Sources of Mortgage Funds

Prior to the Savings and Loan debacle of the early 1980’s, applying for a home loan was a straightforward matter of applying to a bank who would loan you money if they had it and if they perceived you to be creditworthy. Today, the process, as well as the source of funding, is quite different though it works well. Though banks or brokers are still involved on the front end, today the money for your loan is most likely to come from one of three federal government-backed institutions.

These institutions are the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Association (Freddie Mac), or the Government National Mortgage Association (Ginnie Mae). Fannie Mae, Freddie Mac and Ginnie Mae are mortgage companies, formed and backed by the US government whose mission relate, more or less directly, to supporting the American dream of home ownership.
You can apply for a mortgage loan at any home loan office or brokerage office. They will handle the application process all the way through to approval of the loan and closing of the transaction. Most likely, you will not interact with the same company beyond this point as they will probably outsource the processing of payments to another firm, frequently referred to as the loan servicer. The servicing company will likely package your mortgage (a financial instrument in and of itself) with other mortgages, and sell them to one of the Big Three, Freddie Mae, Fannie Mae and | or Ginnie Mae.
In fact, you may notice that the company to whom you send your monthly payments, the “servicer,” may change several times over the life of your loan the mortgage is bought and sold – or as it is outsourced by the Big Three to different servicing firms.