Fannie Mae and Freddie Mac REOs
Wednesday, May 21st, 2008Although real estate mortgages are funded through banks, mortgage bankers, and their financial lending institutions, in most cases the money actually comes from two giant secondary lenders: Fannie Mae and Freddie Mac.
These are quasi-public organizations that create a secondary market for residential real estate loans. This means that when a bank creates a mortgage, it can then “sell” that mortgage to Fannie Mae or Freddie Mac and recoup most of its investment, which it can then loan out again. It continues to service the loan (collect the payments) for a fee, although it can also sell this servicing to some other similar organization if it chooses. (This is why, if you’ve ever had one of these mortgages, you find that the lender to whom you make payments is constantly changing.)
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