Source: CNBC Select
Both Fannie Mae and Freddie Mac are corporations that buy mortgages from banks — by doing so, they’re essentially helping banks to create more cash flow so they can continue originating and processing home loans for everyday people. Each of the two entities then either holds onto those mortgages as part of their own portfolio or repackages them into mortgage-backed securities.
Fannie Mae is the nickname for the Federal National Mortgage Association, while Freddie Mac is the nickname for the Federal Home Loan Mortgage Corporation. The two corporations each purchase their loans from different sources — Fannie Mae buys them from large banks and credit unions while Freddie Mac buys them from smaller banks and credit unions.