Fannie Mae and Freddie Mac are by far the largest players in the highly liquid secondary loan market. This being said, the two do not originate or issue loans. Instead, they buy large pools of loans from traditional originators, thereby injecting additional liquidity into the real estate lending markets.
Fannie Mae’s originators are known as Delegated Underwriter Servicers (DUS). To streamline the application and approval process, Fannie Mae gives DUS’s a strict window in which they can extend loans. If the borrower or project does not meet these requirements, then the DUS must consult with Fannie Mae before offering financing.
Freddie Mac, on the other hand, originates through any number of approved mortgage banking firms. It is important to note that while a loan originator may qualify for Fannie Mae programs, they may not be accepted by Freddie Mac.
Fannie Mae and Freddie Mac lenders offer fixed rate financing for 5, 7, and 10 year terms, usually with a 30 year amortization. They also will price as floaters over LIBOR. While they primarily originate multifamily loans, Fannie and Freddie also are active in financing senior housing, mobile home parks, and student housing.
When Fannie Mae and Freddie Mac became insolvent in 2008, the government took over the private shareholders’ position, and regained control of each agency.