US government-backed mortgage institutions Fannie Mae and Freddie Mac are eyeing the lucrative online lending market. Helen Osborne reports
Fannie Mae is a US government-licensed public mortgage financier poised to conquer the web in the US.
Though its main services involve purchasing mortgages from banks, mortgage companies and other home loan providers, it has recently added an application that powers hundreds of banks’ online mortgage systems. This addition puts it in the position of the most influential infrastructure provider for the online lending market – although this market now constitutes only a small part of overall mortgage business. The move to the internet is intended to create a more efficient mortgage market.
Fannie Mae and competing government-chartered mortgage financier Freddie Mac have been the only two bodies to invest in the electronic infrastructure needed for online mortgages.
Rather than lending directly to home buyers, Fannie Mae purchases mortgages from lenders in the secondary mortgage market. And Freddie Mac, created by Congress in 1970 to ensure competition, purchases loans from banks and mortgage brokers, then packages those loans into mortgage-backed securities.
