The Federal National Mortgage Association (Fannie Mae, created in 1938) and the Federal Home Loan Mortgage Corporation (Freddie Mac, established in 1970) are government-sponsored enterprises (GSEs) in their eighth year of conservatorship under the FHA.
That is an exceedingly long arrangement, by historical standards. And it’s an arrangement that the incoming President Donald J. Trump and his Treasury Secretary pick, Steven Mnuchin, hope to end. Depending on who you ask, that could have huge ramifications for housing markets, or none at all.
Spencer Cowan, a research consultant and former head of the Woodstock Institute’s applied research for economic security program, says that in order to speculate on the fate of Fannie Mae and Freddie Mac, it is imperative to first understand the role they play in our current mortgage market.
“You need to know how it all works,” Cowan says.