GSEs stand for “Government-Sponsored Enterprises.” They are financial institutions established by the United States government but operated independently. GSEs play a critical role in the country’s financial and mortgage markets. Their primary function is to provide stability and liquidity to these markets, making it easier for banks and lenders to offer loans to consumers.
The two most prominent GSEs in the United States are:
- Fannie Mae (Federal National Mortgage Association): Fannie Mae primarily focuses on the housing market, particularly the secondary mortgage market. It purchases and guarantees mortgages from lenders, which helps ensure that banks have a steady source of funds for lending to homebuyers.
- Freddie Mac (Federal Home Loan Mortgage Corporation): Like Fannie Mae, Freddie Mac operates in the secondary mortgage market. It purchases, guarantees, and securitizes mortgages, providing additional liquidity to the housing finance system.
These GSEs work to make homeownership more accessible and affordable for American consumers by providing a consistent and reliable source of mortgage funding for lenders. While they are government-sponsored, they are publicly traded and have their own shareholders. Their mission is to promote stability in the housing market and expand opportunities for homeowners.
