CHAPTER 2
Fannie Mae and Freddie Mac: Underwriting Changes That Affect Every Potential Homeowner
WE MENTIONED BOTH Fannie Mae and Freddie Mac in the first chapter, but now let’s take a closer look at how both operate, what their place is in the mortgage industry, and the new lending guidelines they issue.
When lenders make a loan, they do so for a profit. They charge an interest rate at which they’ll get an annual return. For instance, if you borrowed $200,000 at 6 percent on a 30-year fixed-rate mortgage, the lender expects to get a rate of return of 6 percent on that loan. Easy enough.
Say, now, a lender makes not just one $200,000 loan but ...
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