What’s the difference between Fannie Mae and Freddie Mac?

June 25, 2024

Here’s what you need to know about the two major players behind the scenes of the mortgage industry.

Fannie Mae and Freddie Mac are both home mortgage companies created by the U.S. Congress. They are also both federally backed and provide liquidity, stability and affordability to the mortgage market by offering readily available access to capital and guarantees to many banks, mortgage companies and other financial institutions.

The difference between Fannie Mae and Freddie Mac

While both are better known by their nicknames, Fannie Mae and Freddie Mac have more official titles: Fannie Mae is the Federal National Mortgage Association (FNMA) and Freddie Mac is the Federal Home Loan Mortgage Corporation (FMCC).

How they work

Neither Fannie Mae nor Freddie Mac provide mortgages directly to homebuyers. Instead, homebuyers take out a loan from a mortgage lender. The lender can then choose to sell the loan to Fannie or Freddie, assuming the loan is eligible. 

While there are many similarities between the two federally backed mortgage entities, there are also some fundamental differences. Let’s break it down. 

In general, Fannie Mae tends to buy loans from larger commercial banks and lenders. Freddie Mac usually buys loans from smaller banks or credit unions. This is the primary difference between the two. 

Fannie Mae has also been around about 30 years longer than Freddie Mac. Fannie Mae was created at the end of the Great Depression in the late 1930s to offer a more dependable source of funding for homebuyers. It also led to the long-term, fixed rate mortgage that is still most popular today. 

In the early 1970s, Freddie Mac was created to alleviate interest rate risk for banks in the secondary mortgage market where investors were buying and selling home loans. 

Today, both are responsible for promoting access to mortgage credit by increasing the liquidity of mortgage investments and making more funding available for residential mortgage financing. They are also responsible for maintaining stability in the secondary market for residential mortgages and generally keeping the U.S. mortgage market running smoothly.

 

Get more insights about the housing market from a U.S. Bank mortgage loan officer. 

Related content

What is CSDR, and how will you be affected?

At your service: outsourcing loan agency work

Mortgage buydowns and subsidies in today’s talent-focused relocation policies

Treasury management innovations earn Model Bank awards

Sustainability + mobility: Trends and practical considerations

Future-proofing healthcare treasury through automation

Automate escheatment for accounts payable to save time and money

Avoiding the pitfalls of warehouse lending

CRE trends

A checklist for starting a mobility program review

Why Bond Issuers Should Consider a Successor Trustee

ABL mythbusters: The truth about asset-based lending

Easing complex transactions: Project finance case studies

Easier onboarding: What to look for in an administrator

The reciprocal benefits of a custodial partnership: A case study

Crack the Swift code for sending international wires

Ways prepaid cards disburse government funds to the unbanked

Optimizing treasury management

Automating healthcare revenue cycle

Changes in credit reporting and what it means for homebuyers

Look to your custodian in times of change

Tapping into indirect compensation to recruit foreign talent

Why other lenders may be reaching out to your employees

How institutional investors can meet demand for ESG investing

Managing complex transactions: what your corporate trustee should be doing

High-cost housing and down payment options in relocation

Why retail merchandise returns will be a differentiator in 2022

Digital processes streamline M&A transactions

4 benefits of independent loan agents

Save time with mobile apps for business finances

Middle-market direct lending: Obstacles and opportunities

How RIAs can embrace technology to enhance personal touch

Best practices for optimizing the tech lifecycle

What corporate treasurers need to know about Virtual Account Management

Work flexibility crucial as municipalities return to office

An asset manager’s secret to saving time and money

Overcoming the 3 key challenges of a lump sum relocation program

Crypto + Relo: Mobility industry impacts

For today's relocating home buyers, time and money are everything

Webinar: CRE Digital Transformation – Balancing Digitization with cybersecurity risk

Technology strategies to complement your business plan

How jumbo loans can help home buyers and your builder business

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.