What Is the Difference Between Fannie Mae and Freddie Mac?

First, Fannie Mae and Freddie Mac buy mortgages from different sources. Fannie Mae buys mortgage loans from larger commercial banks. Freddie Mac buys mortgage loans from smaller banks, such as thrift banks or savings and loan associations, whose mission is to provide banking services to communities.

Second, Fannie Mae and Freddie Mac have different functions. Fannie Mae has the goal of "securitizing" mortgages, which will make more funding available to lenders, in turn ensuring more mortgage loans are available to potential borrowers and homebuyers. Freddie Mac purchases mortgages on the secondary market and passes them on to investors.

Third, Fannie Mae and Freddie Mac also offer different programs for would-be borrowers. Fannie Mae offers housing loans to applicants whose incomes do not exceed 80% of the middle income in the region. Freddie Mac offers a housing plan that requires applicants to live in the residence and requires that applicants' income not exceed the average income of the area.