms of renewal are to be disclosed in each loan agreement individually. Additional charges and fees associated with renewal may be applied. 

Debt collection practices and other related procedures may be performed. All the actions related to these practices are adjusted to Fair Debt Collection Practices Act regulations and other applicable federal and state laws in order to protect consumers from unfair lending and negative borrowing experience. The majority of lenders do not refer to outside collection agencies and attempt to collect the debt via in-house means. 

Non-payment and late payment may have negative impact on the borrowers’ credit standing and downgrade their credit scores, as the lenders may report delinquency to credit bureaus, including but not limited to Equifax, Transunion, and Experian. In this case the results of non-payment and late payment may be recorded and remain in credit reports for the determined amount of time.