From 1938 to 1968, the Federal National Mortgage Association (Fannie Mae) was the sole institution that bought mortgages from depository institutions, principally savings and loan associations, which encouraged more mortgage lending and effectively insured the value of mortgages by the US government. In 1968, Fannie Mae split into a private corporation and a publicly financed institution. The private corporation was still called Fannie Mae and its charter continued to support the purchase of mortgages from savings and loan associations and other depository institutions, but without an explicit insurance policy that guaranteed the value of the mortgages. The publicly financed institution was named the Government National Mortgage Association (Ginnie Mae) and it explicitly guaranteed the repayments of securities backed by mortgages made to government employees or veterans (the mortgages themselves were also guaranteed by other government organizations). To provide competition for the newly private Fannie Mae and to further increase the availability of funds to finance mortgages and home ownership, Congress then established the Federal Home Loan Mortgage Corporation (Freddie Mac) as a private corporation through the Emergency Home Finance Act of 1970. The charter of Freddie Mac was essentially the same as Fannie Mae's newly private charter: to expand the secondary market for mortgages and mortgage backed securities by buying mortgages made by savings and loan associations and other depository institutions.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") revised and standardized the regulation of both Fannie Mae and Freddie Mac. Prior to this act, Freddie Mac was owned by the Federal Home Loan Bank System and governed by the Federal Home Loan Bank Board, which was reorganized into the Office of Thrift Supervision by the Act. The Act severed Freddie Mac's ties to the Federal Home Loan Bank System, created an 18-member board of directors, and subjected it to oversight by the U.S. Department of Housing and Urban Development (HUD).
In 1995, Freddie Mac began receiving affordable housing credit for buying subprime securities, and by 2004, HUD suggested the company was lagging behind and should "do more."
Freddie Mac was put under a conservatorship of the U.S. Federal government on Sunday, September 7, 2008.
Read more about this topic: Freddie Mac
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