Real Estate for the Newcomer (Part 2)
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Fannie Mae – an acronym (sort of) which stands for Federal National Mortgage Association (FNMA); a federally-chartered enterprise that is owned by a private stockholder. It purchases residential mortgages, converts them into securities, and then resells them to investors. It also supplies funds that the lenders may loan to those potential home buyers.
Freddie Mac – an acronym (again sort of) which stands for Federal Home Loan Mortgage Corporation (FHLM); it has the same function as Fannie Mae.
Mortgage insurance – policy that protects lenders against most or at least some of the losses that occurs when the borrower defaults on mortgage loan. This is primarily required for borrowers with a down payment of less than 20% of the home purchase price.
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