Erica Liu
Secondary Mortgage Market
 The market for the sale of securities or bonds
collateralized by the value of mortgage loans
 Ensure liquidity in the market
 Redistribute funds across the nation
National Housing Act of 1934
 Franklin Roosevelt’s New Deal
 Relief, Recovery, and Reform after Great Depression
 Make housing and home mortgages more affordable
 Protect lenders from the risk of default
Federal Housing Administration
 Assist in the construction, acquisition, and/or
rehabilitation of residential properties
 Regulate rate of interest and terms of mortgages
 Insure mortgages
 Increase the number of people who can afford down
payment and monthly mortgage payments
 Increase the size of market for single family homes
Federal National Mortgage
Association
 1938 – Founded as a government agency
 Establish a secondary mortgage market
 Bought FHA insured loans from private lenders
 Lenders more inclined to extend mortgage credit
 Equalize supply and demand of funds in capital rich
and capital poor areas
World War II
 1944 - Servicemen's
Readjustment Act
(GI "Bill of Rights”)
 1949 – Fannie Mae authorized
to purchase mortgages
insured by the Veteran’s
Administration
VA Home Loan Program
 End of WW II, troops returned home from overseas
 Increased demand for housing and financing
 Designed to help members of the U.S. armed forces
readjust to civilian life after war
 Federally guaranteed home loans to help veterans buy
houses and reestablish good credit
Housing and Urban Development
Act of 1968
 Fannie Mae becomes a government sponsored
enterprise (GSE)
 sold to private shareholders
 Fannie Mae split into two organizations
Government National Mortgage
Association
 Government-owned corporation within the
Department of Housing and Urban Development
 Securitize loans insured by the FHA and VA
 Government maintains control over secondary market
for federally insured mortgages
Mortgage Backed Securities
 Agency pass through securities
 Issued by approved lenders
 Agency guarantees timely
payment

Ginnie Mae - only MBS to carry
the “full faith and credit guaranty”
of the United States government
Federal Home Loan Mortgage
Corporation
 1970 - Emergency Home
Finance Act
 Publicly owned GSE
 Expand secondary
mortgage market and
eliminate perceived
monopoly of Fannie Mae
Role of GSE’s
 1972 – Fannie Mae and Freddie Mac began purchasing
“conventional” mortgages
 Mortgages not guaranteed by FHA or VA
 Loans required insurance from new Private Mortgage
Insurance companies
 Can buy or sell any type of residential mortgage
 Mortgages packaged into securities are restricted to
government loans and those that satisfy underwriting
guidelines (conforming conventional loans)
What’s The Difference?
 GSE’s purchase mortgages
 Freddie Mac - purchase loans from savings and loan
associations
 Fannie Mae -focused on banks and other mortgage
finance companies
 Ginnie Mae only issues guarantee
Sources
 http://www.ginniemae.gov/about/history.asp?Section=About
 http://www.fundinguniverse.com/company-histories/Fannie-Mae-CompanyHistory.html
 http://www.cbo.gov/ftpdocs/120xx/doc12032/12-23-FannieFreddie.pdf
 http://www.encyclopedia.com/topic/Federal_National_Mortgage_Association.aspx
 http://www.referenceforbusiness.com/history2/27/Freddie-Mac.html
 http://www.themonticellogroup.com/American_Mortgage_Market.pdf
 http://www.va-home-loans.com/history_VA_loan.htm
Questions?