Although these two institutions buy mortgages that normally meet their very conservative guidelines to provide new funds for lenders to make new mortgages, both Fannie Mae and Freddie Mac, unfortunately also invested in riskier "Alt A" loans and derivatives which has led to their current troubles. They are an integral part of the home financing system in this country. Over half of all mortgages in this country are owned by these two companies.
Although they were originally chartered as Federal Government Institutions, they are private organizations, but with the implicit belief by investors that the U.S. Government will support them and not let them fail as they are so important to our country and its economy. Without these two institutions, there would be almost no funds available for homeowners to obtain mortgages. Therefor, whatever the government needs to do to support Fannie Mae and Freddie Mac, they need to do.
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