GSE's Part I
GSE (Government Sponsored Enterprise) The government allows GSE's to borrow directly from the U.S. Treasury, provides them with certain services and exempts them from some regulatory requirements. Therefore, the securities markets have the impression that the GSE's are government backed. News flash, their not.
The impression of government backing allows Fannie FNMA & Freddie FHLMC to borrow money at rates lower than most banks. Fannie & Freddie buy and guarantee billions of dollars of mortgages from banks and others and package them as mortgage-backed securities that are sold in the public debt market. They also keep mortgages and MBS in their portfolios.
The two companies accounted for 47.2% of total outstanding residential mortgage debt in 2003.
The impression of government backing allows Fannie FNMA & Freddie FHLMC to borrow money at rates lower than most banks. Fannie & Freddie buy and guarantee billions of dollars of mortgages from banks and others and package them as mortgage-backed securities that are sold in the public debt market. They also keep mortgages and MBS in their portfolios.
The two companies accounted for 47.2% of total outstanding residential mortgage debt in 2003.
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