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Fannie Mae, Freddie Mac and the crisis in US mortgage finance

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  • Lawrence J. White

Abstract

Fannie Mae and Freddie Mac are two large companies – ‘government-sponsored enterprises' (GSEs) – that are heavily involved in the secondary market for residential mortgages. The GSEs' expansion into lower quality mortgages, especially during the middleyears of the 2000s, was supported by insufficient capital and led to their insolvency and conservatorships on 6 September 2008 – which essentially placed them under full government control. As of the spring of 2011 they remain as mainstays of the US residential mortgage market; but they also remain in conservatorships. Their future and the future of mortgage finance is an active topic of political debate.

Suggested Citation

  • Lawrence J. White, 2011. "Fannie Mae, Freddie Mac and the crisis in US mortgage finance," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    • Handle: RePEc:pal:dofeco:v:5:year:2011:doi:3854
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    More about this item

    Keywords

    capital; Fannie Mae; Freddie Mac; government-sponsored enterprises; implicit guarantee; leverage; mortgage-backed securities; mortgage finance; secondary mortgage market;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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