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The Federal Home Loan Mortgage Corporation, also known as Freddie Mac was created by Congress in 1970 to allow a mortgage market secondary to provide increased liquidity to banks and other credit institutions to grant mortgages. The Federal National Mortgage Corporation, also known as Fannie Mae was created by the Federal Housing Authority (FHA) in 1938. Initially, Fannie Mae to securitize FHA loans, and was the first to create a secondary mortgage market.

In 1968, the company was privatized to eliminate debt on the balance of the federal government. Fannie Mae's role in the purchase of FHA loans has been replaced by the Government National Mortgage Association, Also known as Ginnie Mae. Both Fannie Mae and Freddie Mac are private companies that have the implicit backing of the federal government, despite their activities are not explicitly guaranteed (until they are detained in September 2008). Collectively Freddie Mac, Fannie Mae and Ginnie Mae are known as government-sponsored entities or parastatals, and is responsible for maintaining a secondary market for securities backed by mortgages.

Fannie Mae and Freddie Mac buy and sell mortgage loans to create a secondary market. Mortgage originators to bring together groups loans to two companies that purchase loans to hold in their own portfolios, or they will bring all these together into securities lending process known as "exchange". In an exchange program, the author offers group loans, Fannie Mae and Freddie Mac promise the author who receives payments from the pool if Fannie Mae and Freddie Mac receive such payments or not. This guarantee is equivalent to ensure the two companies take all risk of failure of a guaranteed annual premium of small, generally equal to 20 basis points (0.2% the amount of the guarantee).

Fannie Mae and Freddie Mac have strict assurance loan origination because they provide. Regarding the mortgage industry, "loans are loans that meet the underwriting standards of Fannie Mae and Freddie Mac in the final stages of assembly in the great housing bubble, loans Mortgage originated more who do not conform to Fannie Mae and Freddie Mac securities backed by assets of Standards (ABS) market packages that these loans do not conform to collateralized debt obligations and has obtained a significant market share.

Despite its higher standards of credit Prudent, Fannie Mae and Freddie Mac guaranteed loans that many poor outcomes in the wake of the great housing bubble. The guarantee of many types of exotic loans with inflated assessments and made many mistakes as well as asset-backed securities (ABS) issuers bubble. When these loans started to go wrong, Fannie Mae and Freddie Mac face massive losses, so that the government had to assume the trusteeship in 2008.