Review Mortgage Lenders

Fannie Mae

Fannie Mae-Buster Brown

US R&B Chart #1 Hit in 1960, this song belongs to Buster Brown.

Through Fannie Mae, US taxpayers provide backing for some rental home giants

Some renters of homes owned by the “billion-dollar landlords” highlighted in an ABC News investigation might be surprised to learn that they, as taxpayers, have a stake in their corporate landlord’s business.

That’s because of a new initiative by the Federal Housing Finance Agency (FHFA), in which Fannie Mae guarantees mortgage-backed securities on rental homes. (Fannie Mae, along with Freddie Mac , is a government-sponsored enterprise that securitizes mortgages, allowing private lenders to put more of their money back into lending.)

The first deal went to Invitation Homes, founded by financier Stephen Schwarzman, a onetime adviser of President Donald Trump and chairman and CEO of The Blackstone Group private equity firm. In January, it was disclosed that Invitation got $1 billion deal from Fannie Mae to back up its mortgages during the tail end of the Obama administration, thus helping Invitation lower its borrowing costs and acquire more units.

Bill Ackman: Fannie, Freddie Have Increasing Odds Of A Positive Resolution

Fannie Mae and Freddie Mac stocks are trading lower by roughly 30 percent each in what has been an exceptionally strong U.S. stock market this year. But in his most recent letter to investors, Ackman reassured Fannie and Freddie investors that the two government-sponsored enterprises are approaching a positive resolution.

Ackman listed four developments for Fannie and Freddie that have taken place over the last three months that he said are positive: 

A Republican National Committee resolution on September 13 calls for recapitalizing the GSEs. A Sept. 13 letter from six Democratic Senators urging Treasury Secretary Steve Mnuchin and the FHFA director to recapitalize the GSEs. Positive testimony from FHFA Director Mel Watt hinting at potential capital retention in the near future. Comments from Mnuchin that Fannie and Freddie would no longer be in conservatorship by the end of his four-year term in office.

“We believe that the current share prices do not reflect the significant momentum that continues to build for a bipartisan resolution of their status that would be highly profitable for the government and other shareholders, protect the taxpayer against future bailouts and ensure that the dream of home ownership remains widely achievable for generations to come,” Ackman wrote.

Fannie Mae?

What is the difference between Fannie Mae and Freddie Mac in terms of their purposes and in terms of the assets they hold? Are these two essentially identical?

The main difference is how they came about. Freddie Mac is the result of the S&L bailout during the 80s. Fannie Mae's inception dates back to the time of the New Deal. They both, I believe, operate in a similar fashion.