What exactly do Fannie and Freddie do?

[cv2]

Long time reader but first time poster. So be gentle to my ignorance 🙂

Yesterday I was shocked at the loss of 2B at Fannie. I had thought that Fannie only lent money with first mortgage with up to 80% LTV and some minimum FICO scores. Was I wrong?

If I am right, it simply means that this down market has a long way to go because even the “upper” section of the market is showing cracks.

Please chime in.

[cv2]

They also ONLY invest in conforming loans which excludes them from large CA metropolitans.

[cv2]

They also ONLY invest in conforming loans which excludes them from large CA metropolitans.

[cv2]

They also ONLY invest in conforming loans which excludes them from large CA metropolitans.

[cv2]

They also ONLY invest in conforming loans which excludes them from large CA metropolitans.

[cv2]

They also ONLY invest in conforming loans which excludes them from large CA metropolitans.

[HLS]

One thing that they do is buy loans from originators that meet their criteria, and package them into bonds which are sold to investors.

They loan up to 95% LTV with a single loan, with mortgage insurance required on loans above 80%.
The limit was $417,000 with a minimum credit score of 620.

Around 2002, one of the ratings agencies came up with the silly assumption that borrowers with a 1st and 2nd (to avoid mtg ins) were no more risky than single loans, which was the mistake of the century. They foolishly took it one step further and allowed 20% 2nds creating 100% financing, which FNMA & FHLMC never allowed.

FNMA mission:

Fannie Mae provides stability, liquidity, and affordability to the nation’s housing finance system under all economic conditions. We are a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves — and the private investors that fuel its service — to be a model company focused on service, reliability, and value.

Like all who participate in the housing market, Fannie Mae has a responsibility to help home buyers, homeowners, and communities through market challenges. We believe in the long term health of America’s housing market. The nation is growing and that growth will bring a renewed demand for housing and for responsible, sustainable mortgage lending. Fannie Mae will be there to help meet America’s changing housing needs.

[HLS]

One thing that they do is buy loans from originators that meet their criteria, and package them into bonds which are sold to investors.

They loan up to 95% LTV with a single loan, with mortgage insurance required on loans above 80%.
The limit was $417,000 with a minimum credit score of 620.

Around 2002, one of the ratings agencies came up with the silly assumption that borrowers with a 1st and 2nd (to avoid mtg ins) were no more risky than single loans, which was the mistake of the century. They foolishly took it one step further and allowed 20% 2nds creating 100% financing, which FNMA & FHLMC never allowed.

FNMA mission:

Fannie Mae provides stability, liquidity, and affordability to the nation’s housing finance system under all economic conditions. We are a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves — and the private investors that fuel its service — to be a model company focused on service, reliability, and value.

Like all who participate in the housing market, Fannie Mae has a responsibility to help home buyers, homeowners, and communities through market challenges. We believe in the long term health of America’s housing market. The nation is growing and that growth will bring a renewed demand for housing and for responsible, sustainable mortgage lending. Fannie Mae will be there to help meet America’s changing housing needs.

[HLS]

One thing that they do is buy loans from originators that meet their criteria, and package them into bonds which are sold to investors.

They loan up to 95% LTV with a single loan, with mortgage insurance required on loans above 80%.
The limit was $417,000 with a minimum credit score of 620.

Around 2002, one of the ratings agencies came up with the silly assumption that borrowers with a 1st and 2nd (to avoid mtg ins) were no more risky than single loans, which was the mistake of the century. They foolishly took it one step further and allowed 20% 2nds creating 100% financing, which FNMA & FHLMC never allowed.

FNMA mission:

Fannie Mae provides stability, liquidity, and affordability to the nation’s housing finance system under all economic conditions. We are a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves — and the private investors that fuel its service — to be a model company focused on service, reliability, and value.

Like all who participate in the housing market, Fannie Mae has a responsibility to help home buyers, homeowners, and communities through market challenges. We believe in the long term health of America’s housing market. The nation is growing and that growth will bring a renewed demand for housing and for responsible, sustainable mortgage lending. Fannie Mae will be there to help meet America’s changing housing needs.

[HLS]

One thing that they do is buy loans from originators that meet their criteria, and package them into bonds which are sold to investors.

