Fannie Mae and Freddie Mac (GSEs)

What Are Fannie Mae and Freddie Mac?

Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation) are government-sponsored enterprises (GSEs). Congress created them, but they are shareholder-owned companies. Fannie Mae was first chartered by the federal government in 1938. Freddie Mac was chartered in 1970.

Their job, in the words of their regulator, is to bring liquidity, stability, and affordability to the mortgage market. They supply that liquidity to thousands of banks, savings and loans, and mortgage companies. Because the loans they buy must meet their underwriting standards, those standards carry wide influence over how lenders write mortgages.

How They Work

The GSEs work in the secondary mortgage market, where existing loans are bought and sold:

1. A bank or mortgage company makes a loan that meets GSE underwriting standards and falls under the yearly size limit. Such a loan is called a conforming loan.
2. Fannie Mae or Freddie Mac buys it. The lender gets cash back to lend again.
3. The GSE holds the loan or bundles it with others into a mortgage-backed security, guarantees timely payment, and sells it to investors.

Both companies also buy loans on apartment buildings. For 2026, FHFA capped each company’s multifamily loan purchases at $88 billion and required at least half of that business to be mission-driven affordable housing. Loans that finance workforce housing do not count against the cap. See GSE workforce housing lending.

Federal law says the two companies have an affirmative obligation to help finance affordable housing for low- and moderate-income families. FHFA enforces this through annual housing goals and the Duty to Serve rule, which covers manufactured housing, rural housing, and affordable housing preservation.

Conservatorship

On September 6, 2008, as the housing crash damaged their finances, FHFA placed both companies into conservatorship, a form of government control, with their boards’ consent. The U.S. Treasury supports them through senior preferred stock purchase agreements. FHFA, created that same year by the Housing and Economic Recovery Act, holds ultimate authority over their operations. In recent announcements the agency also calls itself U.S. Federal Housing. As of October 2026, FHFA’s website says both companies continue to operate under conservatorship.

Why It Matters for Workforce Housing

Some GSE products are built for buyers with modest incomes and little savings. Freddie Mac’s Home Possible mortgage, which the company describes as a product for low- and very low-income borrowers, allows a 3% down payment, and that money can come from an employer assistance program. The Federal Home Loan Banks, a separate GSE system that FHFA also supervises, fund the FHLBank Affordable Housing Program.

Criticisms and Limitations

The companies’ debts have never carried an explicit federal guarantee. Even so, the Congressional Research Service notes, investors widely believed before 2008 that the government would stand behind them, and when their finances weakened it did provide support. That history is central to the debate over private companies that rely on a public backstop. On the other side of the ledger, the same report says the GSEs’ role in the secondary market can translate into lower interest rates for borrowers. Whether and how to end the conservatorship is still unresolved.