When we start to talk about mortgages and lending, there are a lot of terms that pop up like ARMs, interest rates, fixed rates, conventional, equity, closing dates, etc. Then there are a few names tossed around, too – Fannie Mae, Ginnie Mae and Freddie Mac. These aren’t celebrities walking the red carpet of the lending world, but rather government-sponsored mortgage companies. Today I’m going to focus on the “ladies,” Fannie and Ginnie.
What’s With These Mortgage Company Names?
It may seem odd to have mortgage companies with such southern-sounding names, but in actuality, the names are acronyms of sorts.
Fannie Mae stands for Federal National Mortgage Association. FNMA became fondly referred to as Fannie Mae. Ginnie Mae stands for Government National Mortgage Association, with the name derived from the acronym of GNMA. So now that we are on a first-name basis, let’s discuss what each one does.
How Did These Companies Come About?
Each of the Maes was founded in a unique way for a specific purpose. Here’s a bit on their history:
- Fannie Mae – Back in 1938, the Federal National Mortgage Association, affectionately known as Fannie Mae, was established as a portion of Franklin D. Roosevelt’s New Deal. Its creation was part of an effort to secure mortgages through mortgage-backed securities. These mortgage-backed securities are mortgage loans that are bundled and sold to investors. As a result, FDR helped increase the availability of lenders in the U.S., because lenders were freed up from only using personal or private funding for home loans. It gave them options! Fannie Mae and the New Deal made homeownership more accessible to Americans. Three cheers for that!
- Ginnie Mae – The Government National Mortgage Association, or Ginnie Mae, came along 30 years later in 1968. The idea was similar to FDR’s, aiming to create Ginnie Mae in order to make homeownership a reality for more people through increased access to mortgage loans. This program is an extension of the Department of Housing and Urban Development and offers non-conventional loans like FHA, VA and USDA loans. These loans are government insured, meaning that if you default on your loan, the government has your back. The interest rates are typically lower on government-insured loans, and they are usually easier to obtain approval for.
How Do Fannie and Ginnie Affect Me?
Regardless of whether or not you seek or receive a mortgage through one of these associations, Fannie and Ginnie do affect your mortgage. These organizations set guidelines and regulations that all mortgage lending institutions must abide by; this applies to private banks and direct lenders.
We should all be interested in the health of these organizations, because without them, fewer Americans would have access to homeownership and when they release new regulations, it affects all of us through our mortgage terms.
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