Neither Fish Nor Fowl: An Overview of the Big-Three Government-Sponsored Enterprises in the U.S. Housing Finance Markets

Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation) have certainly attracted their share of controversy during the past few years. On the one hand, there is little doubt that Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System (the third housing GSE) have contributed to one of the most dynamic mortgage markets in the world. At the end of June 2001, 67.7 percent of the U.S. population owned their own homes.1 These homeownership rates are as high as they have ever been in the United States, and they are among the highest in the world.

On the other hand, critics point with alarm to the rapid growth of these government sponsored enterprises, both in terms of their total assets and in terms of their outstanding debt. To put their expansion into perspective, from 1995 to 2000, growth of the U.S. mortgage market averaged just 8.2 percent per year. Meanwhile, growth of the GSEs was at least double, if not triple, that amount.