Government Sponsored Enterprises

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Government Sponsored Enterprises (GSEs) were created by the United States Congress to assist certain groups of borrowers such as homeowners, farmers, ranchers, and mortgage lenders gain access to capital markets. Their implicit federal government guarantee, and other special privileges allow them to participate in the capital markets at advantageous rates. The best-known are Fannie Mae [1] (Federal National Mortgage Association) and Freddie Mac [2] (Federal Home Loan Mortgage Corporation), which are the largest source of housing finance in the United States. Their function is to provide liquidity and assistance relating to mortgages for low- and moderate-income families in promoting access to mortgage credit. They fund residential mortgages by purchasing loans directly from primary market mortgage originators, and then either package these loans into mortgage-backed securities or retain these mortgages in their portfolios.