What is Fannie Mae and Freddie Mac. What was their mission, and how Research Paper

What is Fannie Mae and Freddie Mac. What was their mission, and how did it influence the whole financial meltdown in 2008 What is going on right now with them - Research Paper Example This in turn, made ownership of affordable housing easily and widely available. The company allows its clients to reinvest their property and assets in order to earn more profit and thus, increase the number of money lenders in the market. Fannie Mae also assisted banks in issuing a greater number of housing loans. Since 1968, Fannie Mae has become a publicly traded organization and has held the monopoly of the mortgage market for as long as thirty years since its inception. In 1970, Fannie Mae acquired a higher status in the market and now got the authority to buy private mortgages. Also, the federal government created the another similar firm, the Federal Home Loan Mortgage Corporation, more commonly known as Freddie Mac in 1970 with the aim to compete with and thus help improve the standards of Fannie Mae in the market (Kate). The company started its work by buying mortgages in the market, pooling them up and selling them to the investors with a ‘backing security’. This allowed the lending money available in the market to increase and hence, more home purchases to be available for the customers. Together, the two companies brought great and rapid changes to the US economy. They formed a type of liquid market for the mortgages which defined a very important new rule in the market according to which, the financial institutions did not have to hold on to the mortgages and could easily sell them in the market (Peter 18). In this way, the funds of the companies were freed and they could use it to make further additional mortgages. Thus, the Fannie Mae and Freddie Mac together had a very positive impact on the business market (Duhigg, Friday). Rates of home ownership were also increased in the country and the companies earned large profits in the mere space of two decades. They raised enough money that allowed them to buy mortgages from a number of varied sources which included both pension and mutual funds and also, the