Mortgage Backed Securities: United States and Ireland

The United States government wants mortgages readily available for people in the market for a new home. In order for mortgages to be available, banks would have to have enough capital to make such loans. In effort to support banks, the United States Congress has federal mortgage organizations to monitor and support the mortgage market. Three federal mortgage organizations that exist are Fannie Mae, Freddie Mac and Ginnie Mae. While these may sound like foolish nicknames for government-created organizations, these organizations are vital for monitoring mortgage banks in the United States. If too much capital is readily available from banks to the public, these government organizations buy mortgages from banks. Upon the organizations’ purchase from the bank, the Federal National Mortgage Association (Fannie Mae), for example, can hold these mortgages until a time of need or sell securities, backed by several of these mortgages, to investors willing to invest in real estate. The capital from the investors’ mortgage-backed securities purchase allows for more loans for new homebuyers, while the investors await return through the new homebuyers’ mortgage repayments. It is …

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