The Role of Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac were established to create a liquid secondary market for mortgages, and they currently play a crucial role in providing financial stability by allowing Americans access to long-term, fixed-rate, prepayable mortgages. The discussions in the episode highlight that both agencies are indeed fulfilling their initial mandate successfully, as evidenced by their ability to handle approximately $7 trillion in mortgage-backed securities (MBS) effectively. Their need for an explicit guarantee is emphasized, especially as it pertains to ensuring that American consumers can confidently secure loans that have favorable terms not commonly found in other countries. The focus is on the agencies' ability to continue offering these significant advantages, underscoring their importance in the broader context of the U.S. housing market.