Government and Legal Aspects of Mortgages
Even though the United States government doesn't give mortgages, they have several agencies and programs related to the mortgage industry.Federal Mortgage Agencies
The income of lenders mostly comes from their fees, points, and other loan charges, so the more loans they can make, the more they earn. Selling their mortgages to the secondary market allows them to get cash to make new loans.There are two federally chartered corporations that purchase the largest percentage of home mortgages: Freddie Mac and Fannie Mae. These are nicknames for the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, respectively. Both have requirements that lenders have to meet in order to sell their loans.
Freddie Mac
Freddie Mac is an agency that purchases conventional first mortgages as well as secondary mortgages guaranteed by the FHA or VA from members of the Federal Reserve System and the Federal Home Loan Bank System, and then sells them to investors in order to generate funds for lenders to grant new loans.Congress chartered the Federal Home Loan Mortgage Corporation in 1970 in order to keep funds available to lenders and thereby encourage affordable homeownership; their policies are intended to serve the needs lenders. Freddie Mac is under the oversight of the U.S. Department of Housing and Urban Development (HUD).
Fannie Mae
Fannie Mae is also chartered by Congress, and is the largest provider of home mortgage finances. Like Freddie Mac, they purchase residential mortgages and then resell them, providing lenders with cash to make new loans. They are a privately owned corporation, but are under the oversight of the Federal Housing and Urban Development Office (HUD).[Continued: Government / Legal, Part 2]