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Unformatted text preview: CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 5: GOVERNMENT PARTICIPATION & BACKED LOANS
Mechanism – FNMA raises capital through issuance of stock, both common and preferred; sales of debentures and notes, which are classified under “federal agency debt” in credit markets, even though they are not debts of the government; fees from commitments and guarantees; and sales of mortgages and securities backed by pools of mortgages. The corporation buys mortgages, including first and second liens, fixed– and adjustable–rate loans, graduated payment and other types of loans. A federally mandated ceiling for home loans is adjusted annually in accordance with a house price index. Commitment System – Lenders wishing to sell mortgages to FNMA may do so “over the counter” at posted prices with mandatory delivery of the mortgages, or may obtain a “standby” or “convertible” commitment from FNMA to take the mortgages within a specified period. Since 1981, most commitments have been limited to one or two months. Commitments may be obtained at posted prices or by bidding for them at biweekly auctions. For more information on Ginnie Mae please visit their web site at www.fanniemae.com FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) / FREDDIE MAC
The Federal Home Loan Mortgage Corporation was created by the Emergency Home Finance Act of 1970. FHLMC is owned by the 12 Federal Home Loan Banks to establish their own secondary mortgage market. It is the newest of the three government related agencies. The FHLMC or “Freddie Mac” is another quasi–public entity, which transforms pools of conventional mortgages to securities. Because Ginnie Mae included only FHA and DVA mortgages in its securities, there was a great need to develop a mortgage–backed security for conventional loans. In 1971, the Federal Home loan Mortgage Corporation, also known as Freddie Mac, introduced the first security backed by conventional loans. Freddie Mac is a subsidiary of the Office of Thrift Supervision (OTS), which supervises the federally chartered thrifts. As a government–chartered stockholder–owned corporation, FHLMC buys mortgages and sells them in the secondary market. Freddie Mac buys conventional loan...
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- Spring '10