They loan up to 95% LTV with a single loan, with mortgage insurance required on loans above 80%.
The limit was $417,000 with a minimum credit score of 620.

Around 2002, one of the ratings agencies came up with the silly assumption that borrowers with a 1st and 2nd (to avoid mtg ins) were no more risky than single loans, which was the mistake of the century. They foolishly took it one step further and allowed 20% 2nds creating 100% financing, which FNMA & FHLMC never allowed.

FNMA mission:

Fannie Mae provides stability, liquidity, and affordability to the nation’s housing finance system under all economic conditions. We are a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves — and the private investors that fuel its service — to be a model company focused on service, reliability, and value.

Like all who participate in the housing market, Fannie Mae has a responsibility to help home buyers, homeowners, and communities through market challenges. We believe in the long term health of America’s housing market. The nation is growing and that growth will bring a renewed demand for housing and for responsible, sustainable mortgage lending. Fannie Mae will be there to help meet America’s changing housing needs.

[HLS]

One thing that they do is buy loans from originators that meet their criteria, and package them into bonds which are sold to investors.

They loan up to 95% LTV with a single loan, with mortgage insurance required on loans above 80%.
The limit was $417,000 with a minimum credit score of 620.

Around 2002, one of the ratings agencies came up with the silly assumption that borrowers with a 1st and 2nd (to avoid mtg ins) were no more risky than single loans, which was the mistake of the century. They foolishly took it one step further and allowed 20% 2nds creating 100% financing, which FNMA & FHLMC never allowed.

FNMA mission:

Fannie Mae provides stability, liquidity, and affordability to the nation’s housing finance system under all economic conditions. We are a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves — and the private investors that fuel its service — to be a model company focused on service, reliability, and value.

Like all who participate in the housing market, Fannie Mae has a responsibility to help home buyers, homeowners, and communities through market challenges. We believe in the long term health of America’s housing market. The nation is growing and that growth will bring a renewed demand for housing and for responsible, sustainable mortgage lending. Fannie Mae will be there to help meet America’s changing housing needs.

[cv2]

Thanks, HLS.

So Fannie is quite “conservative” with LTV below 80% (95% with PMI), conforming loan and 620 FICO. Even with this relatively strict qualification, Fannie still lost $2B. I was surprised that nobody were talking about what this means for home prices.

I see two problems and none is good for future home prices.
1. The loss is substantial. with 20% cushion, Fannie still lost $2B. It means that home prices have dropped at least 20% nationally.
2. Fannie won’t be able to make more loans because of the losses. Congress may pressure it to make more loans to boost the housing market.

[cv2]

Thanks, HLS.

So Fannie is quite “conservative” with LTV below 80% (95% with PMI), conforming loan and 620 FICO. Even with this relatively strict qualification, Fannie still lost $2B. I was surprised that nobody were talking about what this means for home prices.

I see two problems and none is good for future home prices.
1. The loss is substantial. with 20% cushion, Fannie still lost $2B. It means that home prices have dropped at least 20% nationally.
2. Fannie won’t be able to make more loans because of the losses. Congress may pressure it to make more loans to boost the housing market.

[cv2]

Thanks, HLS.

So Fannie is quite “conservative” with LTV below 80% (95% with PMI), conforming loan and 620 FICO. Even with this relatively strict qualification, Fannie still lost $2B. I was surprised that nobody were talking about what this means for home prices.

I see two problems and none is good for future home prices.
1. The loss is substantial. with 20% cushion, Fannie still lost $2B. It means that home prices have dropped at least 20% nationally.
2. Fannie won’t be able to make more loans because of the losses. Congress may pressure it to make more loans to boost the housing market.

[cv2]

Thanks, HLS.

So Fannie is quite “conservative” with LTV below 80% (95% with PMI), conforming loan and 620 FICO. Even with this relatively strict qualification, Fannie still lost $2B. I was surprised that nobody were talking about what this means for home prices.

I see two problems and none is good for future home prices.
1. The loss is substantial. with 20% cushion, Fannie still lost $2B. It means that home prices have dropped at least 20% nationally.
2. Fannie won’t be able to make more loans because of the losses. Congress may pressure it to make more loans to boost the housing market.

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