Freddie & Fannie – Their Relationship to home buying….

If you have ever wondered how Freddie Mac, Fannie Mae and other mortgage lenders fit in to home buying in America; Also why the bailout of these financial institutions was so critical and required….during the current credit crisis, understand the process below.

Step-by-step Process

1. Borrower applies for a loan
2. Lender evaluates application using Freddie/ Fannie tools and makes loan to borrower
3. Lender sells loan to Freddie or Fannie. Freddie / Fannie pays lender , providing them funds to make new loans to other borrowers
4. Freddie/Fannie packages loans in to mortgage backed securities and sells them to investors
5. Freddie & Fannie keep money flowing into the U.S. mortgage market, lowering rates and saving money for borrowers

A simple explanation - The problems in the current credit & liquidity crisis originated due to home owners defaulting on their mortgage payments and poor lending practices. When homeowners defaulted on their payments, it impacted the value of these mortgage backed securities and other investment instruments owned by these secondary mortgage lenders. These investment options that are used by companies to grow and invest, suddenly lost value causing a rapid deterioration in company asset value, stock values, investment portfolios and their ability to sustain themselves;

As potential homeowners, awesome buys in Charlotte Real Estate make this an opportune window to invest in your future home. However, thoroughly understand your affordability and homeownership or contact a mortgage lender to evaluate your financial situation.