The U.S. Housing Market Analysis – Part (1)

There are four major players in the U.S. Housing Market: the U.S Government, Lenders, Government Sponsor Enterprises, and Trade Associations.

 The following chart displays the process of the U.S. Mortgage Market: When a home buyer purchases the house,  the buyer needs to get the mortgage loan from a private lender, such as banks. The lender can sell the mortgage loan to Fannie Mae or Freddie Mac (GSEs) or can keep the loan in its portfolio. The GSEs buy the loans from various lenders to securitize them into the Mortgage Back Security depending on the borrowers’ credits. The GSEs sell the MBS to various investors by guaranteeing the MBS. 

 One of the major players in the U.S. Housing market is the government. The U.S. Department of Housing and Urban Development is a major agency, and its major role is to oversee home mortgage lending practices. Under HUD, there are three major agencies: Federal Housing Administration (FHA), Ginnie Mae, and Federal Housing Finance Agency (FHFA).

 The Government Sponsor Enterprises (Fannie Mae/Freddie Mac) are more major players in the U.S. Housing Market. The purpose of GSEs is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS). The Fannie Mae was created in 1968 along with Ginnie Mae, which remained in the government, but the Fannie became a public traded company in 1970. The government owns the preferred stocks, but the public owns the common stocks. The Freddie Mac was created by Congress to compete with Fannie Mae in 1970. The GSEs borrow from investors and buy the loans from lenders. They securitize the mortgages in the form of MBS which would be sold to various investors.

There are three major associations in the U.S. housing market, each representing a different interested groups: National Association of Realtors, National Association of New Home Builders, and Mortgage Bankers Association. These associations lobby in Congress for their members’ interests.