Have you met Fannnie and Freddie and do you know how they can help you in the event you are having trouble meeting your mortgage obligations?

Fannie Mae was originally created in 1938 as part of Franklin Delano Roosevelt's New Deal. The Great Depression discouraged private lenders from investing in home loans, so Fannie Mae was created to provide banks with federal funds to finance home mortgages..

Initially, Fannie Mae operated like a national savings and loan, allowing local banks to charge low interest rates on mortgages for the benefit of the home buyer. Because of the financial backing from the federal government, Fannie Mae was able to borrow money from foreign investors at low interest rates. In turn, Fannie Mae provided fixed interest rate mortgages with low down payments to home buyers.

In 1968, due to the financial pressure created by the Vietnam War, Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE (government sponsored enterprise), generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. As recently as the beginning of 2008, Fannie Mae and Freddie Mac owned or provided security for 70 percent of the nation's residential mortgages.

Today, in light of economic turmoil, there are many instances in which the appraised value of a property is lower than the present mortgage and/or the homeowner’s payments have increased or income has decreased. These conditions prevent a routine re-financing. Because an avalanche of defaulted loans would be disastrous for Fannie Mae and Freddie Mac, there is a program that may help struggling homeowners. Only loans owned or guaranteed by Fannie Mae or Freddie Mac are eligible. Your mortgage company can tell you who owns your loan, or you can contact Fannie Mae and Freddie Mac directly to find out if you have such a loan. For more information on this program, go to www.makinghomeaffordable.gov.