Government Sponsored Enterprise
Author: Rob K. Blake
Published: July 23, 2008
Government Sponsored Enterprise - GSE - Defined
In the mortgage world government sponsored enterprises usually refers to Fannie Mae and Freddie Mac. These two stock exchange private corporations were created Congress to improve the liquidity of the mortgage market.
These two mortgage GSEs set national underwriting standards and insures the loans so Wall Street can sell pools of loans to large investors ie. insurance companies, foreign banks, etc.
GSEs insurance are not directly back by the full faith of the U.S. Government, but many believe they are. For this reason, these pools of loans once securitized offer investors a better return than Treasuries.
In recent years, the amount of GSE securitized debt (over $5 Trillion in total!) owned around the world has skyrocketed with Japan, China, and Middle Eastern nations owning a large portion. This is one of the prime reasons we are the world’s leading debtor nation.
Author: Rob K. Blake
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