Fannie and Freddie: All You Wanted to Know ...
Credit Management › Nbr. 10/2008, October 2008
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Summary
The western world's obsession with brand awareness leaves Americans totally unsurprised to find that two American creations, the materteral Fannie Mae and avuncular Freddie Mac, describe worthy institutions that help the mortgage market function. The surprise is that these cosy institutions are massive and own or guarantee about half of the US' $12 trillion mortgage market. Equally surprising is that they are deep in trouble. By March 2008 the Office of Federal Housing Enterprise Oversight thought that reducing capital requirements might loosen the mortgage logjam. It reduced their capital requirements which released up to $200 billion into the mortgage finance market. A lot of bank assets held by Fannie and Freddie are in the form of preferred shares, which are a hybrid of debt and equity that pays interest above equivalent debt instruments. On August 27, Fannie and Freddie did their best to keep everyone's spirits up by selling some short-term debt.
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Fannie and Freddie: All You Wanted to Know ...
The western world's obsession with brand awareness leaves us totally unsurprised to find that two American creations, the materteral Fannie Mae and avuncular Freddie Mac, describe worthy institutions that help the mortgage market function. Aunty Fannie Mae actually comes from a creative pronunciation of the letters denoting the Federal National Mortgage Association (FNMA). Uncle Freddie Mac comes from a similar liberty taken with the l...
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