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Briefing

Government Sponsored Enterprises

Appears in: North America, Finance and Banking, United States, Banks, Nonbank Intermediaries, Real Estate and Mortgage Finance

Critical Issues

Background:

Fannie Mae and Freddie Mac (F&F) are publicly traded government-sponsored enterprises (GSEs) that operate with unique Congressional charters. In order to fulfill their public mandate, F&F engage in two principal activities: 1) "mortgage securitization business" (an off-balance sheet operation): converting lenders’ conforming mortgages into tradable mortgage-backed securities (MBS) and guaranteeing the timely payment of interest and principal against a periodical guarantee fee; and 2) "investment portfolio business" (an on-balance sheet business): issuing AAA-rated agency debt in order to re-purchase MBS and/or whole mortgages in the secondary market for F&F’s own retained mortgage portfolios.

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Associated Readings

Blogs RGE Analysts' EconoMonitor Elisa Parisi-Capone Jul 14, 2008 How to Solve The GSE Crisis? Overview of Long-Term Solutions Analysis RGE Analysis Elisa Parisi-Capone Feb 04, 2010 An Analysis of the Systemic Risks Posed by Fannie Mae and Freddie Mac (RGE Analysis)

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