Fannie Mae does not make home loans directly to consumers, but rather functions as a leading participant in the U.S. secondary mortgage market. By purchasing and securitizing mortgages, Fannie Mae facilitates liquidity in the primary mortgage market by ensuring that funds are consistently available to the institutions that do lend money to home buyers.
The Federal Home Loan Mortgage Corporation (FHLMC) was created in 1970 to expand the secondary market for mortgages in the U.S.. Along with other GSEs, Freddie Mac buys mortgages on the secondary market, pools them, and sells them as mortgage-backed securities to investors on the open market. This secondary mortgage market increases the supply of money available for mortgages lending and increases the money available for new home purchases.
The name “Freddie Mac” was a creative acronym of the company’s full name that had been adopted officially for ease of identification.
On Sept. 7, 2008, James Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA.